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Bouncing back and forth

Stocks were helped by bargain buying and sovereign credit outlook

Bargain buying helped markets recover at the start but didn’t find support towards the end of last week. September F&O expiry and the long weekend in the coming week kept investors from taking long positions. But news of S&P upgrading of the country’s sovereign credit outlook made them bounce back.

Nifty consolidation
The outlook for Nifty remains sideways because of the ongoing technical correction and it is likely to consolidate at 7850-7900 in the days to come. A sharp rally is expected only after this consolidation. The resistance is at 8200- 8220 levels in the short term.

Since the beginning of the year, the FIIs have pumped in over Rs 1 lakh crore into Indian debt. According to the available data, the overseas investors purchased debt securities worth R 282194 crore in the year and at the same time offloaded Rs 164820 crore during the same period resulting in a net inflow of Rs 117374 crore ($ 19.45 billion). In the current month the inflows included R 14900 crore.

According to Department of Industrial Policy and Promotion data, FDI to services sector rose marginally to $ 1.03 billion during the April July period of 2014. In the corresponding period last year, FDI was $ 1.02 billion.

The services has a weightage of over 60 per cent in the country’s GDP and in 2013-14, the foreign investment to the said sector fell to $ 2.2 billion from $ 4.83 billion in 2012-13. The services sector includes banking, insurance, outsourcing, R&D, courier, technology testing.

Buying and selling
State owned steel maker Rashtriya Ispat Nigam LTD (RINL) has filed a draft prospectus with the market regulator for an initial public offering which may hit the market current fiscal.

The government is planning to sell 10 per cent of its stake or 48,89,84,620 shares through an offer for sales in which 35 per cent will be reserved for the retail investors and 50 per cent for qualified institutional buyers.

The government is planning to raise R 43425 crore through the disinvestment drive and SAIL, ONGC, NHPC and Coal India are the other companies waiting for the stake sell in the current fiscal.

In the F&O expiry for September, the Nifty showed a rollover of 69 per cent against 71 per cent in the previous month. The largest rollovers were seen in Titan (95 per cent), Jubilant Food (94 per cent) and Tata global (92 per cent) whereas the least rollover was witnessed in ZEEL (33 per cent), Gail (50 per cent) and IDBI (62 per cent).

The rollover for Nifty was at 59 per cent and that in the IT sector was at 81 per cent. Five more stocks were added to trade in F&O segment from September 10, 2014 and they were Eicher Motors, Mindtree, Motherson Sumi, SKS Microfinance and TVS motor.

Foreign markets
The profit booking made US markets trade lower last week. The economic growth concerns and the geo-political tensions also added in the row. Also, in the euro zone area the manufacturing and services growth slowed unexpectedly in the current month to its weak pace in the year added worries to the health of the economy.

On Chinese front, the manufacturing sector rose unexpectedly while the factory employment fell to a five and a half year low. IT, Pharma and FMCG are the three major sectors which has tremendous scope for further appreciation in the coming week.

Crude outlook is weak and is likely to test $ 92 in the short term, a move below this would cause further downtrend and it can even test $ 91.10 or $ 90.40. In the US markets, for the coming week, pending home sales, consumer confidence, market manufacturing PMI, total vehicle sales, factory orders are the important data to watch out. Also, the non-farm payroll data, balance of trade, initial and continuing jobless claims are to be watched.

Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd. The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

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