Number game

Apr 16, 2012, 07:30 IST | Alex K Mathews

It was a highly volatile session last week with Nifty ending in deep red.

Previous week was quite eventful for the markets. However, market sentiments remained weak due to lack of major cues. IIP numbers were also an issue for the markets. Infact markets are actually expecting or may want a lower IIP and a lower inflation number as most of the market participants want RBI to cut the interest rates in its upcoming policy review meet on April 17. This has triggered buying in banking stocks, which under performed late last month and early this month. We may probably see a rate cut of around 25 bps this time from the RBI. IIP for the month of February was at 4.1 per cent against earlier estimate of 6.8 per cent in January, weighed down by a contraction in consumer durables and consumer goods.

But the January figure of 6.8 per cent was revised down to 1.1 per cent. This was as a result of overestimating sugar production more than two times. It stood at 5.8 million tonne, but was reported at 13.41 million tonne initially. Economists and analysts were taken aback after this drastic revision. Sugar has just 1.5 per cent weight in the IIP and such a large revision could not just be because of wrong data pertaining to sugar, but may also be due to wrong data pertaining to other commodities as well.

The technical indicators of the Nifty are looking weak and it has immediate support at 5147, which is the 200 day simple moving average for the Nifty. If the Nifty trades below this level with volumes, then it may test 5086 in the short term. Resistance for the Nifty remains at 5300 and 5365.
Investors with moderate risk appetite can buy air line stocks, as the government may allow FDI. If the FDI in aviation sector is allowed, then King Fisher airline, Spice Jet and Jet Airways stocks may get a boost.

Gold is positive and it has immediate resistance at $1691 and $1695. Movements above these levels can lift the gold further towards the North. Gold has support at $1656 and $1648. Another major event last week was related to the approval of a bill in the Cabinet. The bill seeks to regulate government purchases of above Rs 50 lakh through a transparent bidding process. The bill also has a provision to debar bidders found engaged in corrupt practices.

The announcement of Q4 results by Infosys was another major development last week. Infosys reported a 27.4 per cent jump in net profit at Rs 2316 crore in Q4 against a net profit of Rs 1818 crore in the same period last year, but the QoQ profit declined by 2.4 per cent. Revenues rose 22 per cent to Rs 8852 crore for the quarter from Rs 7250 crore in the same period last year. The company announced a final dividend of Rs 22 per share and a special dividend of Rs 10 per share. But the stock price came down heavily as the company expects its dollar revenues to grow 8-10 per cent for the year ending March 2013 to $7.55 billion to $7.69 billion, lower than expectations of 10 per cent to 15 per cent.

On the European front, the Greek unemployment rate rose to 21.8 per cent against 21.2 per cent previously and the European IIP rose to 0.5 per cent against an expected -0.3 per cent. On the US front, core PPI rose to 0.3 per cent against 0.2 per cent, the US trade balance rose to -46 billion against -52.5 billion and the US initial jobless claims rose to 38,0000 against 36,7000 previously.

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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