Reserve Bank push

In its first monetary policy of the financial year, the central bank kept its key interest rates unchanged, which is a positive

Volatile trading was seen in the first half of the last week, as investor focus was on RBI’s policy meet in the earnings season. The news of Moody’s upgrading of India’s sovereign rating and positive from global cues supported the markets to an extent.

But profit booking was also witnessed. On a weekly basis, Nifty ended up around 2.3 per cent whereas Bank Nifty closed up around 1.1 per cent. The midcap and smallcap sectors ended up around 3.7 per cent and 6.3 per cent respectively.

Last Thursday and Friday saw markets consolidating above its 50 day moving average. This gives us hope of a further uptrend which can take Nifty towards the 8900 levels and support for Nifty stood at 8717 (50 DMA).

Aggressive buyers can buy Nifty 8800 call options and can hold on the positions for another few more days because the improving Nifty put-call ratio is suggesting lower levels.

Manufacturing sector
The manufacturing sector output rose after a two month decline on the back of increase in new orders. The HSBC India Purchasing Managers’ Index (PMI) rose to 52.1 in March from 51.2 in the previous month. The new orders index stood at 53.2 in the month under review as compared to 51.9 in February.

The government has started its disinvestment programme for the current fiscal last Wednesday by selling 5 per cent stake in Rural Electrification. The government had raised over Rs 1550 crore (at a floor price of Rs 315 a piece) from the issue. In the last week, the global rating agency Moody’s raised its rating outlook on India to ‘Positive’ from ‘Stable’.

The major reason behind the outlook change was because the agency believed that policy makers in the country may enhance India’s economic strength. Moody’s maintained its rating on India and also mentioned that the country’s structural advantages, supported by favourable liquidity conditions and economic diversity will keep India’s growth above its peers.

The other rating, Fitch rating maintained its stable outlook for India. The agency also raised its forecasts for real GDP growth to 8 per cent for the current financial year and further to 8.3 per cent in 2016-17 as compared to 7.4 per cent GDP growth in 2014-15.

Unchanged interest rates
In its first monetary policy of the financial year, the central bank kept its key interest rates unchanged. The RBI maintained the repo rate at 7.5 per cent and the kept the CRR unchanged at 4 per cent. The reverse repo is got adjusted at 6.5 per cent. Earlier, the Reserve Bank reduced its key interest rates twice, outside the regular policy meetings.

RBI said that outlook for growth is improving gradually and has now decided to wait for ‘more convincing data’ on inflationary pressures. RBI also hinted that the uncertainty in the arrival and distribution of the monsoon and unanticipated global developments were two major risks to baseline growth projections and growth output for 2015-16 is projected at 7.8 per cent. Crude is weak below $53.40 and likely to get support at $49.40 and $48.40 in the short term.

In the beginning of the last week, the US markets got boost from the labour market data which fuelled the expectations that the Federal Reserve may delay its interest rate hike further. The minutes from the FED showed that the central bank may remain on track for a rate hike this year. The Asian markets remained mixed.

In the US markets, in the week to come, the data to be watch out includes retail sales, manufacturing and industrial production, initial jobless claims, housing starts, continuing jobless claims, inflation and core inflation and consumer sentiment data. In the Euro zone, the triggers are industrial production, balance of trade, current account, inflation and core inflation and the ECB’s monetary policy.

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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