Range and Ramifications

Jan 21, 2014, 08:28 IST | Alex K Mathews

All eyes on forthcoming monetary policy

Indian markets remained range bound on the back of mixed cues on both global and domestic fronts. Nifty ended up around 1.5 per cent on a weekly basis. The Nifty is likely to move down below 6237 and 6150 in these days. According to data released by the statistics office, the November IIP data fell to 2.1 per cent, making it the second consecutive month of contraction. The manufacturing sector, which accounts for 76 per cent of industrial production, had a bad hit contracting to 3.5 per cent.

The IIP numbers for October have revised marginally to 1.57 per cent and the data for the first eight months for the present financial year stood at 0.2 per cent, against 0.9 per cent in a year ago period. The consumer durables segment contracted by 21.5 per cent in November against a growth of 1.1 per cent in the same month last year. Having a weightage of 14 per cent in IIP, the mining sector grew by 1 per cent in the month under review against a dip of 5.5 per cent in the same month in 2012.

The wholesale inflation data which came out declined to a five-month low on the back of softening vegetable prices. The WPI data stood at 6.16 per cent in December as compared to 7.52 per cent in the preceding month. Food articles inflation was at 13.68 per cent as against 19.93 per cent previously. According to WPI data, inflation in the primary articles basket and the fuel and power segments was at 10.78 per cent and 10.98 per cent, respectively. The RBI has kept its interest rates unchanged for its last month policy meet, as the central bank needs to watch the current situation. Now sights are trained on the quarterly monetary policy on January 28, 2014.

CMC, the TCS subsidiary, reported a 16 per cent rise in the consolidated net profit of R 70.54 crore in the quarter ended December 31, 2013. The company posted a net profit of Rs 61.05 crore in a year ago period. The consolidated net sales rose 14 per cent to Rs 560.92 crore from Rs 492.68 crore in the same quarter of 2012-2013. The international revenue grew 30 per cent on a yearly basis to R 379 crore in the quarter and the net sales for the first nine months of the current financial year, rose 15 per cent to Rs 1607.7 crore.

At the beginning of last week, global market investors were focusing on economic data and corporate earnings, which were mixed. The beginning of the week, the US markets rallied on the hope that the weak payroll data may make the Federal Reserve (Fed) continue its stimulus package for some more time. In Chinese markets, retail sales, industrial production, GDP growth rate and HSBC Manufacturing PMI flash will be major data to watch for. In the US markets, continuing jobless claims, initial jobless claims, market manufacturing PMI flash and existing homes sales data will be in focus. Current data is the major one in the Eurozone area.

The major corporates that may announce earnings are Asian Paints, Emami Ltd, Dewan Housing, Aptecht, Colgate, Tata Coffee, Thermax, Zensar Technologies, Kotak Bank, A P Paper, ECLERX, Zee ENT, M&M Financial, L&T, Biocon, KPIT Technologies, Dabur, HDFC, Cairn, L&T Finance, SKS Micro, ATUL, Coromandel, Torrent Power, JK Cement, Engineers India and BEL.

Gold is slightly positive and it has resistance at $1260, and having support at $1224 and $1200 levels. Selling 6350 call options and buying 6200 put options are advisable in the Futures and Options segment. Counters like ICICI Bank, AXIS Bank, HDFC Bank, Ranbaxy, Tata Steel, WIPRO, TCS, DLF and Bharti are likely to fall further; investors can buy put options of these stocks.

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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