Soaring higher

Updated: Dec 08, 2014, 08:31 IST | Alex K Mathews |

This past week also saw a new high being reached by the markets with global cues ruling the roost

Profit booking was witnessed in the markets tracking the global cues despite strong data. The markets reached a new all time high as markets this week closed down around 0.5 per cent.

Nifty has minor resistance at 8580 and 8626; movements above these levels can cause further uptrend. Support for the Nifty lies at 8504 and 8461. The strategy which can be used in the current market scenario is a call ratio spread, which can be created by buying Nifty one lot 8550 call option and selling two lots of 8650 call options.

The growth in the eight key infrastructure sectors reached a four month high due to the surge in coal production, electricity generation and refinery products.

The October data stood at 6.3 per cent as compared to 1.9 per cent in the previous month. In the first seven months of the current financial year, the data rose 4.3 per cent which was slightly higher from 4.2 per cent in the same month last year.

In the month under review, the coal production grew 16.2 per cent followed by electricity generation which rose by 13.2 per cent. The production of petroleum refinery products grew by 4.2 per cent.

But there was also contraction, which was seen in fertilizer, followed by natural gas and cement. The HSBC India manufacturing PMI data rose to a 21 month high on the back of stronger growth of output and new work intakes.

The indicator which serves as an accurate overview of manufacturing operating conditions rose to 53.3 in November from 51.6 in the previous month. The level above 50 mark indicates expansion where below 50 shows contraction. The sub-index of new orders also jumped to a 21 month high of 56.2 in November from 53 in October.

The major event in the watch out list for the week was the RBI’s policy meet, where the decision made was inline with expectations. In its policy meet, the central bank held its key interest rates for the fifth time in the row. The repo rate stood at 8 per cent and the reverse repo got adjusted at 7 per cent.

Also the CRR kept unchanged at 4 per cent. But the Governor hinted a possibility of rate cut in early next year if the inflation continues to ease and there is an improvement in fiscal health. The central bank’s next RBI policy is in early February. The new government started its divestment programme by divesting 5 per cent stake in steel giant SAIL.

The divestment took place on Friday, December 5, 2014 where the floor for the offer was set at R 83 per share. The government expected to raise R 1500 crore to R 1700 crore from the stake sell and the retailers are entitled to a discount of 5 per cent.

The floor price was a 2.75 per cent discount to the closing price in the previous day. In the 10 per cent of the offered shares has been reserved for retail investors, who can buy share worth up to R 2 lakh in the share sales and a minimum size of 25 per cent of the issue size is reserved for mutual fund and insurance companies. The government has also lined up other majors like ONGC, Coal India and NHPC in the row.

In the last week, on global front, the Chinese PMI data fell to a six month low, added concerns in the markets. Also, Moody’s downgraded Japan’s sovereign debt rating by one notch and the US manufacturing sector slowed for a third straight month was a blow to the markets.

But the markets recovered as the rise in strong data and on the expectations that ECB may come out with more stimulus to support the economy. The ECB President in his speech dismissed the pressure for more stimulus in the policy but hinted to address the same early next year.

For the week to come, the Euro Zone area, Industrial production is the important trigger to watch out. In the Chinese markets, Balance of Trade, inflation rate, retail sales and industrial production are important data. For the coming week, the Indian markets, Industrial production, inflation and manufacturing data are the important triggers.

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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