Tracking the global cues the markets this week markets mainly remained sideways. But low-level buying, positive economic data and strong earnings made the markets cross the 6000 level and ended up around 3.3 percent on weekly basis. Nifty has support at 6045 and 6010.
In order to increase the liquidity in the banking space the Reserve Bank of India this week reduced the Marginal Standing Facility for the second time in less than a month. MSF is overnight interest rate where all scheduled commercial banks can borrow from RBI up to 1 percent of their NDTL. The rate was slashed to 9 percent from 9.5 percent; which may be positive news for the banking stocks. The central bank also said that it will provide addition al liquidity through term repos of 7 day and 14 day tenure for a notified amount equivalent to 0.25 percent of NDTL of the banking system through variable rate actions on every Friday beginning October 11, 2013.
In the week, the International Monetary Fund (IMF) lowered the growth projection of the country to 3.8 percent for the period 2013-14 against 5.6 percent growth estimated early. The IMF but maintained the hope that strong recovery in exports may push the growth to over 5 percent. The reasons for the growth rate revision were cited as lackluster activity in manufacturing and services and of the current high interest rates, whereas the finance ministry expects the economic growth to improve 5.5 percent in the current fiscal from 5 percent on the back of agricultural output pickup and of good monsoon rains.
In order to strengthen India’s capital markets and to attract foreign investment the International Finance Corporation (IFC), an arm of the World Bank, launched a $ 1 billion offshore bond programme this week. The so-called synthetic debt is settled in foreign countries and it allows the investors to profit from rupee interest rates. In an offshore local currency bond, the foreign investor will first convert his currency into rupees and then invest in the bonds. His maturity proceeds would also be in rupees. The benefit to the issuer is that the currency risk is borne by the investor. Investors in these bonds get the benefit of asset diversification and high yields, particularly in situations when the underlying currency is expected to appreciate. IFC may use the current funds to finance private sector investment in the country.
The markets watchdog SEBI came out with new norms for listing of startups and small and medium enterprises in stock exchanges without going for an IPO. SEBI in its notification made amendments of rules to permit listing in Institutional trading platform (ITP). The minimum amount for trading or investment on ITP would be R 10 lakh. According to the market regulator, the move would provide better visibility, wider investor base and greater fund raising capabilities to such companies.
In the global front, the US markets were trading lower as the government shutdown entered the second week. The concerns were also hovering on the default of the recent debt ceiling raising deadline which is on October 17. The US speaker’s rejection of the proposal for raising the debt limit without setting preconditions made the markets to sink more. But the last day saw uptrend in the markets on the news that the lawmakers may agree to raise the debt ceiling to in order to avoid a default. The Asian and European markets also remained tracking the US markets.
In China, the inflation and GDP data will be in focus. In Japan, the Industrial production data will be watched. Industrial Production data, inflation and core inflation data may be trigger in the Euro zone area. Also current account and balance of trade data will be in focus.
Gold is weak and it has minor support at $1285 and $1266, the resistance lies at $1298 and $1308.
Medium term investors can buy stocks like Infotec Ent, Ceat ltd and Aegis Chemicals.
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 firstname.lastname@example.org. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
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