Nifty's 5,000-plus close may be a short-term turning point

The Nifty index has, for the first time in a month, closed above the 5,000 mark. The previous date when the index closed above this psychologically important level was 2 December 2011; but it could not maintain itself above that level for long. After touching a high of 5,099.25 in the next two trading sessions, it slipped lower to touch a new two-year low of 4,531.

Is the Nifty about to soar or sink back?

Though the macroeconomic scenario has not changed either in India or across the world, global markets have rallied from their lows witnessed in mid-December.

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There are, however, somenoticeablechanges since early December in the Indian markets.

For one, the rupee, which was weakening throughout November and early December, has strengthened again and presently trades at mid-November levels of around 50 to the dollar. Apart from Reserve Bank intervention, there are other reasons for the rupee strengthening .

Bond market rates have softened substantially from over 9 percent to 8.19 percent, thanks largely to falling inflation and hopes of rate cuts.

Better than expected industrial (IIP) growth numbers have also buoyed equities markets.

What has remained unchanged during this time is governance, or rather the lack of it. During the last one month, the government missed out on clearing FDI in retail, introducing the new companies bill and the mining bill.

What has also been in favour of the market was stronger economic numbers from the US. Along with this was a coordinated effort by eurozone countries to push forward on fiscal solidarity, giving some breathing room to equity markets as they entered the earnings season.

Initial results by Indian companies have been in line with market expectations, though guidance by the IT majors has been disappointing. A series of good results can help the markets stay over the 5,000-point mark.

Further, with elections on in five states, the government is unlikely to rock the boat. Also, with the economy growing at a slower pace, the government will be looking at measures to boost the economy, thus a pre-budget market rally can be expected after the results season.

Unless, international events go from bad to worse, it looks like the markets might cross or remain around the 5,000 point mark for a couple of months.

Technical analysts say if the Nifty is able to cross the 5,150 mark, it can touch 5,400.