Things go downhill now

South was the direction last week, as a fall in fresh orders was one of the reasons cited for the drop

The markets last week closed in downside with Nifty and Sensex closing down around 2 per cent respectively. The major sectoral losers for the week were Capital Goods and the Consumer Durable sector which closed down around 6 per cent and 4.7 per cent respectively, whereas the gainers Metals and Realty closed up around 5.2 per cent and 3.1 per cent respectively. Nifty has support at 5470 and 5450 and movements below these levels can cause further sell-off. Nifty has resistance at 5850.

Fall
The HSBC services Business activity index contracted for the first time in 20 months. It was the first major data which came out last week. The service sector PMI stood at 47.9 points in July from 51.7 points in the previous month. The reading above 50 points indicates expansion, while the below 50 mark shows contraction in the sector. The composite PMI which comprises both manufacturing and services PMI also contracted o 48.4 points in July from 50.9 points in June this year. The reason behind the drop was cited as a fall in fresh orders.

Profit
Business outsourcing company, Firstsource, reported a 41.6 per cent rise in net profit for the quarter that ended on June 30, 2013. The net profit of the company stood at Rs 41 crore for the quarter under review, as compared to Rs 29 crore in the same quarter last year. The revenues were also seen up around 6.5 per cent at Rs 719 crore from R 675.2 crore in the same period last financial year.

Gujarat Gas also reported a 91.2 per cent jump in the net profit at Rs 101.13 crore in the second quarter that ended in June 2013, as against R 52.88 crore in the corresponding quarter last year. The company said that its consolidated profit after tax for the quarter that ended on June 30, stood at R 100.6 crore as against R 59.50 crore in the previous quarter. The consolidated net sales stood at R 747 crore against R 763 crore.

Selling
The Govt is going forward with its disinvestment programme. The new one in the list is NHPC. The government is planning to sell 11.36 per cent stake in the company which could fetch around Rs 1,800 crore to the exchequer. The Govt disinvested its stake in three companies -- Neyveli Lignite, STC and ITDC which was fully subscribed garnering Rs 395 crore to the government.

The Govt sold 3.56 per cent stake in Neyveli Lignite fetching Rs 360 crore. In ITDC, the government sold 5 per cent stake and in STC sold 1.02 per cent stake fetching Rs 30 crore and Rs 4.54 crore respectively.

International
On the global front, the US markets were trading flat because of the lack of any major triggers. But the concerns on the Federal Reserve’s timeline of winding down its stimulus plan, which was signaled by some of the officials, made the markets reverse the direction and remained in negative territory throughout last week.

Some sort of recovery though was seen in other markets. On the Chinese trade data which beat estimates, the Exports seen up 5.1 per cent from a year ago and imports also rose 10.9 per cent in an annual basis.

Ahead
This week, in the US markets, the major data to watch out for include Export and Import Index, inflation and core inflation data, retail sales and industrial production data. In the Eurozone, balance of trade, GDP growth data, IIP data and inflation are the main data to come out. Bank of Japan’s monetary policy meeting was also a vital global development.

Crude is also looking weak and is likely to get support at $103.24 and $102.15. It has resistance at $105.55. Pharma stocks like IPCA, Lupin and Sun Pharma are facing offloading and these stocks may get support only at lower levels. Britannia, SBIN, Marico, Hathway, IGL, Voltas, M&M, Hindalco, IOC, Escorts, OFSS, Max India, Natco Pharma, Wockhardt, LIC Housing, Srei Infra and Amaraja Batteries are the major ones which may announce their quarterly numbers this week.

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). u00a0

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