Growth galore

Nov 03, 2014, 08:25 IST | Alex K Mathews

The Sensex and Nifty are touching new highs, as investors are reaping rewards and profits

Last week, mixed corporate earnings kept investors confused over taking positions in stocks. But the buying from Foreign Institutional Investors (FIIs) and global cues supported the markets as they rallied to an all time high. Sensex and Nifty in the week closed up around 3.5 per cent.

On a high
The immediate resistance for Nifty lies at 8346 and 8400. It is prudent not to take short positions without finding suitable resistance levels. Nifty has support at 8260; a move below can cause minor sell-off. Most of the front line stocks are positive and one can create bull-spread strategies by buying at the money call options and selling out of the money call options.

In September, mutual fund investments in banking stocks dropped. SEBI data says mutual fund exposure in banking stocks fell to Rs 55398 crore by September 30, accounting for 18.84 per cent of total equity assets under management (AUMs) of Rs 2.94 lakh crore. Mutual fund managers have been raising their exposure to banking stocks since January. .

For the quarter that ended in September, the Gujarat Flurochemicals LTD posted a rise of 89 per cent in its consolidate net profit to Rs 106 crore against Rs 56 crore, in the same period last year. Net sales jumped by 80 per cent to Rs 1254 crore against Rs 695 crore in the corresponding quarter, last year. The company posted a standalone net profit of Rs 38 crore for the period under review.

Fund growth
For the July to September quarter this year, India focused offshore funds and Exchange Traded Funds (ETFs) have registered a net inflow of over $ 1 billion. In investments, India focused mutual funds registered inflow of $ 678 million while ETFs posted $ 505 million of inflow.

The strongest inflows were seen in September at Rs 490 million following the inflows of $ 171 million and $ 45 million in July and August respectively. An offshore India fund is the one that is domiciled in India but invests primarily in Indian markets. Last week, the govt relaxed norms for allowing FDI in the construction development sector. This move may boost affordable housing projects and smart cities.

The minimum built up area requirement for FDI in construction projects has been reduced from 50,000 sq m to 20,000 sq m and has halved minimum capital requirement for such projects from $ 10 million to $ 5 million.

International factors
The decline in oil prices and weak German data as well at the US markets that were down influenced the markets. The major trigger was the two day FOMC meeting. The Federal Reserve ended its bond buying program and expressed confidence in the US economy recovery.

In Euro zone, ECB interest rate decision, PPI, services PMI, retail sales and manufacturing PMI are the data to focus on. In the week to come HSBC manufacturing and services PMI will be major trigger for the Indian markets.

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. 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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