RBI trigger

The policy meet last week saw key interest rates unchanged, with high retail inflation cited as the reason

Last week, the banking sector stocks provided support to the markets. News of capital infusion by the government and the RBI policy meet kept stocks in the limelight. But the higher level profit booking kept the markets away from more highs.

Nifty is likely to test 8690 and 8700 in the short term and Nifty has support at 8517 and 8437 will act as a support for the market. Brave hearts can buy 8500 Nifty put options when Nifty is at around 8700 on expectation that market may not scale up above this resistance level.

Sector rises
On the back of rise in new business orders, the country’s manufacturing sector rose and touched a six month high in July. Nikkei India manufacturing PMI rose to 52.7 in July from 51.3 in June.

It was highest since January’s 52.9 points. A figure above 50 represents expansion while the one below means contraction. As per the report, the growth of new export business orders accelerated in July and was pronounced in five months.

A major trigger for the Indian markets in the last week was the RBI’s policy meet where the central bank kept its key interest rates unchanged citing high retail inflation as reason. RBI in its third bi-monthly monetary policy meet kept unchanged the repo rate at 7.25 per cent and the CRR at 4 per cent and. Reverse repo stood at 6.25 per cent.

The central bank reduced the consumer inflation forecast for January-March FY16 by 20 basis points but maintained full year projection at 6 per cent. RBI also said that further moves will be based on taking cues from inflation rate, monsoon and US monetary policy.

The country’s core sector data came out. It showed that the sector grew at a slower pace of 3 per cent in June as compared to a six month high of 4.4 per cent in May. The data which have a combined weight of 38 per cent in the IIP stood at 8.7 per cent in the same period last year.

Barring fertilizers and steel, all other sectors show a slower pace growth. The coal sector grew at 6.3 per cent in the month under review while the crude oil growth shrank by 0.7 per cent, natural gas production contracted 5.9 per cent in June. The fertilizer production was up 5.8 per cent whereas the steel output was higher at 4.9 per cent in June 2015.

Corporate earnings
The mutual fund managers have infused an amount of over Rs 4300 crore but they pumped in nearly R31000 crore in the debt market last month. According to the official data from SEBI, the mutual fund managers invested Rs 4339 crore last month as compared with Rs 10325 crore in June.

Since May 2014, they have made a net investment of more than Rs 70000 crore in Indian equities. Bajaj Electricals announced its first quarter in the week, where its standalone net profit rose over three fold on the account of turnaround in engineering and projects division.

The net profit of the company stood at Rs 20.34 crore as compared to Rs 5.63 crore in the same quarter last year. For the quarter that ended June 2015, KEI industries reported a 234 per cent year on year growth in the net profit at Rs 11.7 crore.

The profit for the same period last year was atR3.50 crore and for the entire financial year 2014-15, the company reported a net profit of Rs 34.20 crore. The total income for the quarter increased by 32 per cent at Rs 518 crore against R393 crore in the corresponding quarter of the previous fiscal. The company is engaged in the cable business.

International
Chinese weak manufacturing data, which fell to a five month low kept the markets under pressure. Also, the profit booking and mixed earnings kept the markets around the globe in the negative zone. For the Indian markets the major triggers will be Industrial Production, Manufacturing production, inflation data and balance of trade.

Along with these data, earnings may be in focus. SICAl, Power Grid, RCF, GMDC LTD, J&K Bank, India Glyco, HDIL, Tata Steel, , BOSCH LTD, GNFC, Graphite, SBI, Timken, SCI, Wheels, Zicom, Global offshore, STC India, MMTC, ONGC, Rajesh Expo, MEP, Eros Media, BEML, Elecon, PFC, Kwality and Suven are some of the companies that may announce their earnings.

Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. The author may have a vested interest in investments he has recommended.

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