Upward spiral

Sep 22, 2014, 08:22 IST | Alex K Mathews

Positive global cues helped the Nifty and Sensex soar, which was a great sign for investors

Profit booking was seen ruling the markets last week. But positive global cues along with strong buying by the FIIs supported the markets. On a weekly basis, Nifty closed up around 0.2 per cent.

The mid cap sector ended down around 1.5 per cent, whereas the small cap closed up around 0.3 per cent. Going forward, Nifty can move up towards 8210-8275 in the short term. Nifty has support at 8040 and 7925.

Trade numbers
August trade deficit fell to $ 10.84 billion against $ 12.2 billion in the previous month. The data saw a 2.2 per cent rise on a yearly basis from $ 10.60 billion.

The trade deficit for the April to August period stood at $ 56.15 billion from $ 70.60 billion. The exports for the month under review rose to $ 26.96 billion against $ 26.25 billion on a yearly basis; the imports also rose to $ 37.80 billion as compared to $ 36.85 billion.

The exports figure stands at $ 134.80 billion, up around 7.3 per cent on a yearly basis whereas the imports dipped to $ 190.95 billion down around 2.7 per cent. On a yearly basis, the gold imports rose 175.5 per cent to $ 2.04 billion and the oil imports were down 15 per cent to $ 12.84 billion.

The IT sector saw an all time high equity exposure by the mutual fund industry for August. The exposure stood at Rs 29688 crore for the month under preview which was also a third consecutive rise in the exposure.

According to the data from SEBI, the investment for August accounts is 10.53 per cent of their equity assets under management of Rs 2.81 lakh crore. In the previous month, the data stood at Rs 27596 crore.

The other highest exposures by the mutual funds were in the sectors like pharma (Rs 19394 crore) followed by auto (Rs 17754 crore) and finance (Rs 15116 crore).

On the back of a fall in prices of vegetable and other food items, the wholesales inflation data fell to nearly a five year low in August. The WPI data stood at 3.74 per cent against 5.19 per cent in the previous month and 6.99 per cent in the corresponding period last year.

The inflation for the month under review was the lowest since October 2009 when the inflation was at 1.8 per cent. Food inflation also eased to 5.15 per cent in August, against 8.43 per cent in the previous month.

Happenings abroad
Despite strong economic data, the US markets fell as energy and technology stocks extended their fall. The investors were also waiting for the Federal Reserve’s policy meet to get more cues.

On the Asian front, weak Chinese factory and retail data made markets fall. In its two -day meeting, the Federal Reserve predicted that the unemployment rate would fall from 5.9 per cent to 6 per cent by the end of the year.

The US central bank hinted that it will reduce its purchases of treasuries and mortgage backed securities to $ 15 billion in October, down from $ 85 billion a month, last year.

The Chinese central bank's plan to eject 81 billion into the system also revived the consumer confidence. On the Euro front, news that Scotland voted to reject independence from UK bought cheer to world markets.

Outlook for crude oil remains sideways to negative due to lower demand and the dollar stands firm. Crude has support at $ 92 and $ 90.40 and may face resistance at $ 93.75 and $ 95 per barrel. Gold has lost key support levels and may find support at $ 1215 and $1209. Gold may face resistance at $1235 and $1248.

Investors with low risk appetite can buy Nifty 8150 call options and can sell 8250 call options of the September expiry. Another strategy which can suit the current market scenario is to buy 8200 call options of the Nifty.

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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