That yellow metal

Sep 14, 2015, 07:49 IST | Alex K Mathews

The government came out with two plans to reduce import of gold and to use idle gold lying with customers

Last week, Nifty made a new low on the back of weak global and domestic cues. The concerns over the Chinese markets and weak monsoon forecast also dampened consumer sentiment.

But the broad based buying kept the markets from dipping lower. Nifty had major support at 7539 and 7450, a move below these levels can cause further down side to the market. Resistance for the Nifty is at 7956. Movement above this level can give further momentum to the market.

Mutual fund investors
In August, the investors pulled out around Rs 47000 crore from various mutual funds. According to data from the Association of Mutual Funds in India (AMFI), investors withdrew a net of Rs 46750 crore in mutual fund schemes last month, whereas the inflow was around Rs 1.2 lakh crore in the last month.

The liquid or money market fund category witnessed Rs 70489 crore being withdrawn while equity and equity linked schemes saw an inflow of Rs 9156 crore. With the latest data, the net inflow in the schemes was at Rs 1.58 lakh crore in April-August of the current fiscal.

Driven by the new model launches, the car sales in the country have rose 6.06 per cent in August, showing a tenth consecutive month of growth. In the month, domestic car sales stood at 163093 units as against 153781 units in the same month in 2014.

According to SIAM (Society of Indian Automobile Manufacturers), motorcycle sales declined to 823053 units last month from 910312 units last year at the same time. Vehicle sales across categories registered a decline of 2.07 per cent to 1626148 units from 1660512 units in August 2014.

Total two wheeler sales in August were down 2.98 per cent to 1305350 units as against 1345506 units in the same month last year. In a move to reduce the import of gold and to bring the idle gold lying with customers to use, the government last Wednesday came out with two plans; Sovereign Gold Bond Scheme and Gold Monetisation Scheme.

New schemes
Through Gold Monetisation Scheme, gold in any form can be deposited with banks for a period of one to 15 years which will earn interest. At the end of the tenure, redemption will be at the prevailing market value.

The Sovereign Gold Bond Scheme is aimed towards buying gold as an investment. In this scheme, instead of buying actual gold, the customers can buy gold bonds which are equal to the weight of gold. The bonds will be issued in the denominations of five grams, 10 grams, 50 grams and 100 grams for a term of five years to seven years.

Here the rate of interest will be calculated on the value of the yellow metal at the time of investment. On the global front, the markets were affected by the decision by the ECB to expand its stimulus if necessary. Also, the increase in the German industrial production also supported the markets to an extent.

Global fluctuations
On the Chinese front, the government said it would remove a tax on dividend incomes for investors who hold stocks for more than a year in an effort to encourage long term investment. But uncertainty over the Federal Reserve’s decision on its interest rate on its upcoming policy meet kept the markets under pressure.

Gold is weak and it is likely to test $1099 per troy ounce and it is having resistance at $1129. On the US front, retail sales, manufacturing production, manufacturing production, inflation, core inflation, current account, housing starts and initial jobless claims are the important data in the week to come.

In the Euro Zone, Industrial production, balance of trade, inflation, core inflation and current account are the data to focus. In the Japanese markets, industrial production, balance of trade and Bank of Japan’s interest rate decision will be on focus. In this week, inflation data, manufacturing and balance of trade are the major triggers in 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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