The rise in energy prices due to growing unrest in Egypt kept nullifying the positives. Also from the middle of this week, markets in China and Korea are shut on the back of the Lunar New Year holiday. So, cues from Japan and Australia were dominating the Asian front.
The beginning of last week was positive with the GDP growth for the 2009/10 fiscal year provisionally revised to 8 per cent from 7.4 per cent.
We also saw renewed buying in banking space, fuelled by rumours that the Finance Ministry is expected to seek cabinet approval to a proposal for giving proportionate voting rights to promoters of private sector banks.
The country's trade deficit narrowed to $2.6 billion compared with $8.9 billion in November, with HSBC Purchasing Managers Index rising in a slow pace.
The issue of Egypt is gaining strength by the day and is putting pressure on economies which are trying hard to tame their inflation, due to rising fuel prices. Also, the fear of political contagion will keep the Middle East space active, which controls the major supply of oil.
On the Asian side, Australia woke up from the worst flood in history to the deadliest cyclone Yasi which hit the country last Wednesday.
Further the meteorological department has issued warnings of flash floods in areas like Cairns and Townsville. This cyclone has left 75 per cent of the banana crop damaged and consumers are likely to pay around $13 per kg for banana while the sugar industry loss counts up to $500 million.
Sugar prices climbed considerably last week, on the back of price rise due to supply contraction expected worldwide, as Australia is the third largest exporter of sugar. One thing one should keep in mind is that domestic sugar companies will benefit marginally from the rise in global price, as our sugar exports are restricted.
Economic data from around the world was encouraging with the German unemployment rate at 7.4 per cent against 7.5 per cent, the US non-farm employment change declined to 1,87,000 from 2,47,000 while the New Zealand unemployment rate rose to 6.8 per cent against 6.4 percent.
But the US initial jobless claims declined to 4,15,000 from 4,57,000 and these employment data from around the world is indicating that the overall employment markets is showing a revival trend.
Commodity space was active throughout the week, with metal and crude leading in front. Both precious and base metals saw smart run ups, with gold prices above $1350. As manufacturing activity across the globe rushed up, the expected rise in demand helped base metals to gain with copper leading the race.
Sterlite industries gained around 8 per cent during last week and it has further potential to move up towards 185 levels in the short term.
Floods in Malaysia have caused supply disruption as the palm estates are under water and the government is meeting to decide whether it wants extra 50000 tonnes to 100000 tonnes of crude palm to meet its domestic supply shortage.
Our palm oil producers like KS Oil, Ruchi Soya etc are expected to get benefit out of this supply shortage. Crude oil is gaining further upward momentum and is likely to test 93.55 in the short term. Gold is having support at $ 1342 and $ 1326. Major target for the gold will be at $ 1375.
Nifty closed with a loss last week, and still has major support at 5,348. FII activities were evident and they were seen exiting stocks at every rally. The markets lack a reliable trend as gains made in one day are drained away the other day.
So, investors should be cautious while purchasing stocks in bulk quantities and should adopt an inverted pyramid buying strategy with a medium term perspective. Buying Nifty 5400 call options and putting options together is advisable, because increase in volatility will give decent returns to the investor.
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. 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).
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.
Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.
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