Volatile slide

Jan 25, 2016, 08:53 IST | Alex K Mathews

China gives rise to concerns, fall in crude oil price not so nice

Tracking last week’s movement, the markets mainly remained in the negative zone, with weak Chinese data and falling oil prices. The immediate support for Nifty lies 7184 below, that may find support at 7000 and more. Resistance lies at 7500 and 7627, but chances of testing the second resistance point are very remote.

Chinese slowdown
On the concerns of Chinese slowdown and on the sharp fall in crude oil prices, the overseas investors remained sellers in the New Year. According to the data available with the depositories, the Foreign Portfolio Investors (FPI) infused a gross amount of Rs 36368 crore into the equity markets from January 1 to 15, and at the same time, they pulled out Rs 39852 crore, which resulted in the net flow of Rs 3483 crore ( USD 520 million).

In 2015, FPI infused a net amount of Rs 17806 crore in equities and R 45856 crore in bond markets.

IMF downgrade
Last week, the international monetary fund downgraded its forecasts for the global growth on the back of slowing Chinese economy, and, falling oil prices. The IMF forecasted that the world economy would grow at 3.4 per cent in 2016 and 3.6 per cent in 2017, both of which was down 0.2 per cent from the previous estimations. The growth estimate for 2015 was retained at 3.1 per cent. The Fund estimated the US growth at 2.6 per cent this year, and, next which was cut by 0.2 per cent each.

Chinese growth for the current and next year is maintained at 6.3 per cent and 6 per cent respectively. On the other hand, the growth forecasts for India was left unchanged at 7.5 per cent each, for both years.

Deficit surge
The country’s trade deficit widened in the month of December as the gold import rose. According to data released by the commerce department, the trade deficit rose to $ 11.7 billion in December 2015, compared to $ 9.1 billion in a year ago period. In the period under review, gold imports hit a four-month high of Rs 3.8 billion. The country’s export contracted for the 13th month in a row, falling about 15 per cent to $ 22.2 billion, on the back of the decline in the engineering and petroleum shipments. The imports were also down 3.88 per cent to $ 33.96 billion in December on year on year basis.

The cumulative exports during the April to December period declined by 18.06 per cent $ 196.6 billion whereas the imports also fell by 15.87 per cent to $ 295.8 billion. On the back of lower operating costs and higher sales, Ultratech cement reported a 37 per cent rise in its consolidated net profit.

The net profit of the company stood at Rs 545.92 crore as compared to Rs 400 crore in a year ago period. For the October to December period, the total income of the company stood at Rs 6187.91 crore against R 5944.47 crore during the same period last year. The firm is a part of Aditya Birla Group, which is the largest cement company in the country.

Global concern
On the global front, Chinese data remained in focus, where the economy grew at its weakest pace in a quarter of a century last year. The data however ignited the hopes of more stimuli from the central bank. The tumbling oil prices also played its role for the carnage in the markets.

Business confidence, consumer confidence, economic sentiment, inflation and core inflation will be in focus for the Euro area in the coming week. Balance of trade, unemployment rate, inflation rate, industrial production and Bank of Japan’s meeting are the triggers in the Japanese markets.

This week, companies like Intellect, Eveready, Cosmo films, HDFC Bank, SKS micro, Blue star co, HT media, Tata Coffee, HDFC, HEG, Titan, TRF, Asian tiles, Century Ply, ICICI bank, L&T, JSW Steel, Philip Carbon, GIC Housing, GAEL, Care rating and NTPC may announce their earnings.

Crude outlook is slightly positive due to oversold situation support at $29.70 per barrel and resistances at $32.50.

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. All matter published here is for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.

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