Volatile views

Mar 18, 2013, 04:14 IST | Alex K Mathews

Stormy sessions lead to closing on a negative note

The Indian markets were seen trading in a volatile session last week and closed on a negative note. Nifty and Sensex closed down around 1.2 per cent each. The sectoral gainer forlast week was the one which closed up around 1.4 per cent.The sectoral losers were the metal sector and auto sector, which closed down around 2.8 per cent and 2.2 per cent respectively. Also, last week leading private sector banks faced heavy sell off on money laundering reports. Nifty has minor support at 5860 (100 DMA), and 5826 (14 DMA). Movements below these two levels can cause further down trend to the market. Nifty has resistance at 5935; if Nifty can close above this level for more than one day, then it may test 6005 in the near term. 

The IIP data for January 2013 came out last week. The industrial output data stood at 2.4 per cent, from a year ago. This level stood against the 0.5 per cent in December and well above the estimated level of 1.2 per cent. Manufacturing output, which contributes about 76 per cent of industrial production and 15 per cent of the overall gross domestic product, grew 2.7 per cent in January from a year ago.  The capital goods output fell 1.8 per cent annually in January and the consumer goods production posted an annual growth of 2.8 per cent.

Global rating agency S&P pegged India's FY 14 growth at 6.4 per cent and said it will upwardly revise the sovereign rating outlook, if the government continues to focus on policy initiatives. They predicted the fiscal growth on the basis of worse than expected monsoon and political paralysis. Global financial institutions HSBC and Morgan Stanley also lowered the country’s economic growth forecast for the coming fiscal year from 6.2 per cent to 6 per cent. Earlier among the three rating agencies, only Moody’s maintained its positive outlook on India.

In the week also the government went forward with its disinvestments programme: the aluminum major National Aluminium Company Ltc. (NALCO). The government, which currently holds 87.15 per cent stake in the company is going to disinvest up to 10 per cent stake, which could fetch the company a minimum of Rs 1,031 crore.

The floor for the stake sale was fixed at Rs 40/share, which was a 9.61 per cent discounted rate from Thursday’s closing price of Rs 44. The sale was held between 9.15 am and 3.30 pm, through the auction route. Also last week, the government deferred the decision on the stake sale of MMTC on the concerns regarding the valuations of the company.

The FIIs in the first week of the March 2013 pumped in more than Rs 1,400 crore (USD 254 million) into the Indian markets which makes their total investment to Rs 47,909 crore (USD 8.88 billion) in the equity market for the calendar year. At the same time, they reduced their holdings in some of the least performing companies like Moser Baer, Jindal Stainless, Alok Industries and Eveready Industries. Moser Baer has seen a reduction of FII stake from 22 per cent in the quarter December 2011 to 0.1 per cent in December 2012. Jindal Stainless saw a reduction to 1.27 per cent from 21.58 per cent in the year ago period.

On the global front, the US markets were seen trading higher on better than expected data. The Dow Jones was seen closing with a record high. The rise in the US markets were seen driven by the improvement in the economy and of the Federal Reserve’s continuation of its monetary policy.

The European markets swung in between gain and losses on the news of Fitch downgrading Italy, which again raised concerns on the health of the economy. Major data to watch for is the US housing data, Euro Zone current account data and Euro Zone inflation data. For the Indian markets, the next major trigger is the RBI policy meet due tomorrow, March 19,2013.

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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