Taking a tumble

Jan 18, 2016, 07:26 IST | Alex K Mathews

Global pressures may force sell offs

This week too, the markets showed weakness on global cues and falling oil prices. Tracking the global weakness, on the domestic front, huge selling was seen, especially in the mid-cap and small-cap sectors. Most heavyweight counters were tumbling to their new 52-week lows. Nifty has resistance at 7650 and 7900 and the support is 7371, 7158, 7000 and more in the days to come.

Capital goods, banking, cement, oil and gas producers and metal sectors are under the threat of bears. Meanwhile, the US and Euro zone’s markets were also looking weak and chances of further sell-off are expected in the near term.

Highs and Lows
According to SIAM (Society of Indian Automobile Manufacturers), car sales rose for 14th month straight in December to 1,72,671 units, up from 12.87 per cent from a year ago period. The total sales of the passenger vehicles rose 10.46 per cent on a year on year basis to 2,30,960 units. The sales of medium and heavy commercial vehicles grew 19.34 per cent, while light commercial vehicle showed a rise of 5.57 per cent. Sales of two-wheelers declined 3.10 per cent whereas the overall industry sales declined 0.17 per cent.

After showing a better growth for October, the country’s industrial production contracted for the first time in 13 months. For December, the data stood at (-) 3.2 per cent against 9.9 per cent in the previous month, the worst level since October 2011, when the data had contracted by 4.7 per cent. The manufacturing sector contracted 4.4 per cent against a growth of 4.7 per cent in the same month last year. The capital goods output fell by 24.4 per cent in November as compared to a growth of 7 per cent in the same month of previous year. On the back of falling oil prices, WPI based inflation fell for the 14th month straight in December. The data stood at (-) 0.73 per cent, which was slower than expected. In November, the data stood at (-) 1.99 per cent. For the period under consideration, food articles inflation stood at 8.17 per cent, whereas the primary articles inflation was at 5.48 per cent. The fuel and power prices inflation was at 9.15per cent.

Last week, global credit rating agency Moody’s and its Indian subsidiary, ICRA said that the country's sovereign rating carries a positive outlook for the 2016.

Moody's hinted that healthy domestic growth and accommodative policies will benefit the corporates. Currently, India has a rating of 'Baa3'. ICRA expects that the growth of country’s gross value added at basic prices to rise 7.7 per cent in FY17 from 7.2 per cent in FY16.

New Rules
Last week, SEBI came out with norms for mutual fund investments in debt securities. It reduced single security exposure, sector exposure and group exposure for debt schemes. The maximum a debt scheme can invest in the securities of a company has been reduced from 15 per cent to 10 per cent of the corpus and the single sector exposure for a scheme has been reduced from 30 per cent to 25 per cent. The exposure to the housing finance companies within the finance sector has been reduced to 5 per cent from the earlier 10 per cent.

Global concerns
The markets around the globe were concerned with the Chinese slowdown. The multiyear lows of the oil prices, and the beginning of the earnings season were also worrying.

In the US markets for the coming week, inflation, core inflation, existing home sales, markit manufacturing PMI, continuing and initial jobless claims will be in focus.

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever.

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