Last week, the markets closed in negative territory on the backof high level selling and weak economic data. Nifty closed down at around 1.4 per cent on a weekly basis. The midcap and smallcap sectors also closed down at around 1.1 per cent and 1per cent respectively. Nifty had resistance at 6125 and 6160 levels. Movements higher than these two levels can give furtheruptrend to the market. On the other hand, if it breaches key support at 5998, then it may test 5962 and more in the coming days.
The pharmaceutical company, Suven Life Sciences, came out with its quarterly numbers. The net profit of the company stood at Rs 45 crore in the second quarter, which ended on September 30 2013, as compared to Rs 6.48 crore in the same period last year. Total revenue of the company stood at Rs 151 crore against Rs 50 crore in the corresponding quarter of the previous fiscal year. Suven has spent 9.8 per cent of its revenue on research and development during the half-year, which ended in September 2013. It had 607 product patents for 18 inventions and 35 process patents. The company said that the profit growth was due the introduction of one new product, in addition to twoproducts under contract research and manufacturing services.
For October, domestic mutual funds sold shares worth more than Rs 4,000 crore on the back of profit booking. According to SEBI, the funds offloaded shares worth net Rs 4018 crore in the equity market in October. These are under review, as compared to Rs 2800 crore in the previous month. The mutual funds net withdrawal from the stock market has reached more than Rs 9200 crore since the beginning of the year (January- October). On the other hand, mutual fund investors invested a staggering Rs 37,171 crore, in debt schemes in October. In comparison, Foreign Institutional Investors (FIIs) made a net inflow of more than Rs 15,000 crore during last month.
In order to attract inflows, the central bank of India allowed SEBI registered FIIs, and qualified foreign investors to invest in the credit enhanced bonds, up to a limit of $ 5 billion. The circular is also applicable to long term investors registered with SEBI. Reserve Bank of India (RBI), said these investments would be within the overall limit of $ 51 billion, set for the corporate debt. The present limits for investments by FIIs, QFIs and long term investors are registered with SEBI in government securities which are of $ 30 billion.
As the street saw a mild recovery in industrial output, but on the other hand, the retail inflation rose to double digits after a gap of seven months on the account of a surge in vegetable and other food prices. The consumer price inflation stood at 10.09 per cent in October as compared to 9.84 per cent in the previous month. The inflation for the rural and urban areas for the period under review stood at 10.11 per cent and 10.20 per cent respectively.
On the global front, the better than expected US nonfarm payroll data made the US markets trade higher. But the other markets were trading lower, on the concerns that, the Federal Reserve (FED) may start reducing its stimulus plan earlier than estimated. But coming to the end of the week, Americans cheered the news of FED’s nominee, Janet Yellen’s comments, that the before stimulus cut of the US economy must improve. All other global markets also remained in a mixed trend.
Gold is oversold and it is getting support at $1266 and $1272 and has immediate resistance at $1305 and $ 1316 levels. Price declines can be utilised to buy the commodity rather than selling it at the market price. Investors who would like to trade in the index futures can buy 6100 call options along with 6000 put options. Another strategy which is risky, is selling 6300 call options and selling 5800 put options together.
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).