Road to recovery

Aug 25, 2014, 08:52 IST | Alex K Mathews

The Nifty is seeing some positives and could stabilise soon, which will be a huge relief for investors

The Nifty reached a fresh, all time high on the back of buying from the Foreign Institutional buyers. The immediate resistance for the Nifty lies at 7950 and 8000, a move above this can also help the markets to recover further.

Tax collections
The indirect tax collections for the period from April to July 2014 rose 3.9 per cent to R 154350 crore and the indirect tax collections for July grew 4.9 per cent.

For the first four months of the fiscal year, decline was seen in both customs and excise duty collections while the service tax collections saw an increase of 16.4 per cent and the indirect tax collections for the period added 24.8 per cent of the total budget for the year. For July, the three heads of the indirect tax excise, customs and service saw a single digit level increase.

India’s trade deficit rose to a year’s high in July as the export growth slowed to single digits after two months of double digit growth. According to the data released by commerce and industry ministry the trade deficit of the country was at $ 12.2 billion as compared to $ 11.76 billion in the previous month and $ 12.5 billion, a year ago.

The exports in July increased 7.3 per cent to $ 27.3 billion and the imports were up 4.25 per cent to $ 40 billion. The rises in the exports were largely due to the engineering (23.9 per cent), leather (17.23 per cent) and pharma (10.78 per cent).

NSE in the last week announced several changes in its various indices where the major one was the exclusion of United Spirits from the 50 share index. At the same time, Zee Entertainment was included in the place. In Nifty junior, stocks like Mphasis and ZEEL will be excluded whereas Aurobindo Pharma and Motherson Sumi were included.

Adani Power, Bajaj Finserv, Bhushan steel, GlaxoSmithkline, Religare, Gillette, Berger Paints and Vijaya Bank were dropped from CNX 200 index whereas Alembic Pharma, Engineers India, SKS Micro Fin, TVS Motors, IOC, Muthoot Fin, Marico and NALCO were added to the index. These changes will effective from September 19, 2014.

Crude benefits
The falling crude oil has many benefits to the Indian markets. The down fall in crude oil prices reduce current account deficit of the country as India imports about 80 per cent of its crude oil requirements and also the down trend in crude oil prices may cool the rising inflation which in turn may make RBI to lower interest rates.

Fall in the crude oil prices could decrease under recoveries of the PSU OMCs. The lower crude oil prices will support the rupee which may in turn increase the value of rupee. The main reason for the fall in the crude oil is the news that the US economy, the largest importer of crude oil may become self-sufficient.

Insecticides India came out with its earnings, where the net profit of the company rose 23 per cent on the back of higher sales. The net profit of the Agro chemical company stood at R 17.4 crore for the quarter that ended June 2014 as compared to Rs 14.17 crore in the corresponding period last year. Turnover also rose 28 per cent to R 252 crore as compared to R 198 crore, a year ago.

Global factors
The easing of tensions in Ukraine helped the global markets trade higher. The US markets saw that the investors’ focus were shifted towards the minutes of FED’s July meeting which may give clues on how soon the central bank will plan to hike interest rates.

In the stock option segment one can buy HDFC Bank, Tata Motors, M&M, L&T, Axis Bank call options during a rally. If Nifty moves down below the key support then BHEL, DLF, NTPC, Reliance Industries and HDFC put options are advisable. In this week, the GDP data and the August month F&O expiry will be the key triggers for the Indian markets.

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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