The markets last week remained in a range tracking global cues. The fall in the rupee also impacted the markets, with the Nifty this week closing up 0.4 per cent on a weekly basis. Nifty has resistance at 5975 and support is at 5825.
The manufacturing data which came out last week stood flat as new orders fell for the first time since March 2009. The HSBC purchasing manufacturing data stood at 50.3 in June as against 50.1 in the month of May, which was the lowest level since March 2009. The flatness was attributed to the lack in domestic orders, although the export orders are seen to have increased.
The core sectors, consisting of eight infrastructure industries, showed a growth of 2.3 per cent in May this fiscal against 7.2 per cent in the period a year ago. Contraction in the output of coal, crude oil, natural gas and fertiliser caused the data to slow down. The core sector has a combined weight of 38 per cent in industrial production. The coal production showed a fall of 3.3 per cent compared to 9.6 per cent growth in May 2012. Crude oil output dipped 2.4 per cent and natural gas production contracted by 18.7 per cent on an annual basis. But cement and steel production showed a growth of 15.4 per cent and 4.1 per cent from the same period, a year ago.
The buyback offer for Hindustan Unilever by the parent company is 66 per cent subscribed. Shareholders of HUL have tendered 319.7 million shares to the offer against the 487-million-share open offer. After the open offer, the parent company’s shareholding may rise to 67.28 per cent. Unilever PLC, the parent of Indian company Hindustan Unilever, earlier announced an open offer to increase its stake in the company from the present 52.48 per cent to 75 per cent which commenced on the bourses on 21 June 2013 and end on 4 July 2013. The open offer price was fixed at Rs600 per share.
In the week, the Telecom Commission approved hike in FDI in the telecom sector to 100 per cent from the current level of 74 per cent, where 49 per cent of investment can be done through automatic route and further stake hike will require the Foreign Investment Promotion Board’s (FIPB) approval. The FDI hike may reduce the burden on the sector which is sitting on a debt of R 1, 85,720 crore in 2011-12. The official Chinese purchasing managers’ PMI fell to 48.2 in June from 49.2 in May. But the positive US manufacturing and consumer spending data made the markets reverse direction. In Europe, the central bank kept its interest rate at a record low of 0.5 per cent and also signalled to hold the low rates for an extended period. The US markets remained closed on Thursday on the back of Independence Day, and investors were waiting for the non-farm payroll data from the US for more direction.
On the global front, the major data to watch include Chinese inflation data, balance of trade, the Bank of Japan’s interest rate decision and industrial production data. Also, US initial jobless claims may be in focus. For the Indian markets IIP data for the month of May and inflation data will be the major triggers. The earnings season may also be watched. Major companies coming out with their earnings in the coming week include Gruh Finance and Zandu Realty on 8 July, IndusInd Bank on 10 and INFY, South Indian Bank and Sintex on 12 July 2013.
The rupee is weak and if the dollar gets the strength rupee may test 60.5631 and 61.0438 against dollar in the near term. Rupee has resistance at 60.0600 and 59.5421.
Investors with limited risk appetite can buy 5800 Nifty call options and can sell 6000 Nifty call options, or can buy even the 5900 call option for three working days.
Wockhardt, Tata Steel, Yes Bank and Hanung Toys are looking weak and one should avoid buying these stocks for the short term.
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).