Global trends play pied piper, as domestic movements follow

Last week, domestic markets were merely tracking global market movements. If the trend continues, then, we may see Nifty moving towards 7758 and even 7908 levels. Nifty has strong support at 7400 (50DMA). India VIX and CBOE VIX are on the down trend indicating a positive mood for the markets. Investors can buy 7600 call options provided Nifty moves above 7604, which is the 100 day simple moving average.

Last week, the Industrial Production Data of the country came out, which saw a third consecutive month of decline led by the manufacturing sector. The IIP data for January 2016 was at (-) 1.5 per cent and the December's figure were revised to (-) 1.2 per cent. The manufacturing sector slipped to (-) 2.8 per cent against (-) 2.4 per cent on month on month basis. For the period of April - January the data was at 2.7 per cent against 3.1 per cent on yearly basis. The electricity sector stood at 6.6 per cent as compared to 3.2 per cent on monthly basis.

In February, the trade deficit of the country narrowed to its lowest since September 2013. According to data released by the ministry of commerce and industry, exports fell for the fifteenth straight month; from 5.66 per cent from a year earlier to $ 20.74 billion and imports fell 5.03 per cent from a year earlier to $ 27.28 billion. The trade deficit for February narrowed to $ 6.54 billion, mainly due to soft demand for crude oil and falling commodity prices.

Eye on inflation
The country’s wholesale price data for February was out and it showed that it had fallen to a 16-month low. The Wholesale price index based inflation saw a decline of 0.91 per cent, compared to a 2.6 per cent fall in the same period last year. In January, data fell 0.90 per cent.

With the possibility of a rate cut by the central bank, retail inflation of the country fell to a four month low. For February, consumer price index based inflation stood at 5.18 per cent. The data was at 5.69 per cent in January, and, 5.37 per cent in the same period last year. Food articles inflation fell to 5.30 from 6.85 per cent in January and it was 6.88 per cent in last February. While for the period under review the urban inflation stood at 4.30 per cent and rural inflation was at 5.97 per cent.

Global financial services firm, Morgan Stanley revised India’s growth forecast for 2016 to 7.5 per cent from 7.9 per cent quoted earlier. They also reduced the forecast for 2017, to 7.7 per cent from 8 per cent estimated earlier. According to them, recovery in the growth will be driven by urban consumption and a revival in the public capex. Also, growth is improving steadily but the pace of recovery is slower than estimated.

On the global front, the major trigger was the FED's meeting. The US central bank kept its interest rates unchanged, in order to support the economy.

A world view
This week, for the US markets, data like existing home sales, new home sales, durable goods order, continuing jobless claims, initial jobless claims, markit composite PMI, services PMI and GDP growth data. Current account, consumer confidence, manufacturing PMI, services PMI, composite PMI and Economic sentiment data are the triggers in the Euro zone area. In Japanese front, Nikkei manufacturing PMI, core inflation and inflation are in the watch out list. Business sentiment indicator is a major trigger for the Chinese markets.

Crude is still above $36 per barrel, is likely to re-visit $40 per barrel in the near term. Gold is also positive and it is likely to move up towards $1275 per troy ounce. Banking sector stocks are in the forefront after a deep technical correction along with metal and cement sectors. These sector stocks may continue their upward journey.

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