Retail inflation flares up

Rising prices of food means more woes for the common man and an impact on the Consumer Price Index

Profit booking were seen ruling the markets in the last week. But positive economic data supported the markets. In the week gone by, Nifty remained in a narrow range and traded most of the time in between 8063 (50 DMA) and 8206 (100 DMA).

Investors can create a call ratio spread by buying Nifty 8200 call one lot and can sell 8400 two lots of call if the Nifty moves above the 50 DMA with volumes in this week. If Nifty moves down below 8063 then one can buy 8100 put options rather than creating a call ratio spread.

On the back of higher food prices, the country’s retail inflation rose in September. The Consumer Price Index (CPI) based inflation stood at 4.41 per cent from 3.74 per cent in the last month. The data for the same month last year stood at 5.63 per cent.

According to data that was released, rural inflation was at 5.05 per cent and urban inflation was at 3.61 per cent. Overall food inflation stood at 3.88 per cent as compared to 2.2 per cent in August. The rural food inflation rate was 4.05 per cent and the urban food inflation was at 3.45 per cent.

Segment rise
On the back of rise in all segments, industrial growth for the country rose to nearly a three year high in August. The IIP data rose to 6.4 per cent from 4.1 per cent in July. The earliest high level was in October 2012, when data was at 8.4 per cent. For the April-August period, data was at 4.1 per cent against 3 per cent, a year ago.

The manufacturing sector, which has weightage of 75 per cent of the index, grew by 6.9 per cent in August against a contraction of 1.1 per cent in the same month last year. The mining sector growth was at 3.8 per cent in the period under review as compared to 1.2 per cent in the same month last fiscal.

Capital goods showed an impressive growth of 21.8 per cent as against a contraction of 10 per cent in the same month last year. Whereas, the power generation growth slowed to 5.6 per cent in August as compared to a 12.9 per cent in the same month last year.

On the back of new launches and a recovery in the economy, car sales in the country rose 9.5 per cent in September. The domestic passenger car sales stood at 169590 units as compared to 154898 units in the same month a year ago.

According to data from SIAM (Society of Indian Automobile Manufacturers), the total passenger vehicle sales rose 3.8 per cent. Motorcycle sales declined 2.87 per cent and the total two wheeler sales in September declined 1.06 per cent. The sales of commercial vehicles were up 12.07 per cent and vehicle sales across the categories showed a 0.45 per cent decline.

World view
Global markets were up at the start of last week on the hope that the Federal Reserve may keep its interest rates near zero this year. Also, the earnings season was in focus. On the Chinese front, trade was weak which made the markets lose some of its gains.

In the US market this week, the major data may be housing, markit manufacturing PMI, existing home sales, initial and continuing jobless claims. In the Euro zone area, consumer confidence, current account, construction output, markit manufacturing PMI, services PMI and ECB interest rate decision will be in focus.

For the Indian markets, corporate earnings will be the major trigger. The important ones in the list are HCL Tech, Blue Star Info, Federal Bank, Bajaj Finserv, ACC, Bajaj Auto, Wipro, Tata coffee, Idea, KPIT, IRB, Asian Paint, Rallis, Symphony, Raj TV and Infratel.

Gold outlook remains positive after the US Federal Reserve’s decision to postpone the interest rate hike, and there are even speculations that US Fed may hike interest rates only in the month of March 2016. Postponement of rate hike was positive for gold, and it surpassed $1190 per troy ounce. It may get support at $1176 and $1168, a move above $1190 will give further boost its price.

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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