Dhanvarsha

NIFTY RESILENCE... YET TO BE SEEN...

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Global Sketch

As a positive, strong manufacturing data from China provided support to the prices. In this respect, Markit/HSBC preliminary PMI Index for China grew to seven-month high of 50.9 in October. On the other hand, there are still concerns regarding the spiraling debt in China. Domestic banks have aggravated their loan write-offs. As a result, short-term interest rates in China have spiked higher, with the seven-day repo rate surging to 5%.  In addition, the political regime is expected to initiate a variety of reforms in the coming months, which can cool down the economic growth in the short run.

Markets are factoring in the probability of a delay in the tapering of the monetary stimulus by the Federal Reserve. Some expectations state that central bank will keep the bond buying program intact March 2014. On currency front, US dollar has tumbled to a two year low against Euro in the light of fragile US employment report. In this respect, September payrolls increased by only 148,000, well below the expectations of an addition for 180,000 jobs. Market participants did not pay heed to the fact that the unemployment rate inched lower to 7.2%. 

Domestic Sketch

On the domestic front, investors were cautious ahead of the RBI policy decision next week. Sentiment weakened further after Icra slashed India's GDP growth estimate by 0.20 per cent to 4.7-4.9 per cent in FY'14

In Indian physical markets, gold spot premiums have hit US$120/oz over London spot prices, as the supply remains constrained on account of import restrictions.  However in the light of recovery in Indian rupee, it is widely anticipated that the government may ease the curbs on imports in the days ahead.

The Telecom Regulatory Authority of India is firm on its stand of lowering the reserve price for spectrum auction by 60%.  IT spending in India is expected to reach US$71.3bn in 2014, a 5.9% increase over 2013 forecast, research firm Gartner said. BP is working with Indian Oil Corporation to set up an acetic acid plant in Gujarat, while the BP-RIL joint venture has submitted a proposal for Gujarat State Petronet Corporation’s LNG terminal in the state.  RBI policy meet (28 Oct),  Sep fiscal deficit (31 Oct),  Oct Markit manufacturing PMI (1 Nov)

Key domestic benchmarks ended on a bearish note as the Sensex closed in the red for the fourth day on the trot tracking weakness in fellow Asian equities as disappointing US economic data clouded the outlook for the global economy. Also, citing hardening interest rates which may have a negative impact on the already tepid economy.

India's foreign exchange reserves shot up for the third week in a row, adding a healthy $1.9 billion to touch 4281.12 billion in the week to October 18 on account of growth in a key component, the Reserve Bank of India (RBI) reported on Friday.

 

WrapUp

After enjoying three consecutive weeks of gains the Indian equity markets took a breather as participants  preferred to take some profit off the table at higher levels.

Both the key Indices managed to hit their respective three year high for the first time since November 2010, but were unable to sustain as traders turned cautious ahead of the the RBI policy meet scheduled next week.

The market edged lower last week, with stock-specific action on the basis of outcome of second quarter results taking centre stage. Almost 350 companies have declared their results so far with almost 16.1% growth in the top line and 11.7% growth in the bottom line. Other income grew by 4.5% and interest expense grew by 16.2%.

 

 

The FIIs for the week remained net buyers , while DIIs were net seller for the week. Nifty future has seen some unwinding in last few trading session, while long addition was witnessed in bank nifty future. The rollover in Nifty and Bank Nifty future stood at 32% and 13% respectively. On option front, fresh put writing has been seen at 6100strike and 6000strike, while call writing was witnessed at 6200 and 6300 strike. Nifty might trade in the range of 6000-6320.

 

RampUp

 

Given persistent inflationary pressure at the consumer level and uptick in inflation at the wholesale level, RBI is expected to increase repo rate in Oct 29 monetary policy by 25bps. Further, the market expects a further 50 bps reduction in the MSF rate. The other major economic data to watch out next week are the September core sector data and the manufacturing PMI data for October. Moreover, F&O expiry on  Thursday will keep the market volatile in the coming week.

We advocate caution in the coming days and would advise initiating long positions only on a confirm breakout above 6,200. Nifty has been showing immense resilience sustaining above 6,050 but failure to register a weekly close above 6,200 could confirm a ‘double top reversal’. Moreover, with Nifty appearing overstretched and negative divergence in momentum oscillators.

Going to next week, next batch of second quarter results of India Inc, the outcome of Reserve Bank of India's (RBI) Second Quarter Review of Monetary Policy 2013-14 and the outcome of the Federal Open Market Committee's (FOMC) two-day policy meeting will dictate near term trend on the domestic bourses. The market may remain volatile as traders roll over positions with F&O expiry in the week.

Among prominent quarterly results which will be announced next week, Maruti Suzuki, NTPC, Ranbaxy, Bharti Airtel, DLF, Grasim, Lupin. Jindal Steel & Power, Sesa Sterlite, Bank of Baroda, Dr Reddy’s and IDFC are the one’s which will be awaited. Auto and cement stocks will be in focus as the companies from these sectors start unveiling their monthly sales volume data for October 2013 from Friday itself and new month starts on. Further, there would be stock specific movement as and when corporates announce their second quarter earnings.

Nifty@Resilience Test

28-10, 29-10 Market would Rock

Rock N Roll



OMSARAM