Policy potential

Nifty last week closed at 6776 up around 05 per cent on a weekly basis On the lower side Nifty has last support at 6742 if it is broken then we can see Nifty falling further Resistance for the Nifty lies at 6855InflationFor measurement of inflation The Reserve Bank of India RBI has adopted the new CPI combined The central bank has said that it will compute and release real effective Exchange ratio REER only on the basis of CPI from this financial year The RBI said that REER index is constructed using a CPI for both India and trade partner countries which may ensure a higher degree of comparability of formerrsquos international competitiveness along with trading partner countriesRBI SETS THE PACE The Reserve Bank of India building in Mumbai PicSameer MarkandeREER indicates movements in exchange rates of the home currency against a basket of currencies of trade partner countries and is considered to be an indicator of international competitiveness RBI recently released a monthly series on CPI based REER for both 6 currency and 36 currency baskets for the period 2004 to March 2014For the period of April January the FDI in the services sector dropped by about 61 per cent to 18 billion According to the department of industrial policy and promotion the services sector received FDI worth 466 billion in the same period last year The services sector consists of banking insurance outsourcing RampD courier and technology testing and the sector accounts for over 60 per cent to the countryrsquos GDP The overall foreign inflows to the country have fallen to 1879 billion during the first 10 months of 201314 from 1910 billion in same period last yearGrowthThe International Monetary Fund IMF revised the economic growth of India citing the reasons as supported by the global growth improving export competitiveness and implementation of recently approved investment projectsThe IMF said that the countryrsquos growth is expected to recover to 54 per cent in 2014 from 44 per cent in 2013 and also projected a growth rate increase to 64 per cent in 2015 The IMF expressed its bearish view on all other emerging markets expect India and had reduced the growth forecast for the entire emerging markets to 49 per cent from the current level of 54 per centAlso the World Bank projected an economic growth rate of 57 per cent in the fiscal year 2014 for the country on the back of a more competitive exchange rate and many large investmentsFor encouraging the inflows of long term overseas fun the capital market regulator restricted the foreign investors from buying government securities having maturity of less than one yearSEBI in its circular said that FIIsQFIs are only permitted to invest in dated government securities having maturity of one year or above and it has also stated that the existing FIIQFI investments in treasury bills shall be allowed to taper off on maturitysale The overall limit for the FIIQFI investments in government securities would remain unchanged at 30 billionGlobalWeak trend were also ruling the global markets as the investors were cautious ahead of the FED minutes and of the Bank of Japanrsquos meeting The Bank of Japan held off its monetary expending stimulus saying that the business sentiment is improving but most of the companies remained cautious on the economyrsquos outlookIn the US markets the markets saw a sell off coming to the end of the week as the investors exited technology and biotech shares after the dovish commentrsquos from Federal Reserve The minutes showed that despite of the recent weakness in economy the US central bank remained in its decision to wind up the bond buying program late this yearIn the option segment one can buy put options of SSLT Hindalco BPCL Tata Motors and SBI Also in the stocks segment Piramal ENT and Neyveli Lignite can be bought for short termIn this week the markets may remain closed for two days today on account of Ambedkar Jayanti and on Friday for Good FridayAlex 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 email him at alexgeojitcom Geojit BNP Paribas has membership in and is listed on the National Stock Exchange NSE and the Bombay Stock Exchange BSE