RBI raises the bar
The Indian markets were seen trading lower due to profit booking on the back of geo-political tensions. The Nifty on Friday, closed at 7568 down around 0.70 per cent on a weekly basis. The daily charts and weekly technical charts are indicating that the weakness will continue, and there are possibilities that Nifty may even test 7452 in the near term. Nifty has resistance at 7598 and 7630.
The Reserve Bank of India (RBI) in the last week came out with its policy, where the central bank kept its key rates unchanged as widely anticipated. The RBI in its policy meet left the repo rate unchanged at 8 per cent and the reverse repo got adjusted at 7 per cent. The CRR was also left unchanged.
The central bank lowered the banks’ minimum bond holding requirements, which is known as SLR by 50 basis points to 22 per cent effective from August 9. RBI has also lowered the Held to Maturity (HTM) to 24 per cent. RBI retained its economic growth forecast of 5.5 per cent for 2014-15 and also stressed that the next goal is to bring down inflation to 6 per cent by January 2016.
Sintex Industries last week came out with its earnings where the standalone net profit rose 24 per cent. On standalone basis, the net profit increased to Rs 51 crore for the quarter that ended June 2014 against Rs 41 crore in the same period last year. The net sales were at Rs 761 crore from Rs 615 crore last year.
On consolidated basis, the net profit for the same period stood at Rs 62 crore from Rs 47 crore in the same quarter last year. The net sales increased to Rs 1341 crore from Rs 1124 crore last year. The company informed that the infra segment and textile business saw a growth of 84 per cent and 39 per cent respectively in the period under review.
As of better realisations across the business segments, Tata chemicals reported more than a double in consolidate net profit. For the quarter that ended June 2014, the net profit stood at Rs 176 crore against Rs 75 crore in the previous year. Sales were also up 16 per cent to R 3889 crore against Rs 3331 crore. The company reported Rs 43.26 crore as other operating income for the reporting quarter against Rs 19.86 crore a year ago. The fertilizer business and non-subsidized agri input segment grew 43 per cent and 28 per cent respectively.
Domestic passenger car sales for July rose 5.04 per cent to 1, 37,873 units from 1, 31,257 units in the same period last year. According to the data released from Society of Indian Automobile Manufacturers (SIAM), the motor cycle sales in the period under consideration grew 6.17 per cent to 8,59,290 units from 8,09,386 units in the corresponding period of 2013. The total two wheelers sales in July grew 13.73 per cent to 12, 87,462 units from 11, 32,066 units in the same period last year.
On the global front, sell offs were witnessed as majority of the global markets were trading near below their 200 day moving averages. Also, the geo-political tensions added to worries. The US president authorised air strikes against Iraq and the imposition of sanctions against Russia were the geo political tensions. Last Thursday, the ECB held its borrowing rates at record levels.
Due to geo-political tensions, demand for gold has increased, and it is likely to test $1322 and thereafter minor corrections are expected, but outlook is positive for the yellow metal. After correction it can even test $1340. Gold has support at $1305 and $1301 per troy ounce.
Reliance Industries, L&T, BPCL, Tata Steel, Tata Motor and Asian Paints are weak and if the Nifty falls below 7550 levels, these stocks can decline more than other Nifty stocks. Corporate earnings will remain a major trigger for Indian markets for this week also. On the economic data front, Balance of Trade, IIP data, Inflation and Manufacturing Production data are the major ones.
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 email@example.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).