Corporate earnings lead the way

Aug 03, 2015, 08:40 IST | Alex K Mathews

Cabinet approval of the GST bill that has recommendations from parliamentary panel was a strong trigger

Last week, the focus in the markets was corporate earnings. Nifty was seen below its 50 and 200 DMA. Along with a fall in the Chinese markets which added pressure to the markets.

Eyes on Raghuram Rajan
Eyes on Raghuram Rajan

But the consistent buying ahead of the July F&O expiry and the news that the Cabinet approval of the GST bill that incorporates recommendations from a parliamentary panel was a strong trigger.

As long as Nifty trades above 8420 (200 DMA) we can expect Nifty to test 8681. Support for Nifty is at 8408 and 8300. Investors can create a bull spread by buying 8550 call option and selling 8700 call option one lot each.

Fancy stocks
Auto stocks have once again caught the fancy of investors. Banking stocks which were under tremendous pressure are also likely to gain in the near term. Outlook for gold is weak below $1100 and support likely to emerge at $1064. The government has come out with its disinvestment program for the second time in the current fiscal year, this time with PFC (Power Finance Corporation).

The stake sale took place on July 27, and the government has fixed the floor price for the same as Rs 254 per share which is a discount of 2.14 per cent over Friday’s closing price of Rs 259.55 for 5 per cent stake on offer. At the floor price, the government is expected to garner around R1676 crore through divestment.

At present the government holds 72.80 per cent equity in PFC and the company would be the first disinvestment under the modified OFS rules of SEBI under which companies are allowed to disclose stake sale plans two 'banking' days ahead of the issue. For the current fiscal, the target of PSU disinvestment target is at R69500 crore.

Godrej Consumer Products in the last week reported a 38.88 per cent rise in its consolidated net profit on account of healthy volume growth in core categories. The net profit stood at Rs 199.23 crore as compared to Rs 143.45 crore in the corresponding period last year.

During the period under review the company’s total income from operations stood at Rs 2097.66 crore up 11.07 per cent against Rs 1888.51 crore in the last fiscal. The company has also declared an interim dividend of Rs 1 per share for the fiscal year 2015-16.

Rollover figure
For July, the rollover figure of Nifty stood at 64 per cent as compared to 59 per cent in the previous month. But the rollover was at 66 per cent for May 2015. The Bank Nifty and IT saw a rollover of 77 per cent and 62 per cent respectively. Company results were the focus on the global front also. The US Federal Reserve’s policy meeting was a major trigger.

In the FED’s meeting, the US central bank said that the economy and the jobs market are continuing to be strengthened. The FED also kept its interest rates unchanged which provided a positive base to the markets.

For the US markets, the data in the limelight will be manufacturing PMI, construction spending, total vehicle sales, factory orders and balance of trade, initial and continuous jobless claims. Retail sales, Services PMI and manufacturing PMI are the important triggers in the Euro zone area. On the Chinese front, balance of trade, inflation data and manufacturing PMI will be the major triggers.

For the Indian markets, manufacturing and services PMI will be the trigger for this week. Also the RBI policy meet will be in focus. Along with this in the earnings corner, companies like Bharat Forge, Hero MotoCorp, Kalindee, Atul Auto, Bharti Airtel, FDC, Siemens, Tata chemicals, Hexaware, Britannia, Godrej Properties, Deepak Fertilizers, Bomdyeing, Motherson Sumi, Tata global, Trent, Cummins India and Bata India will be in focus.

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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