Global impact

Buying in selected counters kept the markets away from more lows

The movements on the global front were mainly seen impacting the Indian markets in the last week. But buying in selected counters kept the markets away from more lows. Going forward, we can expect continuation of the uptrend in Nifty with support at 8455 and 8390.

During the period of April-May 2015, the foreign direct investment in the service sector fell 15 per cent. According to data available from Department of Industrial Policy and Promotion (DIPP), the FDI stood at $488 million.

The sector which contributes over 60 per cent to the GDP has the FDI level at $574 million during the April-May period of 2014. Other sectors which showed decline in the period was construction development, telecommunication and pharmaceuticals.

Automotive Axles in the last week announced its earnings where the company’s standalone net profit showed a substantial rise. For the quarter that ended June 2015, the net profit of the company rose 37.67 per cent to R78.11 million from Rs 56.74 million in the same quarter previous year.

Revenue raise
The revenues for the period under review also rose 25 per cent to R2344.99 million as compared to R1876 million for the last year. The operating income was at R127.67 million as compared to R94.17 million whereas the operating margin for the quarter was at 5.44 per cent as compared to 5.02 per cent in the last year.

The retail inflation for July fell to 3.78 per cent on the back of cheaper food prices. The Consumer Price Index was at 5.40 per cent in June 2015 and in same period last year it stood at 7.39 per cent. The food inflation for the month under review fell to 2.15 per cent against 5.48 per cent in the last month.

Inflation for rural segment was 4.44 per cent in July whereas for the urban sector it stood at 2.94 per cent. On the back of fall in vegetable and fuel prices, the wholesale inflation fell to a historic low. In July, the WPI data stood at (-) 4.05 per cent as compared to (-) 2.40 per cent in the previous month.

The data was in negative zone since November 2014 and in a year ago period the inflation was at 5.41 per cent. The food prices fell 1.6 per cent in July from a year ago period whereas the fuel and power dropped 12.81 per cent.

In its August quarterly index review, the MSCI has made major changes in most of indices. Stocks like Glenmark Pharma, Britannia and Indiabulls Housing Finance are likely to be included in the MSCI emerging markets. Inclusion of Britannia may cause an inflow of $110 million whereas the inclusion of Glenmark may cause a fund inflow of $ 94 million.

Fund inflow
The inclusion of Indiabulls Housing will result in a fund inflow of $86 million. The weight age of Sun Pharma and Bharti Infratel are expected to go up which in turn result in an inflow of R480 crore and R144 crore respectively.

Stocks included in or excluded from the MSCI index every quarter based on criteria such as average traded value range, minimum liquidity, minimum length of trading, room for overseas investment and free float market capitalization and the current changes will be effective from September 1.

On the global front, the main event was the devaluation of Chinese currency Yuan after weak economic data. The Chinese central bank has described the move as a “one-off depreciation” based on a new way of managing the exchange rate than better reflected market forces.

Also the weekly jobless claims in US unexpectedly rose but the data was close to a four decade low, which showed a steady progress in the labour market. Crude is weak and is trading below the previous lows and made a new low at $41.35 per barrel (Nymex). The outlook continued to be weak.

In the US markets, housing starts, core inflation, inflation, existing home sales, initial and continuing jobless data are the triggers. Current account, Balance of trade, construction output, consumer confidence data and markit manufacturing PMI are the data in the Euro zone area. In the Indian markets, the corporate earnings announcement for the June 2015 quarter is coming to an end and some of them in line are HCL-Info systems and Hercules.

Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. The author may have a vested interest in investments he has recommended.

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