Nifty closed on a negative note last week, down around 1.9 per cent on a weekly basis. The Mid-cap closed down around 0.3 per cent and Bank Nifty closed down around 2 per cent. The major sectoral losers were Consumer Durables and the Auto sector, which closed down around 4.2 per cent and 2.9 per cent respectively. Nifty has support at 5900-5850 levels. The short term RSI is in the oversold and there can be bounce back from these levels. Movements below these levels can cause further sell-offs, which can take Nifty towards 5786 (200 DAM). Major resistance lies at 5992 and 6012.
The HSBC Manufacturing PMI data fell to a 50-month low led by a fall in output and of the slowdown in new orders. The PMI data stood at 50.1 in May 2013 as compared to 51.0 in April. The overall index remained above the 50-mark that divides growth from contraction for over four years. Morgan Stanley, the global brokerage firm has estimated that India will grow at 6 per cent in the current fiscal. The brokerage firm also pegged the Sensex target at 23,000 by the year-end. On the other hand, the Bank of Merill Lynch lowered India's GDP growth projection saying that the economy will expand at 5.8 per cent during the current fiscal on account of slow economic recovery. The global brokerage also cut its growth forecast on India for the year 2014-15 to 6.8 per cent.
In order to keep the current account deficit under control the government has raised the import duty on gold and silver to 8 per cent from the 6 per cent levied earlier. Gold and silver imports were seen doubled to $ 7.5 billion in April and gold imports were alone up 27 per cent, from a year ago period. RBI has also come out with new plan to curb gold import. The central bank has banned the import of gold by domestic consumers through bank credit and made the overseas purchase of gold a cash and carry business. Under the new rule, all gold import is to be made only on 100 per cent cash margin basis, not on acceptance basis.
For increasing foreign fund flow and reducing current account deficit, the government is planning to raise the Foreign Direct Investment (FDI) cap in various sectors including the defence sector, which currently holds 26 per cent in FDI. According to the Department of Industrial Policy and Promotion, for the fiscal year 2012-13, India has seen a dip of around 38 per cent in FDI, which stood at $ 22.4 billion as compared to $ 35.1 billion in the previous year. The sector that received large FDI inflows in the year under review includes services, construction, automobiles and pharmaceuticals.
In the week, US markets mainly remained mixed as of weak economic data. The US manufacturing data contracted for the first time in six months. Also, the concerns that the Federal Reserve may end its bond buying plan added fire to the uptrend of the markets. The major reason the markets were waiting was the monthly jobs report for further direction. The Asian markets were seen tracking the footsteps of the American markets
without much activity. On the global front, for the US markets, IIP data as well as and retail sales data will be watched. The initial and continuing jobless claims is the other major data to be looked at.
The BSE IT Index breached its 200 DMA of 6080, which is positive and going forward it has the potential to move towards 6378 (100 DMA) and 6500 levels. So in the coming days more buying can be seen in IT stocks. The Rupee is weak and may test 57.35 levels, the low which the Rupee tested on June 2012. The Rupee may bounce back close to this level, because the HUL’s parent company Unilever has to bring nearly $5.2 billion for the proposed share buyback programme. V Guard, Thermax, Mind Tree, Natco pharma are the few stocks, which can give decent, returns to investors.
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 email@example.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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