FII equity inflows hit 10-month low of Rs 2,100 cr in December

Overseas investors pumped in a little over Rs 2,100 crore in the Indian equity markets in December, making it the lowest investment in 10 months, primarily on account of profit booking.

The net investment by Foreign Institutional Investors (FIIs) for the entire 2014 was more than Rs 98,000 crore.

These investors got re-christened as FPIs or Foreign Portfolio Investors last year under a new regulatory regime that promises to make it easier for them to invest in India.

 According to latest data, FIIs have made a net investment of Rs 2,132 crore in the stock markets in December.

This was the lowest investment by FIIs in a single month since last February, when they had pumped in a net amount of Rs 1,404 crore.

Market analysts attributed the low inflow to profit booking, even though the central government took up the ordinance route to raise the overseas investment ceiling in insurance sector. 

However, experts are of the view that there is nothing to worry and FIIs will be back to the Indian stocks markets this month.

Apart from equities, foreign investors have infused a net of Rs 11,836 crore in debt markets last month.

In 2014, the net investment by overseas investors into the equities was Rs 98,150 crore, while in the debt markets it was Rs 1.6 lakh crore, aggregating to Rs 2.58 lakh crore. 

Return of the bull brigade

It has been a buoyant start to the New Year. The bulls, back from their year-end break, seemed determined to continue the party in stock market.

Both the Sensex and the Nifty ended the week with more than 2 per cent gains.

But as we begin 2015, there is a sense of unease on the pace of the expected recovery in economy and corporate earnings.

Most stock prices have run up ahead of the fundamentals, making them rightly, if not stiffly, valued at the current juncture.

The major trigger that everyone is awaiting is the interest rate cut by the Reserve Bank of India. This is expected to boost consumption and kick-start the investment cycle.

It will also provide some relief to our debt-laden companies. Margin expansion due to lower commodity prices is another plus for companies.

The risk to equities largely stems from global factors. Falling crude prices, causing contraction in economies of oil producing companies, can impact our exports and FDI inflows.

The possibility of foreign investors withdrawing funds once the US starts hiking rates and the impact of economic contraction in Europe, Japan and China on our exporters, are other concerns.

Nervousness was evident in other global markets too last week. Volatility returned as concerns on global economic growth resurfaced.

The Institute of Supply Management’s factory index dropping sharply in the US, slower than expected expansion in manufacturing in Euro zone, and a Chinese manufacturing index slipping to the lowest level in 18 months, further stoked these concerns.

But then, hope springs eternal in human hearts.

Investors decided to latch on to the positive fallout of these depressing statistics — the possibility of another round of stimulus in the Euro zone and China and the US postponing its policy rate hike.

That helped indices stabilise in the later part of the week.

Economic data releases last week were mixed. The eight core industries growing at 6.7 per cent in November over last year and HSBC manufacturing PMI at two-year high of 54.5 in November were the positives.

But the burgeoning fiscal deficit and the government’s attempts to salvage it by increasing excise duties on petrol and rolling back excise duty cuts on autos and capital goods does not lend much comfort.

Sensex (27,887.9)

The Sensex moved higher from the low of 27,267 to end the week 646 points higher.

The week ahead: Friday’s surge has taken the Sensex close to the short-term resistance at 27,932 that occurs at 61.8 per cent retracement of the previous down-move. The index has also managed to close slightly above the 50-DMA at 27,730.

The close above 28,000 in the early part of the week will mean that the index is headed higher towards 28,822 and then to 29,381 in the upcoming sessions.

But a reversal in the early part of the week will find the index halting at 27,091 or 26,469. Short-term view will turn negative only on a strong move below 26,469.

Medium-term trend: The movement of the index suggests that we can have one more spurt that takes the index to a new high before a serious decline. The index is expected to move close to the 30,000 level before a serious correction sets in.

This view will be negated on a close below 26,469. Key medium-term support stays at 24,500.

Nifty (8,395.4)

The Nifty too has closed on a strong note on Friday.

The week ahead: The Nifty managed a close above the 50-day moving average but it is halting just below the critical resistance at 8,400. If the index manages to move above this level on Monday, next targets will be 8,550 and then 8,626.

Short-term traders can then buy in declines with stop at 8,250. Supports below this level are at 8,244 and 8,142.

Medium-term trend: The medium-term trend in the index is positive. The rally that commenced last week could take the index to yet another new life-time high. The immediate targets are 8,724 and 8,825.This view will however be negated on a close below 7,961. Key medium-term support stays at 7,600.

Global cues

It was a turbulent week in global equity markets. Most benchmarks began the New Year on the back foot. CBOE volatility index spiked to 20.1 as the US benchmarks launched into a sharp decline.

