On the back of weak economic data and global cues, the markets last week remained mainly in the negative zone. But the FIIs buying on the other side, provided a strong support. On a weekly basis, the Nifty closed down at around 1.5 per cent and Bank Nifty closed down at around 3 per cent. The midcap and smallcap sectors ended down at around 2.2 per cent and 1.5 per cent respectively.
On the stocks front, the losers were Union Bank and Yes Bank, which closed down at around 6.6 per cent each. The gainers on the other hand, were Wipro and Sesa Sterlite, which ended up at around 5 per cent each. Nifty outlook turned out to be slightly negative especially below 6200, and it is likely to go down below 6000 in the near term.
According to a World Bank Group arm, the Foreign Direct Investment (FDI) flows received by India in the January-March 2013 period, shows a rebound in inflows. The report cites that the reason behind this, was due to new investment policies placed for selected sectors, like telecom and insurance. According to the Multilateral Investment Guarantee Agency’s report, India is by far the largest recipient of FDI in South Asia, which comprises of India, Pakistan and Bangladesh.
According to Reserve Bank of India (RBI) data, India saw higher FDI inflows of $ 4.5 billion in the January-March period 2013 against $ 1.4 billion a year ago. On the back of imports hitting the lowest level in more than two and a half years, India’s trade deficit narrowed, in November. Merchandise exports rose by 5.86 per cent to $ 24.6 billion in the month under review, on a year-on-year basis.
On the other side, imports fell by 16.37 per cent on a yearly basis to $ 33.83 billion. Gold and silver imports dropped to 80.49 per cent to $ 1.05 in November, compared to a year ago period. Gold purchases were seen a reduction, after the government took steps to curb imports, like imposing a 10 per cent import duty and requiring that, 20 per cent of the imports are to be re-imported.
Higher vegetable prices pushed retail inflation to a nine-month high, of 11.24 per cent in November as compared to 10.17 per cent, in the previous month. The vegetable prices rose to 61.6 per cent in November as compared to the same period a year ago, and against 45.67 per cent increase in the previous month.
Fruit prices rose by 15 per cent. Inflation in the food and beverages segment was 14.72 per cent as compared with 12.56 per cent in the previous month. The data shows that the provisional inflation rates for rural and urban areas for the month under review were at 11.74 per cent and 10.5 per cent respectively. The double-digit data has fuelled speculations that the Reserve Bank may hike its rates in the coming monetary review.
Starting last week, the US markets were up on the better-than-expected jobs data. The jobless rate fell to a five-year low of 7.0 per cent in November. Also, the Chinese exports data was supporting. But coming to the end of last week, the US markets turned direction, on concerns about an imminent reduction of stimulus by the Federal Reserve. All other markets were simply following the US markets. The investors are now waiting for the Federal Reserve’s decision on its bond buying programme in this week’s monetary policy.
For the Indian markets, the Wholesale Price Index (WPI)-based inflation will be the major data to be focused. Also, the RBI’s monetary policy meet on December 18 will be another trigger. Gold outlook is negative, but getting support at around $1192 levels and facing resistance at $1238. Early stimulus withdrawal in the US is a major concern for the markets. Major counters like ICICI Bank, TATA Motors, L&T and Bank of Baroda etc are looking extremely weak. If Nifty falls below 6100, then we can expect more intensified sell-off at these counters.
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 firstname.lastname@example.org. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).