Rebound, we found

Buying of stocks post sell off and an improvement in global cues reverse gloomy situation

The sustained Foreign Institutional Investors selling in the domestic market and weak global cues were seen ruling market sentiments, in the early part of last week. But the buying of selected stocks after the recent sell off, and the improvement in global cues, made the markets rebound on Thursday and Friday.

On Friday, Nifty ended at 6063. Nifty has a resistance at 6100 and 6138 and above these two levels, Nifty can further move towards 6200. On the other hand, a move below 5970 may destabilise the market rhythm, and it may retest either 5933 or move down below 5880.

During last week, India’s manufacturing sector data for January came out, which expanded at the strongest pace in the past 10 months, on the back of better growth in export and domestic orders. The HSBC India Manufacturing Managers’ Index stood at 51.4 against 50.7 in the previous month, which is also the highest reading since March 2013. The data was also expanding for the third consecutive month in January and a reading above differentiates growth from contraction.

On account of fall in food prices, the retail inflation for industrial workers fell to 9.13 per cent in December, as compared to 11.47 per cent in November and 11.17 per cent in the same month, previous year. The food inflation was at 11.49 per cent in December, against 16.17 per cent in the previous month and 13.53 per cent, in a year ago period. According to the data, the all India Consumer Price Index (CPI) for industrial workers for December 2013, declined by four points and pegged at 239 points.

For the quarter that ended in December 2013, Suven Life Sciences reported over a four fold increase in the standalone net profit, on account of higher sales. The standalone net profit of the drug firm stood at R 36.43 crore, as compared to a standalone net profit of Rs 7.75 crore in the same period for a year ago period.

The net sales for the quarter under review were at R 119.42 crore, as against Rs 62.39 crore in the year ago period. The overall expenses were at R 66.79 crore, in the October - December quarter, as compared to Rs 49.71 crore during the same period of 2012.

Whirlpool of India, reported a two fold increase in the net profit to Rs 21.25 crore, for the quarter that ended on December 31, on account of higher growth in revenues. The net profit of the company for the October — December quarter of 2012-13 was at R 10.07 crore. The net sales for the quarter under review increased to Rs 647.15 crore from Rs 598.33 crore, for the same period last year.

Globally, weak corporate earnings and concerns on the emerging markets made US markets sink in the beginning of last week. Also, of the weak economic data, the investors thought that the Federal Reserve may rethink on their stimulus withdrawal. But coming forward, the better earnings reversed the market sentiment and its direction. All other markets were simply following in the footsteps of the US markets.

On the Asian front, watch out for the Chinese balance of trade and inflation data. In the Eurozone area, the industrial production, balance of trade and GDP growth rate will be in focus. While in the US, retail sales and initial jobless claims data will be in focus.

If there is a sell-off then HUL, ITC, Reliance, SBI, TCS, INFY and Hindalco are set lose faster than other counters. So it is advisable to buy put options these counters for the short term perspective. In the stocks’ session Biocon and Asian Paints can be bought for a medium term. The outlook of international gold is positive and is likely to test $1268 and $1280 in the near term. The support lies at $1250 and $1235 dollars per troy ounce.

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 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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