The highs and lows

On the back of strong corporate earnings and positive turnover in the global front, the markets last week ended up at around 1.5 per cent. Strong FII buying last week also supported the markets. Nifty is likely to test 6229 in the near term. As the extreme short term indicators are in the over bought zone, we can expect sideways movements well above 6229.

The index of Industrial Production (IIP) which came in earlier slowed to 0.6 per cent in the month of August from an upwardly revised 2.75 per cent in the previous month. The numbers remained disappointing, but the analysts expect a better in the coming quarter as of better exports. Capital goods production contracted by 2 per cent in August from a year ago period, and the consumer goods sector also saw a negative growth of 0.8 per cent. The basic goods and electricity sector production grew 1.5 per cent and 7.2 per cent respectively as compared to 1.7 per cent and 5.2 per cent respectively from the month of July. The non durable goods growth was reported at 5 per cent against 6.8 per cent in the July month.

The earnings also remained an attractive part of the week. The Mid size MindTree last week announced it’s quarter numbers for the September quarter, which showed a jump of 78 per cent in the net profit. The company reported a net profit of Rs 128.70 crore as compared to Rs 72.40 crore from a year period, and the revenues stood at Rs 769.60 crore in the quarter that ended on September 30, 2013 against Rs 596.30 crore. This is a 29 per cent increase from the same period last year. In dollar terms, the company reported revenues of $ 124 million, a 15.6 per cent rise from a year earlier and thenet profit was at $ 20.7 million, 61 per cent higher than a year ago.

The private sector bank, Development Credit Bank (DCB), reported its earnings last week, which showed a 50 per cent increase in the net profit. The net profit of the bank was at Rs 33.09 crore for the second quarter that ended in September as compared to Rs 22.13 crore in the same period last fiscal, 2013-14. The total income rose to Rs 296.08 crore in the July-September quarter from Rs 247.46 crore in a year ago period. The bank reported a total income of Rs 601.92 crore for the first six month of the current fiscal, compared to Rs 488.51crore in a year ago period. The net profit for the six months in2012-13, stood at Rs 75.91 crore against Rs 41.01 crore in the last year same period, indicating a rise of 85 per cent rise.

On the back of rise in the food prices, the retail inflation for the month September rose marginally to 9.84 per cent. The data was at 9.52 per cent in the previous month. For the rural and urban area, the retail inflation stood at 9.71 per cent and 9.93 per cent respectively. They were 8.93 per cent and 10.32 per cent in the month of August. Vegetable prices rose by 34.93 per cent in the period under review as compared from 26.48 per cent in the previous month. The retail food inflation index accelerated to 11.44 per cent in September. The rise in the inflation has dampened the hopes of the markets for a rate cut.

In the beginning of last week, the global markets were weak on the concerns regarding the US government shut down and on the chances of debt default of the country. But coming to the middle of the week the US lawmakers decided to sign a deal for raising the debt limit for a short term which may otherwise go default on October 17, and to end the government shutdown which started from October 01, helped the markets around the globe to take some breath.

Gold is looking strong and is likely to test 1335 and 1348 in the near term, with support at $1312 and $130. The investors with short term perspective can buy stocks like Lovable, Karur Vysya Bank, Oil India, Ramco Systems and L&T Finance.

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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