The Sensex saw some bad trends with weak profits and marginal growth
In the last week, markets remained in negative territory on most days. This was due to tracking of global peers and selling by foreign institutional investors.
Share markets
The immediate resistance for Nifty lies at 7975 and 8150. On the other hand, a move below 7832 could affect the market outlook. Infosys in the last week reported a 28.6 per cent rise in its consolidated net profit to R 3096 crore for the quarter that ended September 30, 2014. Consolidated revenue was also up 2.9 per cent at Rs 13342 crore.
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An interim dividend of R 30 per share was declared and recommendation of a bonus issue of one equity share for every equity share held. For FY15, the company maintained its revenue guidance of 7 to 9 per cent growth. In the April-June quarter this fiscal, Infosys reported a net profit of R 2,886 crore and revenue of Rs 12,770 crore.
With a fall in new orders, Indian manufacturing activity slowed to a nine month low in September. HSBC Manufacturing PMI fell to 51 from 52.4 in August. But the level still remained above 50. Reading above 50 is considered as growth whereas below is contraction. The new orders sub-index fell to 51.3 from 54.5, which was the steepest fall in 18 months.
Growth recorded
The August eight core sector industries rose to 5.8 per cent from 2.7 per cent in the previous month on the back of better performance seen in steel, coal, cement and electricity generation. The data was at 4.7 per cent in the same period last year. For the first five months of 2014-15, the core sectors grew 4.4 per cent marginally higher from 4.2 per cent in the same period last year.
Steel production stood at 9.1 per cent in August whereas electricity generation rose 12.6 per cent against 11.2 per cent and 3.4 per cent in the previous month. Coal production rose 13.4 per cent in the month preview against 6.2 per cent in the previous month. Due to renewed confidence from investors and effective policies, IMF raised India’s growth forecast to 5.6 per cent for 2014 from its earlier estimates of 5.4 per cent. In its report, it said GDP for 2015 is expected to expand by 6.4 per cent.
But IMF also cut the world growth forecast to 3.3 per cent in 2014 down 0.1 per cent from the July estimate and to 3.8 per cent in 2015 down 0.2 per cent from its earlier forecast. Similarly, World Bank forecast an identical 5.6 per cent growth rate for India, this year. The recent fall in crude oil prices like NYMEX crude trading at around $ 84 a barrel and BRENT crude falling below $ 90 a barrel had positive effects on many sectors. In the oil marketing companies, the under-recoveries may be decreased. Also, tyre manufacturing and paint companies may benefit from lower crude oil prices.
Future forecast
On the global front, US markets were weak as investor focus was shifted to earning season. The major trigger last week was the Federal Reserve’s minutes for September. The US Central Bank assured support to the economy, which made the US markets witness their biggest one day jump of 2014. But the rally didn’t last as concerns on the global economic growth and its effect on corporate earnings popped up.
This week, major data to watch out for is inflation and balance of trade. Also, earning season will play its role in markets movements. For Nifty, one can buy 7950 call options and can also buy 7900 put options together. Another strategy which can suit the current situation is a ratio spread, which can be created by buying 7900 call option one lot and selling 8100 call options two lots.
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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