Follow the trigger with rigour

Feb 24, 2014, 08:32 IST | Alex K Mathews

Weak global cues and the Union Interim Budget set the direction for the past few days

The markets last week remained in a tight range tracking weak global cues. We can safely assume that we may see a level of 6175 from Nifty at first, and from thereon, we can expect profit booking. Later though, in the coming days the market may trade subdued without many positive triggers. Nifty will have support at 6069 and 6000.

The major trigger the markets were waiting for last week, was the Union interim budget. On Monday, the Finance Minister presented the interim budget for the fiscal year 2014-15 with the following major highlights. The GDP expansion in the third and fourth quarters of 2013-14 was estimated at 5.2 per cent and for the same period, the fiscal deficit was seen at 4.6 per cent.

The factory gate tax on some capital goods and consumer durables were reduced to 10 per cent from 12 per cent. Excise duty on small cars, two wheelers and commercial vehicles were reduced to 8 per cent from 12 per cent. For the fiscal year 2014-15, the government is set to provide Rs 112 billion rupees capital infusion in state run banks.

For the quarter ended December 31, 2013, ABB reported a more than three fold rise in the net profit. The net profit increased to Rs 58.5 crore from Rs 16.7 crore in the same period last year. Revenue of the company grew 6 per cent to Rs 2175 crore and the EBITDA also rose to 7.9 per cent from 5.3 per cent in the corresponding quarter of the previous year.

For October to December, the company received orders worth Rs 1666 crore, a 5.5 per cent increase over a year ago. The full year 2013 order book stood at Rs 6717 crore while the order backlog was Rs 7709 crore as on December 31.

Foreign Investors seem to be shifting their money from large caps to mid cap stocks as the latter has shown a spectacular performance in the past three months. The BSE mid-cap index has surged 15 per cent in the past three months as compared to the Sensex.

Mid cap stocks like Aurobindo Pharma, PI Industries, TVS Motors, Arvind, Infotec ENT, Apollo Tyres and Indian Bank rose between 50 per cent and 100 per cent during the period. Rising stakes were seen in companies like eClerx Services, Polaris software, Amaraja Batteries, Aurobindo Pharma, Persistent System, petronet LNG, HDIL, Natco Pharma and Omaxe during the December quarter.

From February 26, 2014 futures contracts on the volatility index, India VIX futures will be available for trading which will be a series of three serial weekly contracts with a contract size of Rs 10 lakh and a tick size of 25 paisa. The price of the futures will be quoted multiplying India VIX by 100 and it will be quoted up to four decimal places with a tick value of 0.0025.

The futures will be cash settled and will be settled on a T+1 basis. The daily settlement will be done at the volume weighted average of the last hour's prices of the futures contract and the final settlement will be done at the closing price of the underlying index. Volatility is the rate and quantum by which price of equity/debt/currency fluctuate.

In the US markets, the economic data remained mixed last week. Consumer confidence for 4.5 years. Another major event that the markets were focusing on was the release of the FED's minutes for the January policy meet. In the meeting, the US Central decided to continue tapering of its bond buying program.

In the mid cap segment, counters like KPIT, Voltas, Ajanta Pharma, JB Chem., Finolex Industries, Aditya Birla Chemicals are looking very strong. For Indian markets, the major trigger will be the GDP data to be announced on February 28 2014, after market hours.

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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