08 August,2011 07:37 AM IST | | Alex K Mathews
It was a gruesome week for the equity markets worldwide.
Global markets crashed on worries of global economic recovery in the US and Europe and also due to the fact that borrowing rates and inflation remained high in many developing nations.
In the case of Nifty, it literally crashed towards the end of the previous week to the lowest level since November 6, 2010. Given the current situation, economic data, which came out last week, too posed challenges.
Inflation
Our country is facing high food inflation, which is still above the comfort level of the Central Bank, but inflation rate has come down from 17.05 per cent in January 2011 to 8.04 per cent in the week ended July 23.
Food inflation increased to 8.04 per cent against 7.33 per cent and this was due to pressure on onion prices.
Given the upcoming festival season, higher minimum support price for agricultural output by government will keep the food inflation at higher levels.
Sales
The July auto sales numbers, released last week, were disappointing due to the prevailing higher tax and high fuel price. Maruti reported a 25.33 per cent dip in its July sales at 75,300 vehicles compared to July 2010.
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Tata Motors reported a 6 per cent dip in sales and Hyundai motors reported a 1.5 per cent decline in sales at 49,667 units against 50,411 units in the same period last year.
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The cement sales grew between 7.4 and 28 percent in July.
Ultratech reported a 7.4 per cent growth in sales while ACC reported a 28.21 percent rise in sales. Production rose 7.3 per cent for Ultratech while production at ACC jumped to 2.03 mt from 1.55 mt.
Stock
Last Friday, Nifty came down to a low of 5116 and bounced back from there. The crucial support remains at 5116.
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If Nifty slips below this level, then further selling can be seen towards 4800 levels. On the technical front, the markets are oversold. Most of the global markets are trading below their respective 200 Daily Moving Average (DMA).
Investors
Investors can use this opportunity and start buying stocks with a medium term outlook in small quantities. Many stocks are trading at great valuations and can be bought.
Overall market sentiment on the global front remains weak. Europe and US are looking weak given the debt situation they are in. US had raised the debt limit of the country to $16.1 trillion but still the outlook hasn't changed.
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The fear in the minds of investors reflected in gold price, which shot up to an all time of $1681.2 levels and witnessed profit booking. It is still looking bullish given the uncertainty, which is still prevailing.
Crude prices fell below $90 and came down towards $85. Economic data too was not supporting the markets as the US ISM manufacturing index fell to 50.9 from 55.3. European markets too lost heavily.
Gold
On the commodity space, gold prices hit an all time high.u00a0 If the financial market crisis spreads towards the dollar denominated commodities, then we should expect a decline in gold price too. Gold has resistance at $1670 and $ 1699. Crude has last support at $83.
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If crude trades below this level, we can expect a heavy sell off, which can bring down the price of crude towards $ 65 mark.u00a0 Stocks like BPCL, HPCL and IOC are expected to outperform in the future.u00a0 Investors with short-term perspective can buy these stocks.
