Market to continue booming; Crude prices fall on Chinese fatigue; Little relief from inflation; Foreigners excited

Markets on Monday traded above concerns that a sharp slowdown in China’s growth could weigh on global growth. US indices, which were initially down, rebounded to close with moderate gains. At the same time, crude oil prices fell by more than 5 percent on fears of reduced demand. Industrial metals fell between two and five percent. These will cast a shadow over trade today. However, the Indian market is trying to continue the gains of the past weeks. General economic indicators are not encouraging but not depressing for the market.

Yesterday, the Dow Jones gained 0.45 percent and the Nasdaq gained 0.62 percent. US futures are slightly lower this morning but investor sentiment is positive. The results of Walmart and others will determine the course of the western market today.

Asian markets are giving a mixed picture this morning. Japan’s Nikkei index opened slightly lower. Later losses were reduced. The South Korean market showed early gains. China is also gaining.

The SGX Nifty rose to 17,857 on Monday in derivatives trade on the Singapore Exchange. It is trading at 17,835 this morning. This indicates that the Indian market will start trading with gains today.

Indian markets rallied more than 10 percent from June’s lows as major indexes rose for the fourth consecutive week. Sensex rose 1.84 percent and Nifty 1.73 percent last week. On Friday, the Sensex rose 130.18 points (0.22%) to close at 59,462.78, while the Nifty gained 39.18 points (0.22%) to close at 17,698.15. The mid-cap index gained 0.73 percent while the small-cap index gained only 0.25 percent.

Foreign investors are entering the market on demand. Foreigners invested Rs 3040.46 crore in the cash market on Friday. Foreigners invested a total of $1.04 billion in Indian stocks last week and $2.83 billion so far in August.

Nifty has support at 17,625 and 17,550 today. 17,750 and 17,810 will be barriers on the upside.

Crude oil fell sharply yesterday. This was due to China’s July industrial output decline and a slowdown in refinery activity. If this trend continues, China will not be able to achieve the target of five and a half percent GDP growth in July-December. China’s central bank yesterday cut key interest rates and took steps to increase liquidity in the market. This caused the Chinese stock market to rise on Tuesday morning.

Brent crude oil dropped to $93 yesterday from $98 at the weekend. A little higher this morning.

A report that construction investment in China fell 12 percent last month dragged industrial metals lower. Copper prices fell from above $8,000 to $7,865 a tonne. Aluminum fell by more than 4 percent to 2384 dollars. Nickel prices fell by 6 percent.

Gold closed at $1,804 on Friday. But on Monday, the price fell sharply to $1778. That’s because the dollar index rose and the stock market overcame Chinese concerns. Gold is trading at $1777-1779 this morning. Gold will show significant movement only after the minutes of the US Fed tomorrow.

It is indicated that the pavan price in Kerala, which rose to Rs 38,520 on Friday, will drop significantly today.

The rupee ended flat at Rs 79.65 per dollar as the dollar index edged lower on Friday. Today the dollar index has climbed to 106.6. It will exhaust the rupee. A high trade deficit will also be negative for the rupee.

A market without Jhunjhunwala

The sudden death of Rakesh Jhunjhunwala, who was a big presence in the Indian stock market for four decades, shocked the market workers. The absence of a ‘Big Bull’ with a large investment portfolio has eliminated a large source of vitality in the market. This sudden end could cause no small problems for the growth of the aviation company he started, Akasha Air. The absence of an investor who can scrutinize the performance of a number of companies in which he has significant investments and suggest corrections will be significantly affected. These issues cannot but be reflected in business today. Those who have been paying attention to buy the stocks he invests and sell the stocks he sells have not been disappointed. Like many other big investors, Jhunjun Wala did not keep his investment matters a secret. It is this openness that made him popular.

There are many unbelievers

There are not a few people in India and outside who do not believe in the current boom in the market. The major indices of the Indian market have risen by 10 percent in the last four weeks. They think that there is no suitable environment for this and the time is coming when the income and profit of the companies will decrease. They have no doubt that economic recession is coming. The likes of Jeremy Grantham also suggested yesterday that market indices need to fall another 50 per cent from current levels. There are those who warn that the indices could move lower for another correction at any time. Most advise caution till Nifty crosses 17,900.

Economic indicators without relief

Retail price inflation in July eased to 6.71 percent. Industrial production growth in June fell to 12.3 percent. Export growth in July was just 2.14 percent. The trade deficit jumped to 30 billion dollars.

In these figures released on Friday, there is only a slight relief in the decrease in price inflation. There is an alarming decline in exports. Industrial production growth is not satisfactory.

It has gone down from above seven percent. Lowest rate in five months. However, the price rise is above the tolerance limit of 6 percent.

Repay increases will slow down

The rise in retail prices will help the Reserve Bank of India’s Monetary Policy Committee (MPC) avoid a major hike in the repay rate at least next month. The repo rate was increased three times from 4 percent to 5.4 percent. Financial observers now expect the next hike to be a maximum of 35 basis points. Many believe that the repo rate will be in the 6.0-6.25 percent range by the end of March. This is based on expectations that global crude oil prices will fall below $100 and a good monsoon will keep food prices low.

Will food prices fall?

The main reason for the decline in retail price inflation is the fall in food prices. The food price inflation was 8.31 per cent in April and fell to 6.75 per cent in July. How long this will last is doubtful. The price of pulses including nuts is increasing again. In addition to shortage of stocks, crop damage in many states and low fresh harvest have contributed to the rise in prices. Prices of wheat and rice are also rising. Paddy cultivation has decreased by 15 percent. The status of wheat stand is also not satisfactory. Although the Center thinks that the implementation of the Essential Commodities Act will keep prices down, it remains to be seen how effective they will be.

The rise in the Index of Industrial Production (IIP) rose to 12.3 percent in June from 19.6 percent in May. Last year there was a big slowdown in the production sector due to covid in these months. It decreased in the following months. It is concluded that the IIP increase will be reduced to a single rate in July. This June growth was only 2.8 percent compared to growth in February 2020 before Covid.

Foreign demand falls

Things are not encouraging at all in the export sector. The increase seen in exports compared to the previous year does not reflect the reality. Exports decreased from the previous month. In contrast to June’s exports of $40.13 billion, July’s exports were only $36.27 billion. 3894 crores in May. This does not bode well. Export organizations say that the demand is decreasing. Exports of engineering products and jewelery declined.

The trade deficit is increasing out of control. The deficit widened from $4,207 crore to $9,899 crore during the four-month period of April-July. The increase is 135 percent.