Pumping success

Feb 16, 2015, 08:16 IST | Alex K Mathews

Due to certain measures taken by the financial sector regulators, foreign factors increased their Indian capital investment which saw upward trends

The markets on the domestic front last week opened weaker, tracking the movements of the previous week. The foreign investors also mainly remained sellers. But the oversold situation of the markets and betterment of cues on the global front reversed market movements.

The current trend upwards is likely to continue and may test 8900 in the near term; thereafter we can expect minor technical correction. But one should keep in mind that markets are likely to move above 9000 before the union Budget. Support for Nifty is at 8727 and 8600.

More money
Following certain measures taken by the financial sector regulators, the foreign investors pumped nearly Rs 12000 crore into the Indian capital markets. According to the data available from Central Depository Services LTD (CDSL), between February 2 and 6, the FIIs bought shares worth Rs 4702 crore ($ 761 million) whereas in debt market segment they made an investment of Rs 11760 crore ($ 1.9 billion).

In the last week, RBI and SEBI amended their norms for foreign portfolio investments and hinted to make their future investment only in corporate bonds with a minimum residual maturity period of three years. As there is no lock in period, they would be able to sell the securities to domestic investors. In 2014, the net investment by the foreign buyers were Rs 1.16 lakh crore in the debt markets whereas it was Rs 98150 crore in equities.

JK Tyre last week came out with stellar earnings for the quarter that ended December 2014. The company reported a jump of 55.53 per cent in its consolidated net profit at Rs 91.81 crore as compared to Rs 59.03 crore in the October to December period of the last fiscal. The net sales of the company under the considered period rose to Rs 1825.76 crore from Rs 1703.42 crore in the same period last year. The growth was led by radical tyres for trucks and buses.

To present a better picture of the price situation in the country, the government released a new series of Consumer Price Index with 2012 as the base rate from 2010. Under the new base year, the retail inflation for January rose to 5.1 per cent as compared to 4.3 per cent in the previous month.

According to old series, the retail inflation was 5 per cent in December. Due to costlier fruits and vegetable items, the food inflation was at 6.13 per cent. The data however stood below the RBI’s target; the central bank aims to keep inflation at or below 6 per cent to January 2016.

Foreign factors
The US markets remained weak in the beginning last week because of the Greek political uncertainty even though there was strong jobs data. These fuelled concerns of a nearby rate hike by the US central bank. Also the weak Chinese trade numbers and the CPI added to the down fall.

In Greece, the euro area finance ministers put off decisions on Greece’s bailout term until next week. But the markets turned to the positive zone because of better German data and a cease fire agreement between Russia and Ukraine. On the global front, the Chinese markets House price index will be the major data in this week.

In the US markets, manufacturing production, industrial production, initial jobless, continuing jobless claims, PPI, manufacturing PMI and FOMC minutes are important triggers. In the Euro Zone area, the data to look at is balance of trade, current account, consumer confidence, markit services and manufacturing PMI.

Some of the major earnings that may be announced this week include Ambuja cements, SKF India, KSB Pumps and Sanofi. Besides, the WPI inflation data will be an important trigger on the economic front. Crude is weak and has physiological support at $ 50 per barrel. Gold is weak because of lower demand and a strong US dollar. IT has support at $ 1216 and $ 1211 per troy ounce.

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).

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