A gloomy close last week, does not augur too well for the immediate future
The weekend witnessed markets closing in a negative zone with a weekly loss of around 2 per cent each. The gainers for the week were the telecom giant Bharti Airtel and Coal India which were up around 9.5 per cent and 1.35 per cent respectively. The losers for the week were Tata Motors and ITC, which were down around 5.56 per cent and 5 per cent respectively. In the Midcap session, the gainer was Ashok Leyland, which was up around 9 per cent and the loser was the BEML, which was down around 5.6 per cent.
The IIP data for the month September came out on Monday, which stood at 163.60, which was lower 0.4 per cent, as compared to level in the month September 2011. The downtrend was weighted by the decline in manufacturing, consumer and capital goods. The manufacturing sector which constitutes over 75 per cent of the index was seen declined by 1.5 per cent as against a growth of 3.1 per cent in the same period last year. The capital goods were seen as a contraction of 12.2 per cent as compared to the contraction of 6.5 per cent in September 2011. Consumer goods also were down around 0.3 per cent against a growth of 5.7 per cent, in the same month last year. But the mining sector rose by 5.5 per cent compared to a contraction of 7.5 per cent last time.
India's exports were down 1.6 per cent in October for a straight six-month period, which was due to troubled European countries. Exports stood at $23.24 billion, which was 1.63 per cent lower from the exports data in October 2011. On the other hand, imports were up 7.37 per cent to $ 44.20 billion against a year ago. This increased the trade deficit to $20.96 billion during October. Oil imports were seen up 31.6 per cent to $ 14.78 billion compared to the previous year and the non-oil import declined by 1.73% to $29.42 billion.
The auction of 2G mobile phone spectrum saw a disappointing response from companies, as the government was only able to fetch Rs 9,407 crore in the process though the government had a revenue target of Rs 40,000 crore. On the reforms side, the Finance Minister has asked RBI to start the process to finalising the guidelines of issuing new private banking licenses. For attracting retail investors, the finance ministry is planning to give a report on Rajiv Gandhi Equity Savings Scheme (RGESS), which may provide a 50 per cent tax deduction on investments up to Rs 50,000 to investors whose annual taxable income is below Rs 10 lakh.
On the global front, the week was weak in US as investors focused their attention on the looming US fiscal cliff. Investors may also wait for the outcome of the meeting between the US president and party leaders on deficit reduction. But Japanese stocks were trading higher on the hopes that the election in December may lead to further monetary easing. For next week, US markets may wait for the outcome of more economic data like existing home sales. Other data awaited include French manufacturing PMI, French services PMI, German Manufacturing PMI and German GDP.
Option traders can buy HUL 520 put option, Reliance Industries 780 Put option, ICICI Bank 1020 Put option and SBI 2050 put option with a holding period of two or three days. The precious metal is also weak below $1720 and it may find support at $1702, if it trades below then it may find support at $1681. Major resistance for gold is at $1741. Apollo Hospital can be bought at around 830-815 levels for a target price of Rs 875 and Rs 910 in the near term. Investors with a long-term horizon can buy M&M, Maruti, HDFC and HDFC Bank at price declines. Nifty on Friday closed below its 50-day moving average at 5625. As long as Nifty remains below this crucial support level, there are chances that Nifty may fall further towards 5500 or even below that.
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 email@example.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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