The Dow did not make any progress this week and ended 220 points lower. Short-term support stays at 17,200 and 16,700. Short-term view will turn negative only on a close below the second support. Target on a strong break above 18,100 is 19,200.

Many of the Asian benchmarks such as the Jakarta Composite, Karachi 100 and Shanghai Composite Index closed the week on a firm note.

The strength in the dollar index is however a cause for concern. It is currently drawing close to the 2005 peak of 92. If this level is breached, it can move on to 96 or 102.

With a reversal in the benchmarks, the market appears set to surge to new highs

India raises excise duties on petrol, diesel

India on Thursday raised excise duties on petrol and diesel by 2 rupees ($0.03) a litre to fund infrastructure projects in the current and next fiscal years.

The increase, the third since Prime Minister Narendra Modi lifted diesel price controls in October, seeks to cash in on lower world oil prices to bolster strained government finances without stoking inflation.

The allocation of these resources to fund 15,000 km of road projects would spur economic activity and boost employment, the government said in a statement.

The higher excise duties come into effect from Jan. 2.

The government last raised excise duties on petrol and diesel by 2.25 rupees a litre and 1 rupees a litre respectively on Dec. 2.

India's fiscal deficit was 5.25 trillion rupees ($83 billion) during April-November, or 98.9 percent of the full-year target. The deficit was 93.9 percent during the same period a year ago.

($1 = 63.35 rupees)

Happy New Year 2015

Santa gives Indian markets a miss

The truncated Christmas trading week turned out to be quite volatile, as price moves caused by profit-booking and strong US data held sway over the indices.

The week ahead is expected to be relatively passive due to year-end holidays, which may result in a lack of global as well as domestic triggers to stock prices. Investors should tread with caution in the coming week.

The rupee too was choppy and stayed below the 63 mark against the dollar. Crude oil extended its weekly fall by tumbling 4 per cent to close at $54.7 a barrel.

The commodity needs to hold above $50 levels to see some relief in the coming weeks. The next level to watch is pegged at ₹38. Even natural gas extended its decline on worries of a supply glut and has plunged 13.3 per cent to close the week at $3 per mmbtu.

Globally, the US indices — the Standard & Poor’s 500, Dow Jones Industrial Average and the Nasdaq Composite —registered new highs on Friday even as most other major markets were shut that day. The S&P 500 and the Dow ended the week at records, posting their biggest rally in the past three years.

Back in domestic markets, the daily relative strength index, which bounced back a week ago is weakening. It is on the brink of re-entering the bearish zone from the neutral region. Volumes in the past week were below par.

The short-term trend continues to be down. Other indicators in the daily charts continue to hover in the negative territory supporting this downtrend. Indicators in the weekly chart have also given a sell signal and the momentum is fading.

The indicators are displaying negative divergence, indicating that the medium-term trend is under threat and that a reversal may be on the cards. However, this trend is likely to take sometime to unfold.

Sensex (27,241.7)

Last week, the Sensex reversed downwards from the intra-week peak of 27,851 and fell 130 points or 0.48 per cent for the week, closing on a marginally negative note.

The week ahead: The index continues to be in a short-term downtrend. The significant resistances are at 27,700 and 28,000.

A decisive rally and close above 28,000 is needed to alter this bearish short-term view. Inability to surpass 27,700 in the early part of the week will be an indication that selling pressure continues.

The Sensex is testing an immediate support at 27,000, a psychological level as well. A fall below this level can pull the index down to 26,042 or 25,144 in the coming sessions.

Medium-term trend: The movement over the coming weeks will determine that the medium-term correction is continuing or just a short-term corrective decline.

A strong rally above 28,000 will be needed to indicate that the bullish momentum has returned and that the index can regain its highs.

A failure to surpass this levels will mean that the decline from the 28,822-peak can extend downwards to 24,500. The 200-DMA hovering around 25,395 can act as a key base in the event of a sharp fall.

Nifty (8,200.7)

The Nifty too reversed downwards from the intra-week peak of 8,364.7 and declined 24.5 points to end the week on a marginally negative note.

The week ahead: The index has key resistance at 8,324 and 8,400 levels. Inability to rally above the first resistance will indicate selling pressure exists.

On the downside, the index can test a key support at 8,100 levels. A fall below this level can pull it down to 7,961. Further breakthrough of this level will strengthen the downtrend and drag Nifty down to 7,854 and then 7,601 levels.

Medium-term trend: The index is also testing the 8000 support which it managed to hold recently.

Having said that, a fall below this level will signify that the uptrend is under threat. Failure to rally beyond 8400 will keep the near term downtrend alive. A fall to 7,724 or 7,600 is possible in the weeks ahead.

