A falling tale

May 05, 2014, 09:21 IST | Alex K Mathews

Weak global cues and profit bookings cost the Indian markets dearly. Strong FII buying however, helped to keep trading afloat to some extent

For most days in the last week, the Indian markets fell as of the weak global cues and profit booking. But the strong FIIs buying saved the markets from a drastic fall. The Indian markets last Thursday remained closed on the back of May Day. Nifty closed at 6694 down around 1.3 per cent on a weekly basis. For the week, Nifty has support at 6650 and resistance at 6870.

Sectoral growth
In March, the growth in the output of the eight core sectors fell to 2.5 per cent from 4.5 per cent in the previous month. The official data showed that for 2013-14, the production in these sectors rose 2.6 per cent which was the lowest in at least nine years. The core sector growth for 2012-13 stood at 6.5 per cent.

Downfall in the fertilizer, natural gas and crude oil segments caused the pull back in March, whereas cement production remained flat and the electricity growth nearly halved. The natural gas sector's production fell 9.3 per cent as compared to 4.4 per cent in the previous month, along with fertilizer which also fell 6.1 per cent. Steel was the only sector which showed a positive growth, as it rose 5.4 per cent as compared to 4.8 per cent in February.

UPL reported a 29 per cent increase in the consolidated net profit on account of higher sales. The agro chemicals company's net profit stood at R 360.28 crore for the quarter that ended March 31 as compared to Rs 278.40 crore in the same quarter last fiscal. Total income during the same period of 2013-14 increased to Rs 3338.31 crore from Rs 2820.33 crore in the same period a year ago.

The consolidated net profit for the year 2013-14 rose to R 949.79 crore as compared to R 774.60 crore in 2012-13. The total income of the company also rose to R 10770 crore from R 9185.70 crore in 2012-13. The company also announced 200 per cent dividend of R 4 per share on the face value of R 2 per share.

Company profits
In the last week, the FMCG company Marico Ltd came out with healthy numbers, where the company reported 32 per cent, one year jump in the consolidated operating profit. The company reported a consolidated operating profit of R 154 crore for the quarter that ended March 31, 2014.

The operating margin also increased by 228 basis points on a yearly basis to 14.2 per cent and the consolidated operational income rose by 17 per cent to R 1072 crore. The company reported a 5.85 per cent rise in the consolidated net profit at R 88.77 crore for the quarter under review, as compared to R 83.86 crore in the same quarter last year.

The company also said that the results cannot be compared with last year's same quarter as its skincare business 'Kaya' was de-merged in October 2013. Net sales for the period rose 7.27 per cent to R 1069.81 crore as against Rs 997.25 crore in a year ago period. Gold lost major supports and it is likely to test $ 1272 and $ 1265. It can rebound during the weak towards $ 1299 per troy ounce.

Global influences
At the beginning of last week, global cues were weak on the back of concerns about Ukraine. But strong corporate earnings and economic data made the markets rebound. Apart from this, investors were waiting for the reports from the Bank of Japan and Fed's policy meet.

In its policy meet, the US central bank announced a fourth $ 10 billion cut in its quantitative easing program. Now, the monthly bond purchases are at $ 45 billion. On the other side, Bank of Japan kept the monetary policy steady and hinted no additional stimulus on the near term horizon. Now all the eyes were on the US jobs data.

For Indian markets, the corporate earnings will be watched. Companies like Emami Ltd, Canara Bank, Vijaya Bank, Titan, GE shipping, Brigade, Syndicate Bank, Allahabad Bank, GATI, Amtek Auto, Amtek India, NIIT Tech, TV Today, Ranbaxy and Timken may announce their earnings in the week.

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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