Markets trading high after stable government in power

With a new government coming to power, the Indian trading scene, imbued with a sense of optimism, can expect to see more ups than downs in the coming weeks

The markets last week, were seen trading high as hope of a stable government solidified and the general election verdict came out end of the week.

RBI has made some suggestions to the Government of India. Pic/Bipin Kokate
RBI has made some suggestions to the Government of India. Pic/Bipin Kokate

On Friday, the markets reached a record high; with the Nifty touching a high of 7563 and the Sensex reaching 25375. The Sensex closed around 4.9 per cent up and the Nifty at around 4.5 per cent up. For this week, Nifty has support at 7062 and below it may test 6927. In the short term, Nifty has resistance at 7300 and 7440.

Torrent pharmaceuticals came out with earnings; it reported a 119 per cent jump in net profit for the quarter that ended March 31, 2014 at R 244 crore from R 111 crore in the corresponding quarter in the previous year. The company’s revenues also increased by 41 per cent for the quarter under review to R 1225 crore from R 871 crore in the same period last year.

For the financial year 2013-14, the net profit of the company rose by 53 per cent to R 664 crore from R 435 crore a year ago, and the revenues were also up to R 4184 crore from R 3212 crore. The board of directors has also recommended a dividend of Rs 5 per share for the year 2013-14.

The trade deficit data of the country was seen shrinking due to rising exports data. In terms of the dollar, April exports grew 5.26 per cent a year ago after reversing for two months. The imports in terms of the dollar declined 15 per cent which made the data stand at $ 10.1 billion in April as compared to $ 17.7 billion a year ago.

According to the data released by the commerce and industry ministry, the exports for the country were valued at $ 25.6 billion and imports were at $ 35.7 billion. The gems and jewellery exports contracted 8.1 per cent and gold imports were down 74 per cent in April to $ 1.76 billion from $ 6.78 billion last year. Silver imports were also down 26.5 per cent to $ 468 million. The recovery in exports was led by engineering goods, overseas sales which rose 21.25 per cent to $ 5.75 billion.

The country’s wholesale price based inflation was out last week, which fell to a two month low on the back of moderation in food and fuel costs. The WPI data stood at 5.20 per cent as compared to 5.7 per cent in March. The April WPI inflation in the overall food segment eased to 8.64 per cent from a high of 9.9 per cent in the previous month.

In the last week, a panel appointed by the RBI has recommended many reforms for Indian banks. The panel suggested the government transfer all its stake and powers in public sector banks to a separate entity, which may be known as Bank Investment Company (BIC) and also recommended the government cut its stake in PSBs to less than 50 per cent. The committee proposed the BIC be constituted as a core investment company under RBI regulations, and, also said that all the existing laws governing the banks be cancelled and banks be governed by the Companies Act.

On the global front, the initial news was from the Chinese economy as the country’s cabinet said it will deepen reforms to improve quality and access to the nation’s stock, bond and commodities markets.

The government said that it will relax limits on foreign investment in listed companies, expand the quotas for capital flow and develop commodities trading tools. The US markets were also seen making record highs on the back of renewed buying and on the improved economic outlook. But coming to end of the week, mild selling pressure was seen in the bourses.

The rupee is strong and it is likely to test 58.75 and 58 in the days to come. Rupee has resistance at 59.45 and 59.75 in the short term against the dollar. Banking stocks are positive but upside is capped due to over buying.

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 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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