Dull after the storm

Last week, the market witnessed sell-off after the budget announcement. The investors were expecting too much from the budget. The overall performance in the week, was also dull on various negative macro-economic data. On a weekly basis, the Nifty closed around 2.4 per cent and the Sensex closed down around 2.2 per cent respectively.

The Bank Nifty closed with a weekly loss of 4.4 per cent. The mid cap and small cap sectors also closed down around 3.7 per cent and 5.6 per cent respectively. Nifty has breached its key support at 5843 (100 DMA) and may get minor support at 5658 and 5548 (200 day moving average) levels.

Growth
The GDP data for the third quarter which came out last week fell to a 15-quarter low of 4.5 per cent compared to 5.3 per cent in the previous quarter on the back of poor performance in the services and industry sectors. The economic growth in the first nine months of this fiscal (April- December) stood at 5.1 per cent, which was lower than 6.6 per cent in a year ago period.

The GDP data for the first and second quarter stood at 5.5 per cent and 5.3 per cent respectively, for the fiscal year 2012-2013. The farm sector was seen expanded by 1.1 per cent in the October-December period this fiscal, against 4.1 per cent in the same quarter last fiscal. The growth rate in the services sector, including insurance and real estate stood at 7.9 per cent as compared to 11.4 per cent.

Other data showed that the eight core sector industries grew by 3.9 per cent in January 2013 which was up from 2.2 per cent in the same month last year. But the cumulative expansion of these industries in the April to January period of 2012-13 slowed to 3.2 per cent from 5 per cent, in the same period last year. The fertilizer output shrunk by 9.1 per cent for the month under review as against 4 per cent growth in January 2012.

But the petroleum refinery output and the steel production grew by 10.5 per cent and 9.4 per cent respectively, in January 2013 as against 6.4 per cent and 4.5 per cent respectively in January 2012. This eight core stocks has a weightage of 37.9 per cent in the overall index of IIP data.

Deficit
Last Thursday, the Finance Minister (FM) P Chidambaram presented the Union Budget for 2013-2014. The FM said that the government has been able to contain the fiscal deficit at 5.2 per cent in 2012-13 by following the path of fiscal consolidation. He also said that the main area of worry is the current account deficit. The FM announced Rs 14,000 crore worth of capital infusion would be made into the sector banks to meet the Basel III regulations. Also, he said that the modified provisions of GAAR will come into effect from April 1, 2016. But the rating agencies Fitch and S&P said that the ratings are unaffected by the recent Budget.

Deadlock
In the beginning of last week, the global markets were trading in the negative as of the concerns on political deadlock in Italy. Then came the comment from the Federal Reserve's Chairman that they will continue their bond buying programme, which is necessary for the revival of the economy. Also, the successful long-term debt sale of Italy despite the political deadlock made markets rebound. The Chinese PMI data for the month February stood at 50.1 compared with 50.4 in January.

Data
This week, investors are waiting for economic data which includes initial jobless claims, non-farm payrolls, unemployment rate, balance of trade, ISM Non-Manufacturing Index and on the Asian Front, the investor may be looking forward for the Chinese and Japanese Balance of Trade Chinese Industrial Production and retail sales on a year on year basis.

The major trigger for the Indian markets may be the HSBC's Services PMI data, which is due on March 5, 2013. Gold has minor support at $1564 and $1545. Movements below these levels can cause more selling. Resistance is at $1585 and $1602. Counters like Titan, BPCL, IOC, ONGC and Sun TV are positive and buying can be expected in these stocks. 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).