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Snakes and ladders game

After a flip-flop week phase, this week promises steady going and some major gains for investors

The markets in the last week shifted in between gain andlosses, tracking global markets. The concerns over Ukraine and Russia and signs of a possible slowdown in the Chinese economy was the negative news for the week.

Pro-Russian Crimeans wave Russian flags as they gather to celebrate in Simferopol's Lenin Square on March 16, 2014 after exit polls showed that about 93 per cent of voters in Crimea region supported union with Russia
Pro-Russian Crimeans wave Russian flags as they gather to celebrate in Simferopol's Lenin Square on March 16, 2014 after exit polls showed that about 93 per cent of voters in Crimea region supported union with Russia

But strong Foreign Institutional buying and positive economic data supported the markets. NIFTY closed at 6504, up around 0.69 per cent on a weekly basis.

With exchanges closed due to Holi on Monday and today (Tuesday), if everything goes well, the NIFTY may move above 6561 and may test 6627. On the other hand, if the world market cues are negative then we can expect a downside at 6374 and more.

Production
The Industrial production data for January which came out last week showed an uptick. The IIP data stood at 0.1 per cent against a contraction of 0.6 per cent in the previous month, which is also the highest since September 2013.

The December IIP was revised to -0.2 per cent from -0.6 per cent. Manufacturing sector which has 80 per cent of the total IIP data fell 0.7 per cent against a contraction of 1.6 per cent on a monthly basis.

Consumer durables data declined 8.3 per cent against a decline of 16.2 per cent and the capital goods segment saw de-growth of 4.2 per cent versus a fall of 3 per cent in the last month. The mining sector grew 0.7 per cent against 0.4 per cent and the electricity sector saw a rise of 6.5 per cent as compared to 7.5 per cent in the previous month.

Inflation
The wholesale price index based inflation data which came out last week, eased to a nine-month low with decline in food prices. The inflation data stood at 4.68 per cent in February as compared to 5.05 per cent in the previous month. Food inflation dropped to 8.12 per cent in the month under review against 8.8 per cent in the previous month, and overall inflation in the basket fell to 3.99 per cent from 16.6 per cent.

For February, domestic car sales rose 1.39 per cent to 1.60 lakh units as compared to 1.58 lakh units in the same period last month on the back of excise duty cut. According to the monthly report, released by the Society of Indian Automobile Manufacturers, the two wheelers sales also went up 9.69 per cent to 12.2 lakh units against 11.12 lakh units.

But at the same time, the commercial vehicles sales were still in the negative zone; and fell 30 per cent to 47,982 units in February as compared to 68,388 units in February 2013. The total light commercial vehicle sales were down 32.54 per cent to 31,610 units in the month under preview against 46,858 units a year ago.

Gains
After hitting a low in August 2013, the Rupee is the smartest gainer among the major emerging market currencies. On Tuesday, last week, Indian currency reached its seven month high of 60.60. As per last Tuesday's closing (11.03.2014) Rupee appreciated 11.4 per cent against the dollar since touching its low.

Strong currency is good for imports, including petroleum and edible oil and for travelling overseas but exporters may face the heat. After the Rupee, the Malaysian currency is the second one on the list with a 1.5 per cent gain. The Rupee has benefited from a series of measures introduced by the government and RBI.

Market
The global markets in the beginning of last week were ruled by the worries on the slowdown of the Chinese economy.

In China, the exports slid the most since 2009 in the last month and the inflation eased to a 13-month low which added to concerns of a possible deflation. More data which came out from China remained negative such as IIP data and retail sales data. But, in the US markets the weekly jobless claims data and retails sales data were positive.

The Rupee is likely to remain firm after the strong macro - economic data which came on Friday and it may help the Rupee along with FII investments flow to our country to test 60.74 in the near term against the dollar. Investors can buy Castrol, International Paper AP, GATI, Alembic Pharma and Voltas for a short term.

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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