Stable predictions amidst instability

The Finch rating predicts a stable outlook for India, but a fall was registered by the Nifty and Sensex through the week gone

In the last week, domestic markets were mainly affected by global bourses’ movement. Also, stalled Parliament activities and Nifty trading well below key moving averages, added fuel to the fall.

Nifty has resistance at 7767 and 7800 levels. It tested a low at 7575 and is likely to test 7539 and 7500. Aggressive traders can buy Nifty 7500 put options alone. Gold is weak; support at $ 1055 and resistance at $ 1085 per troy ounce.

Rating
Fitch rating has affirmed India with a rating of BBB with a stable outlook. It also forecasted growth at 7.5 per cent in the current fiscal and 8 per cent next year. The rating agency said, growth may be supported by the government’s capital expenditure and gradual implementation of a broad based structural reform.

It also expects the current account deficit to drop to 1.1 per cent of GDP in 2015-16. According to a report, the domestic passenger car sales jumped 21.80 per cent to 194158 units in October from 159408 units in the same month a year ago.

According to Society of Indian Automobile Manufacturers (SIAM), the motorcycle sales rose 5.66 per cent to 1065856 units in the month under preview. The total sales of two wheelers rose 13.31 per cent to 1656235 units as against 1461712 units in October 2014.

Vehicle sales across categories showed a 13.91 per cent increase. According to Paris think tank Organisation for Economic Cooperation and Development (OECD), India is witnessing a firming growth despite most developed and developing economies showing mixed trends.

The OECD conclusion was based on Composite Leading Indicators (CLIs) that are designed to anticipate turning points in economic activity relative to trend. In October, India’s CLI inched up to 100.30 from 100.1 in September.

Domestic
The present flow of markets and domestic investors are focusing on stocks which have less FII holdings. According to a study, over 70 per cent of NSE 500 stocks with FIIs having holding of less than 10 per cent have outperformed the broader market.

Some of the gainers were Godfrey Philips, Parsvnath Developers, Lanco Infratech, Titagarh Wagons and First Source solutions. Companies having more than 10 per cent FIIs holding like Dr Reddy’s Lab, UPL, Rallies and Kolte Patil has declined between 15 per cent and 25 per cent in the past one month. In November, the indirect tax collection rose on the back of rise in the excise duty.

The indirect tax collection which includes excise duty, customs duty and services rose 24 per cent in the period. According to a report, India’s economy is projected to grow by 7.3 per cent next year and will be the fastest growing economy in the world in 2016 and 2017 despite global conditions.

United Nations World Economic Situation and Prospects 2016 report said India will witness an economic growth of 7.5 per cent in 2017. The report specified China will see a slowdown in 2016 to 6.4 per cent from 6.8 per cent it had achieved in 2015 and a growth of 6.5 per cent in 2017.

The global growth is expected at a mere 2.4 per cent in 2015 marking a downside revision by 0.4 per cent from what was estimated earlier. US markets were boosted by the strong employment data last week. The data suggested that the economy is strong enough to contain a central bank rate hike. Global moves were affected by China’s data.

Trade data
Exports fell by 6.8 per cent in November and imports were down 8.7 per cent. Now all eyes are on the FED policy meet. For the week, in the US markets — inflation, core inflation, industrial and manufacturing production, current account, initial and continuing jobless claims along with Federal Reserve’s policy meet will be in focus.

Industrial production, markit manufacturing PMI, composite PMI, balance of trade, core inflation, inflation and current account are the Euro zone data. For Indian markets, manufacturing, inflation and balance of trade will be vital.

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.

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