However, an emphatic break of the level, can take the index to a new high.

Global cues

In the shortened week, most global asset markets were closed for festive holidays. The CBOE volatility index continued its decline the previous week to close at 14.5 as investor concerns faded. The Dow surged 248 points to close at 18,053.7 which is a record closing.

The index can trend upwards to 18,400 and then to 19,200 in the medium term. Gold and silver ended the week on a flat note.

Even as the US markets are soaring, Indian indices appear weak

Market enters a turbulent patch

The four-day week ahead could see further volatility as the December derivative contract expires this Wednesday. Investors will keep an eye on the unfolding events in Russia and elsewhere as they juggle with their investment strategy.

There was heightened drama in all financial markets last week. Indian equity investors who were thus far rejoicing at the positive impact of sliding crude prices on companies’ input costs and the country’s import bills, began worrying about the negative impact on our exports and foreign portfolio and direct investment flows.

The currency market was also in an upheaval with the Russian rouble facing a speculative onslaught and the Russian central bank hiking the interest rate in the country by 6.5 percentage points. The rupee added its bit to the ongoing pandemonium, moving close to the 64 mark against the dollar.

But peace returned in the latter part of the week, thanks to the Federal Reserve saying it intends to be patient in hiking interest rates in the US, and that policy rates could remain at the current level for a ‘considerable time’.

Higher volumes in the cash segment on the days when the market declined signal that retail investors are willing to buy in declines. Derivative volumes on the NSE too hit record levels in the early part of the week, signalling higher trading interest. Foreign portfolio investors stayed net sellers till Thursday, according to SEBI.

The fate of equity markets now hinges on crude price movement. As explained earlier, the level between $60 and $65 was the critical support for the commodity. Crude fell to $53.6, representing a 74 per cent retracement of the previous up-move. This is also permissible as a retracement when selling pressure is intense. It needs to be seen if crude holds above the $50 mark in the coming weeks. If it does, some stability can return to financial markets. Else a slide to $38 will be on.

Momentum in the daily chart deteriorated with the daily oscillators moving deeper into the negative zone. But there was a slight recovery towards the weekend. The short-term trend, however, continues to be down.

Oscillators in the weekly chart are giving a sell signal but they continue to be in the positive zone, implying that the medium-term view stays positive.

Sensex (27,371.8)

The Sensex reversed upward from the low of 26,469 mid-week and gained 823 points from there.

The week ahead: But the negative bias in the short term has not yet reduced. The Sensex has immediate resistances at 27,407 and then 28,000. We need a strong close above 28,000 for the near term trend to turn positive. But failure to move above 27,400 early next week will be taken as a negative signal. It will mean that the index can move lower to 26,042 or 25,144 in the days ahead.

Since the 50-DMA is also positioned at 27,500, a close above this level will be construed a short-term victory for the bulls.

Medium-term trend: As explained earlier, we are expecting the completion of a medium-term move at the November peak at 28,822. The extent of the pull-back next week will determine if we are in a medium-term correction or if the correction over the last three weeks was just a short-term pull-back.

If the Sensex moves above 28,000, it will mean that the up-trend has resumed and we will be hitting new highs soon. On the other hand, inability to move above that level will mean that the move down from the 28,822-peak will have legs that can pull it lower towards the 24,500 level indicated earlier. The 200-DMA at 25,200 will also be an important support if there is a sharp medium-term correction.

Nifty (8,225.2)

The Nifty reversed from the low of 7,961 to end the week on a flat note.

The week ahead: The index faces short-term resistance at 8,231 and then at 8,372. That the index is halting at the first hurdle implies that traders need to be a little watchful in the early part of the week. Presence of the 50-DMA at this level adds to its significance. Reversal in the early part of the week can pull the index lower to 7,961. A move below this level can take the index to 7,854 and then 7,601.

Medium-term trend: The medium-term view is under threat as the index moved below 8,000 last week. But a strong close below this level is needed to signal that further deterioration is possible.

Inability to move beyond 8,372 in the next couple of weeks will strengthen the possibility of a drift lower towards 7,724 or 7,600 over the coming weeks. But if this level is surpassed, the index will be on course to record a new high soon.

Global cues

Most global benchmarks recovered in the second part of the week to erase some losses. The CBOE volatility index too declined sharply from the intra-week high of 25.2 to close the week at 16.5, as investor trepidation abated.

The recovery has been spectacular in Dow, with a strong piercing white candle in the weekly chart that has gone past more than three-fourth of the white candle formed in the previous week. That the index retraced only 38.2 per cent of its previous up-move implies that it can move higher to 18,400 or 19,200 soon.

