External factors cause upheaval
Global cues and the Federal Reserve controlled the rises and falls in the market in the week gone by as hopes are high from this week to see better trade
Selling was seen on the domestic front because of weak global cues. News that Federal Reserve will support the economy made markets rise. Nifty closed at 8225, up around 65 points. Resistance for Nifty lies at 8300 and 8368, and a move above these two levels can further boost the market.
A fall in manufacturing and capital goods sector made industrial production data fall in October. Indian Industrial production data contracted by 2.4 as compared to 1.2 per cent decline in growth during the corresponding month last year.
Industrial activity, which is measure in terms of Index of Industrial Production showed a growth by 2.5 per cent in September and in August the data stood at 0.4 per cent. The cumulative growth for April to October 2014-15 stood at 1.9 per cent whereas the data was at 0.2 per cent last year.
As the demand for gold pushed the imports, the country’s trade deficit widened to the highest level in 18 months in November. The deficit stood at $ 16.86 billion as compared to $ 9.57 billion in a year ago period and $ 13.35 billion in the previous month. Imports rose 26.79 per cent to $ 42.82 billion as the gold imports rose to $ 5.61 billion from $ 835.83 million a year earlier.
The exports were also up, rose 7.27 per cent from a year earlier to $ 25.96 billion, after a 5.04 per cent fall in October. On account of rise in revenue from the service taxes and customs, the indirect tax collections rose marginally by 7.1 per cent to over R 3.28 lakh from April to November.
According to the official data, the indirect tax collections in the fiscal have been 52.7 per cent of the budgeted target of 2014-15. Service tax collections increased 11.5 per cent during the eight months ending November to R 102592 crore whereas the customs rose 10.2 per cent to over R 123308 crore for the period. But the excise collections fall by 0.2 per cent to Rs 102762 crore and the total indirect tax collection for November stood at R 44060 crore.
Lowest inflation level
On the back of sharp falls in the global commodity prices, the country’s WPI inflation fell to the lowest level in over five years.
The data was only in July 2009 a deflation and the food inflation declined to almost zero at 0.63 per cent in the month under review from 2.7 per cent in October. Inflation was seen across broad segments like primary products and manufactured items.
The fall in inflation has given hope of early interest rate cute by the central bank. The consumer inflation for November eased on the back fall in food articles.
The CPI based inflation slowed for a fourth successive month, stood at 4.38 per cent against 5.52 per cent in the previous month. The data was the lowest since the government started releasing the data in January 2012.
Food inflation also further eased to 3.14 per cent from 5.59 per cent in the previous month. The RBI was seen revised down the CPI inflation forecast for March 2015 to 6 per cent from the earlier level of 8 per cent.
The fall in oil prices kept markets under pressure globally. Also, weak data from China, France and Germany along with the Russian central bank’s move to arrest the fall in ruble by increasing its key interest rate from 10.5 to 17 per cent added to the pressure.
The investors then shifted their focus towards the FED policy meet for more cues. The Federal Reserve, in its meet indicated it may take a ‘patient’ approach towards lifting the interest rates and may consider increase in interest rate in the mid-2015. Crude oil outlook is still weak, and it is having last support at $ 53.60 (Nymex Crude) per barrel.
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).