A turn for concern

Aug 24, 2015, 09:43 IST | Alex K Mathews

Sell offs, monsoon worries and weak Chinese cues cause flurry

Domestic markets saw a sell off in almost all counters on the back of weak Chinese cues. Nifty crossed below key support levels adding to pressure.

Going forward Nifty may test 8128 in first major support level. Nifty has resistance at 8393 and 8457. Moody’s Investors Services, the rating agency lowered India’s growth forecast because of concerns about the monsoon and slow progress of reforms.

The global rating agency has reduced the country’s GDP forecast to 7 per cent for 2015 from 7.5 per cent estimated earlier. Moody’s retained its growth forecast for 2016 at 7.5 per cent. The global rating agency maintained its baseline GDP growth forecast for China at 6.8 per cent for 2015 and 6.5 per cent in 2016.

Offer for sale
Last week, the government planned to sell 5 per cent of its stake in Dredging Corporation of India. The stake sale is through ‘Offer for sale’ mode where the government will sell up to 14 shares of face value of Rs 10 each representing 5 per cent of the total paid up equity share capital of the company.

The floor price is fixed at RS 382 per share, which is likely to fetch Rs 54 crore. The offer took place on a separate window of Stock Exchanges and started on August 21, 2015 at 9.15 am and closed on the same day at 3.30 pm.

A minimum of 10 per cent of the size of the offer was reserved for retail investors and no single bidder other than mutual funds and insurance companies shall be allocated more than 25 per cent of the offer shares. In the current fiscal, the government is planning to raise Rs 69500 crore from the disinvestment.

The central bank has given its nod to 11 payment bank applicants. The payment banks differ from conventional banks as it cannot lend to its customer and it is only allowed to take deposits, allow remittances and provide simple financial products.

The payment will need to invest 75 per cent of its funds in government securities and the minimum capital needed is set at Rs 100 crore. The bank will be allowed to accept savings deposits of up to Rs 1 lakh from each customer. Some of the major ones in the list include, National Securities Depository LTD (NSDL), Reliance Industries, and Aditya Birla Nuvo.

Net profits
Vadilal Industries LTD came out with its earnings where the net profit of the company rose 58.75 per cent. The net profit for the first quarter of the current fiscal stood at Rs 21.36 crore as compared to Rs 13.45 crore for the same period last year.

The net sales for the period under preview were at Rs 182.40 crore as compared to Rs 167.61 crore a year ago. The earnings per share stood at Rs 29.72 against Rs 18.72 for the same quarter in the financial year 2014-15. The company is in the ice cream and frozen foods business.

The positive data from the US front and the bailout program did not make a big impact on the markets. On the economic front, the Chinese manufacturing data fell to the lowest level in more than six years.

Also, the other trigger was the US Federal Reserve’s minutes, where the official was satisfied with the improvement of labour market conditions but expressed concerns on sluggishness of inflation.

Pharma, IT and FMCG stocks will remain in focus this week. Minor short covering can be expected in the frontline four wheeler stocks. For the US markets, the major triggers will be Markit manufacturing PMI, consumer confidence, new home sales, markit services PMI, durable goods order and continuing jobless claims. Economic sentiment, industrial sentiment, consumer and business confidence will be in the watch out list for the Euro zone area.

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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