Several crucial calls and global tensions cause trepidation
The markets opened flat in the beginning of last week, but remained direction less throughout the week. There were many economic factors affecting the markets in both ways. The first was the WPI data, which rose an annual 7.25 per cent in June against 7.55 per cent in May. It slowed to its lowest level in five months in June, helped by the increase in fuel price.
The government made many crucial decisions last week. The government imposed about 21 per cent duty on imported power gear, to guard against low- priced equipment from China. The cabinet was considering change in the Forward Contract Regulation Act (FCRA) bill to give more powers to commodity market regulator FMC, by providing financial autonomy and allowing entry of institutional investors in the market. The finance ministry is considering using the Specified Undertaking of UTI or SUUTI as a holding company for all state-running banks in a bid to fast track its budget proposal to raise capital through bonds. The Food Ministry has proposed imposing 10 per cent import duty on sugar as the country has surplus production.
In the beginning of last week, IMF cut India’s economic growth estimate from 6.8 per cent to 6.1 per cent in 2012 as external demand slowed down and domestic demand decelerated. It attributed the slow domestic demand to capacity and monetary tightening by the RBI. India’s export fell to the second month in June and the more decline imports brought, which brought down the trade deficit to a 15-month low.
There was news of the resignation of two prominent leaders from the Cabinet, which made the markets remain in negative in the last trading day of last week. The Ministry has directed state-run banks to come up with a uniform rate for borrowing in the wholesale, or bulk markets, as it attempts to improve the profitability of lenders. The Power Ministry has agreed to the model for price pooling of coal.
The Met department said that monsoon will soon gather momentum as favourable conditions are building up over the Bay of Bengal which will bring showers to the rice, oilseeds, pulses and coarse cereal growing states by mid-week. Also the earnings that came last week such Axis Bank Bajaj Auto were in line with expectations.
On the international front, markets in the start of Ben Bernanke's gloomy view on the US economy made up hopes of a new monetary policy. But on the last day, selling was seen in the markets on the Europe crisis. Oil prices were also seen down on the concerns of Middle East tension, which may affect supply. The drought in the US made commodities like corn and soybean hit a record high.
Kotak Mahindra Bank April-June net up 6.49 per cent caused heavy selling at this counter. The stock has support at Rs 555 and Rs 543. The outlook for the rupee is also remains sideways; it has support at 55.5525 and resistance at 55.03000. A breakout on either direction can give a clear picture on the future course of the market.
The outlook for the crude is firm and it is likely to move towards $93.56 and $ 95 due to tensions between Iran and U.S. Lower level support can be expected $90.70 and $89.11.
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).