Indices have recovered but there are some hurdles in the near term

Market looks for a foothold

Equity markets are now on a slippery slope thanks to the selling fury unleashed last week by the crash in crude oil prices. Stocks are going to start the coming week on an extremely wobbly note as they react to the dismal industrial production numbers for October and the sharp dive in US equity market on Friday.

There was pandemonium in financial markets last week. Our hopes of a leisurely amble into the New Year were dashed as OPEC continued to pressure oil prices lower, sending Nymex crude to $58 on Friday. This caused a wave of global risk-off trades that made most global equity markets dive sharply.

As we have been reiterating, crude oil had important support zone between $60 and $65 dollar. Since many traders would have placed stop losses just below $60, break of this level will increase the downward momentum. Unless there is a strong recovery in the early part of next week, the slide could intensify, pulling crude prices toward the 2009 trough at $38.

This is not that great for earnings of oil companies or countries such as Russia and Venezuela whose primary exports are oil products. There are also concerns being expressed about possible debt default by these countries.

Both the Dow and the Nasdaq have lost more than 3.5 per cent last week making investors wonder if the long-awaited correction is finally here. As a thumb-rule, investors expect benchmarks to fall at least 10 per cent to signal a correction. A decline of more than 20 per cent is needed to signal a bear market.

While no one is really expecting the bear to emerge from its lair, either in the US or India, many investors waiting on the sidelines would welcome a correction since that would provide them an opportunity to enter the market.

Economic data has not been cheerful. OECD Lead Indicator showed that the Euro Zone is at risk of sliding back into recession with the UK and Russia at higher risk.

While the slide in consumer price inflation in India is worth cheering, the sharp contraction in industrial production has been a shocker.

Momentum in the daily chart deteriorated significantly last week. Price rate of change oscillator moved into the bearish zone and the relative strength index is close to oversold zone.

Weekly oscillators are moving in the neutral zone, implying that the medium-term trend has not reversed lower yet. But negative divergence in some of the momentum indicators implies that a reversal could be on the cards.

Sensex (27,350.7)

The short-term trend has reversed lower after the sell-off.

The week ahead: The bearish candle in the daily chart of the Sensex and the close below the 50-day moving averages are negatives for the index.

But the move last week is in consonance with our view that a five-wave pattern from October-17 low completed last week.

The index is currently poised at a critical support, just around the 50-DMA and the previous peak formed on September 9. The next support for the short-term is at 27,050.

Short-term investors should keep away from market on a dip below 27,000. For, the next support is at 25,910.

If the index manages to move higher in the early part of next week, resistances will be at 27,912 and 28,256.

Medium-term trend: If we assume that the move that began at 17,448 is now complete, then the current correction should drift lower down to 24,500 in the Sensex.

This could happen in a gradual manner.

The movement of the Sensex next week and the strength in the pull-back, if any, will give us more clues about the medium-term intention of the index.

Nifty (8,224.1)

The Nifty too drifted lower to close just above its 50-day moving average on Friday.

The week ahead: The index has closed on a negative note on Friday. With the weak industrial production numbers and sell-off in US on Friday, Nifty could open lower on Monday.

Immediate support to watch is at 8,082. Traders with short positions should watch out for a reversal from this region.

Fresh short positions are advised only on a strong close below this level. The next target is at 7,737.

Rebound next week will face resistance at 8,375 and 8,473. Inability to move above the first hurdle will be the cue for traders to initiate fresh short positions with stop loss at 8,480.

Medium-term trend: Our medium term view is unchanged. The fall last week strengthens the wave-count of completion of the move that began in August 2013 at the recent peak.

The extent of the pull-back next week will determine if this is the onset of a medium-term correction. A strong close below 8,090 will be the first indication of a deteriorating medium-term trend.

If a medium-term correction is in progress, the Nifty can drift lower towards 7,724 or 7,600 over the coming weeks. A sideways move between 7,600 and 8,600 can then ensue for a few months. The outlook will deteriorate significantly only on close below 7,600.

Global cues

Many global benchmarks took a deep dive last week with some commodity-heavy indices such as Brazil’s Bovespa and Russia RTSI declining 7.6 and 12 per cent, respectively. Indices such as the CAC and the FTSE are now in the third leg of the wave that began in September.

The evening star and bearish engulfing candle in the weekly chart of the Dow implies that the correction could extend for some more time. Immediate support for the index is at 17,135.

A breach of this level will take it lower to 16,650.

As long as the second support holds, the medium-term outlook is not under threat.

The medium-term trend is at risk, unless there is a smart turnaround soon