Eye on Inflation

Some relief at Greece deal and attention on Iran were major events

The Nifty crossed above its 100 DMA which added support to the markets. Nifty is likely to trade in a range between 8434 to 8650 levels in the days to come. A break out in either direction will give a major direction for the markets.

In order to boost inflows to the country, the cabinet has introduced a concept to simplify foreign investment norms by merging all investments as a composite sectoral ceiling, which may avoid distinction between foreign investments by FIIs, NRIs and other FDIs.

The composite caps have been suggested for sectors like agriculture, petroleum and natural gas, manufacturing, airports, real estate and telecommunications amongst others. Under the new reform, the permissible limits for FIIs, FPI, and NRIs is 24 per cent of the paid up capital in the banking sector, which may go up to 49 per cent through a special resolution.

For defence, the sub-sectoral limit for FIIs is at 24 per cent and it will stay. In the last week, retail inflation was out, where the data rose for a second straight month mainly on the back of a rise in food inflation. The CPI based inflation; which rose to an 8 month high was at 5.4 per cent in June as compared to 5.01 per cent in the previous month.

The core inflation stood at 4.8 per cent in the month under review against 4.6 per cent in a month ago period. For June, the food inflation spurted to 5.48 per cent from 4.8 per cent in May.

Prices in focus
Cheaper vegetable and fuel prices kept wholesales inflation which came out in the last week in the deflation mode, for the eighth month in a row. For June 2015, the WPI based inflation stood at (-) 2.4 per cent as compared to (-) 2.36 per cent in the previous month. In the same period last year, inflation was at 5.66 per cent.

The overall wholesale inflation in the food category declined to 2.88 per cent as compared to 3.80 per cent in May. Vegetable prices declined 7.07 per cent while, inflation in fuel and power category stood at (-) 10.3 per cent in June. Hindustan Media Ventures announced its earnings, where the company posted a rise of 23.11 per cent in the net profit.

For the first quarter of 2015-16, the company reported a standalone net profit of Rs 41.71 crore as compared to a standalone net profit of Rs 33.88 crore in the same period last year. The net sales during the period stood at Rs 221.51 crore against Rs 207.14 crore in a year ago period. The company is in the business of printing and publication of newspapers and periodicals.

Led by the growth in digital business, Zensar Technologies posted a 36 per cent jump in its net profit for the quarter that ended June 30, 2015. The company posted a net profit of Rs 76.08 crore as compared to Rs 55.96 crore in the same period last year. The revenue growth in the period under review rose 16.5 per cent to Rs 704.64 crore from Rs 604.78 crore in a year ago period.

The company said that the US accounted for 78 per cent of the company's revenue whereas Europe and Africa contributed 10 per cent and 8 per cent respectively.

Greece and the world
On the global front, the major trigger was Greece, where the countries around the globe hoped that the country may be able to secure fresh funding. Much to the relief the country reached a deal with its creditors.

Also the oil countries came into focus, as Iran and six power countries reached a nuclear deal. On the US front, the strong corporate earnings lend the markets a strong base.

In the US markets, existing home sales, initial and continuing jobless claims, new home sales and markit manufacturing PMI final are the important data. Current account, consumer confidence, markit manufacturing PMI flash and markit services PMI flash are the triggers in the Euro Zone area.

This week, major earnings, which may hit the markets include that of Tata coffee, Kitex, Welspun India, HDFC Bank, Tata sponge, Idea, Hindustan unilever, Eicher Motors, SKS Micro, Wipro, SBT, TTK Prestige, Igarashi, Granules, Biocon, ABB, Axis Bank and Atul. Gold's outlook is weak and it may remain subdued in the near term without much trigger.

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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