Negative territory

Mar 16, 2015, 08:09 IST | Alex K Mathews

The rupee has been low in comparison to the dollar, which along with weak global cues has affected the Sensex and Nifty

Tracking weak global cues, the markets mainly remained in negative territory. The weak rupee against the US dollar added fuel to concerns too. Lower level buying helped the markets recover from some of their losses.

Resistance for Nifty lies at 8754 and 8800, above these levels further rise can be expected. Consistent trading below the 50 day moving average of 8665 can cause heavy sell-off, but chances of this happening are remote.

Food prices
On the back of costlier food items, there was retail inflation in February. The Consumer based Index (CPI) inflation rose to 5.37 per cent in the month. Data was calculated with a new base year of 2012. For January, the inflation with a new base year has been revised upwards to 5.19 per cent and the data for February last year stood at 7.88 per cent.

Food inflation for the month under review rose to 6.79 per cent from 6.06 per cent in January. In the rural segment, the retail inflation was 5.79 per cent in February 2015 and in the urban segment it stood at 4.95 per cent. India’s current account deficit narrowed in the October to December period from the previous quarter, on the back of falling oil prices.

The data reached $ 8.2 billion or 1.6 per cent of GDP in the December quarter which was lower than the deficit of $ 10.1 billion or 2 per cent of GDP in the previous quarter. But the data stood wider than $ 4.2 billion deficit or 0.9 per cent of GDP in a year ago period.

The merchandise trade deficit widened to $ 39.2 billion during the period as the exports declined 7.3 per cent against 4.5 per cent dip in imports. The Insurance Bill has been passed by Parliament which will now allow foreign direct investors to invest up to 49 per cent from 26 per cent in Indian insurance companies.

Foreign investment
On the back of foreign investment attracting steps taken by the centre, the FDI inflows to the services sector grew by 44 per cent in the April to December period of the current fiscal.

According to the data from Department of Industrial Policy and Promotion (DIPP), the services sector which includes banking, insurance, outsourcing, R&D, courier and technology testing received an investment of $ 2.29 billion against $ 1.59 billion in the same period last year.

In 2012-13, the FDI to the sector had fallen to $ 4.83 billion from $ 5.21 billion in 2011-12. The services sector contributes over 60 per cent to India’s GDP. Telecom ($ 2.67 billion), automobile ($ 1.58 billion) and power ($ 576 million) were the other sectors which showed record inflows.

International news
Strong US jobs data resulted in sell offs on the global front. This sparks concerns of imminent interest rate hike by the Federal Reserve in coming months. Also, weak Chinese data heightens fears. The Euro was seen touching a 12-year low against the US dollar on the back of ECB’s quantitative easing programme and deepening crisis in Greece, which has raised more concerns.

The US dollar index hit the 100 mark, the highest level since April 2003 as the investors were seen shifting towards haven safe investment. Coming to the end of the last week, the markets showed recovery because of broad based buying.

In the US markets, the data in the list for this week will be Industrial production, manufacturing production, current account, initial jobless claims, continuing jobless claims, existing home sales and FED interest rate decision. Both crude and gold are still weak and there are no major trend reversals expected in this manner.

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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