Mixed cues, flat notes

Jul 22, 2013, 01:46 IST | Alex K Mathews

In spite of banks trying to curb currency volatility, last week saw mixed signals from the global and domestic fronts

Markets in the previous week ended on a flat note with mixed cues from foreign and domestic front. On weekly basis Sensex and Nifty closed up around 1 per cent and 0.4 per cent respectively. The major sectoral gainers were FMCG and IT sector, which closed up around 7 per cent and 4 per cent respectively. Nifty may test 6185 and 6200 levels whereas strong support lies at 5975 below 5940 and 5925.

In order to arrest the volatility in the currency instability the central bank of India raised two interest rates. On Monday of last week, the Reserve Bank of India (RBI) decided to raise the Marginal Standing Facility (MFS) to 200 basis points to 10.25 per cent from 8.25 per cent which sucked R 12,000 crore from the system. The bank rate was adjusted to 10.25 per cent. MFS is the rate at which the scheduled banks can borrow funds from RBI on overnight basis and the bank rates refers to the rate at which RBI gives loans to the banks. Under the new move the liquidity adjustment facility will be capped at R 75,000 crore from Wednesday 17, 2013.

India’s trade deficit data for the month June narrowed from a seven month high by the slowdown in the gold imports. The trade deficit narrowed to $12.24 billion from $ 20.14 billion in the month May which was a seven month high. The gold and silver imports slowed to 22.8 per cent on yearly basis at $ 2.45 billion in June. But on year on year basis imports of gold and silver grew by 22.8 per cent. Imports were seen declined marginally by 0.37 per cent $ 36 billion during the month and exports stood at $ 23.79 billion as compared to $ 24.9 billion in a year ago period.

The wholesale inflation for the June rose to 4.86 per cent as compared to 4.70 per cent in the previous month, which was also 43 month low. The rise in the inflation data was due to, the sharp prices rise in the primary articles, which jumped by 8.14 per cent in June from 6.65 per cent in May. The prices of the food articles rose by 9.74 per cent from 8.25 per cent. The core inflation fell to a 42nd month low which was due to the lack of demand in the economy. The core inflation data stood at 2.1 per cent in the month of June as compared to 2.43 per cent in the previous month. However the wholesale inflation data remained in the RBI’s comfort zone of 4 to 5 per cent.

In the earnings, small cap bank DCB gave out with encouraging numbers. The company posted a net profit of Rs 43 crore in the first quarter as compared to Rs 19 crore in the same period last year. The net interest margin for the quarter under review, stood at 3.44 per cent as against 3.18 per cent for the first quarter last year. The operating income of the bank also rose to Rs 305.84 crore on an annual basis. The bank’s capital adequacy ratio as per Basel II norms stood at 13.89 per cent as the quarter ended 30 June 2013.

On the international front, the US markets rose to their ever high on the comments from Federal Reserve (FED) Chairman. The FED chairman in his twice yearly monetary policy report to the Congress said that the central bank is committed to support the economy and revamping of the stimulus plan will only happen after achieving its goals.

The major data to watch for on the global front include: US continuing jobless claims, Durable goods order, Markit manufacturing PMI, Nonfarm Payroll data, balance of trade and new home sales data. Also ECB interest rate decision will be another trigger for the markets. In Japan GDP and Industrial data will be in focus. 

Gold is sideways and may breach $1,300 level in the near term. It has immediate support at $1,272 and $1,263. Powerful movements can be seen if gold breaches $1,300 mark next week. Investors can buy TCS, Bank of Baroda, PNB, HUL and ITC call options, ahead of expiry.

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 alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk. 

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