The Indian markets in the last week swung in between gains and losses. But strong buying by foreign institutional investors and positive cues on the global front made the markets hit its all time high on Friday. Nifty closed at 7583 up around 4.9 per cent on weekly basis. The outlook of the market is positive and it is having a short-term target of 7700. Immediate minor support for the Nifty is at 7500 and 7402.
Rise and fall
In the last week, the services data came out which returned to growth after a contraction of 11 straight months on the back of increase in orders. The HSBC services Purchasing Manager’s PMI data for May stood at 50.2 points against 48.5 in the previous month. The reading above 50 points shows an expansion whereas the level below shows a contraction. The composite output index rose to 50.7 points in May from 49.5 in the previous month, an expansion for first time in three months.
Blue Star announced better earnings, where the earnings rose 130.67 per cent in the quarter that ended March 2014. The net profit stood at Rs 42.79 crore in the quarter under preview as compared to Rs 18.55 crore during the previous quarter that ended March 2013. Sales also rose 1.44 per cent to R 863.15 crore in the quarter that ended March 2014 as compared to Rs 850.89 crore in the same quarter that ended March 2013.
For the full year that ended March 2014, the net profit was at Rs 75.90 crore, it rose 46.72 per cent from Rs 51.73 crore in the previous year that ended March 2013. Sales stood at Rs 2751.20 crore for 2014 as against Rs 2740.55 crore in the previous year that ended March 2013.
For April 2014, the output of the eight core industries increased on the back of healthy turn around in the electricity, fertilisers, cement and coal sectors. The output of eight core industries increased 4.2 per cent in April which was up from 2.5 per cent in the previous month. The growth in the eight-core sector in the same month last year was at 3.7 per cent.
Electricity production increased 11.2 per cent in April 2014 from 3.5 per cent in April 2013. The fertilisers, cement and coal sector reported a growth of 11.1 per cent, 6.7 per cent and 3.3 per cent in the period under review. Steel production increased 3.1 per cent as compared with 10.1 per cent in the same month last year. At the same time crude oil, natural gas and petroleum refinery products contracted 0.1 per cent, 7.7 per cent and 2.2 per cent respectively in the same period.
On the global front, the US markets were up in the beginning last week with hopes that the ECB may deliver monetary stimulus in its week’s meeting. Also, the Chinese data was supportive. Chinese manufacturing data is expected to be faster in five months and policy-makers also said they will cut the requirement ratio for some banks. But Chinese services data which fell to a four-month low added some pressure to markets.
The ECB’s monetary policy which came out on Thursday gave the markets again a reason to rise. The ECB cut its interest rate to -0.10 per cent and said it will move further to persuade banks to lend. Also, the European central bank said that its governing council will intensify preparations related to outright purchases of asset backed securities.
For this week, the main events to watch out for in the Indian markets include inflation data, manufacturing and industrial production data. Sugar stocks like Shree Renuka and Dhampur are looking strong on the charts. Investors can buy Nifty 7700 call options and 7400 put options June series together on anticipation of sharp swings on both the sides.
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 firstname.lastname@example.org. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).