Dismal times

The markets last week witnessed heavy sell off as Nifty broke its support of 5600 and also moved below its 200 DMA. The selling was based on global cues and was purely technical. Nifty closed down around 2 per cent on a weekly basis. The sectoral losers for the week were FMCG and Auto sectors, down around 3.2 per cent and 2.4 per cent respectively. The sectoral gainers were Healthcare and Oil and Gas, which closed up around 2.7 per cent and 1.2 per cent respectively.

Mario Draghi, president of the European Central Bank at a press meet in Frankfurt, Germany on April 4, 2013. Pic/AFP

The current account deficit (CAD) data stood worse than projected: it was driven by heavy oil and gold imports and by muted exports. The CAD widened to a record high of 6.7 per cent of GDP in the December quarter - it stood at USD 32.63 billion in the quarter ended December 2012 as compared to USD 20.16 billion in the same period last year. But on the other hand, the balance of payment turned positive - it stood at a surplus of USD 781 million as against a deficit of USD 158 million in the previous quarter.

SEBI has tightened the takeover norms for companies in order to prevent promoters from influencing the stock prices in open offers. The watchdog said in its notification that an acquirer must not withdraw the open offer even if the acquisition through the preferential issue is not successful. SEBI has urged the government to form a single regulator for companies taking deposits from the public in an illegal manner. The capital market regulator is also planning to put in place new sets of regulation against insider trading and for share buyback.

According to the latest data available from SEBI, FIIs made an investment of R1,39,408 crore during the fiscal ended March 31, 2013. This is the highest inflow in a single fiscal year since their entry into the Indian markets. The increasing inflows are due to government initiatives such as the deferment of the General Anti Avoidance Rule (GAAR) implementation by two years to April 2016, while RBI’s measures, such as easing interest rates, helped to maintain the rhythm. However, in the last couple of days of the week, the FIIs turned sellers.

Globally, markets traded lower mainly due to weak US economic data. The monetary policies of the Bank of Japan and the European Central Bank (ECB) also had an impact on the markets. The Bank of Japan aims to double the monetary base over two years through the purchase of long-term bonds. In its meeting, the ECB held its rates at a record low of 0.75 per cent, hinting at a rate cut in the coming month. The ECB President also added that the bank will stand “ready to act” in order to boost the economy. Now the investors are eagerly waiting for the retail sales report, initial jobless claims report and FOMC minutes.

For the Indian markets, the major economic data to be revealed this week is the IIP data for the month of February. It is due on Friday, April 12. After that, the investors’ focus may shift towards the corporate earnings for the quarter January - March 2013. Infosys is likely to reveal its quarterly numbers on April 12 too. Rupee is weak and is oversold; it is likely to bounce back from 55.2 in the short term. Resistance is at 54.52 against the dollar.

The immediate support for Nifty lies at 5521 and 5501. The resistance lies at 5650 and 5705. Counters such as Maruti, Dr. Reddy, Bajaj Auto, Hero Motors, ONGC and GAIL are likely to move up from the current levels. Investors with high risk appetite can buy stocks and then buy Nifty put options to protect their down side risk.

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 Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

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