The markets showed large-scale volatility in the past week, ahead of corporate earnings and IIP data. The fall in the markets on the last day was primarily due to the fall in the major technology stock Infosys despite good IIP data. In the week, rating agency Standard & Poor said that India still faces the risk of downgrade over the next 24 months. The outlook will be changed to stable if the government comes out with more reforms to reduce structural fiscal deficits, and increase growth prospects. Also the rating agency lowered the standalone ratings of SBI and Union Bank on the concerns over their asset quality.
The major trigger was the earnings of the heavyweight stock INFY. The company reported a rise of 24 per cent in net profit to Rs 2369 crore and also the revenues increased 2.5 per cent to Rs 9,858 crore on a year-on-year basis. But the stock declined on the news of lowering the rupee revenue guidance of the company for FY13. Heavyweight stock. HDFC Bank also came out with its earnings, reported a 30 per cent year-on-year rise in net profit to Rs 1,559.98 crore for the quarter ended September 30, 2012. IndusInd Bank reported a 30 per cent growth in net profit at Rs 250.25 crore in the second quarter on the back of growth in the net interest income and the total income rose 31 per cent to Rs 2048.42 crore during the quarter. TTK Prestige, the kitchen appliances maker showed a net fall of 12 per cent to Rs 30 crore for the quarter ended September 2012. But the net sales rose 10 per cent to Rs 335.5 crore.
The IIP data for August came out which beat street expectations and rose to 2.7 per cent as compared to 0.1 per cent in July. The mining, manufacturing and electricity sector indices showed a growth of 2 per cent, 2.9 per cent and 1.9 per cent respectively as compared to the same period a year ago. Last week, the cabinet agreed to hike the prices of urea based fertilizers by Rs 50/tonne. The payment of fertilizer subsidy to companies will be based on the receipt of the fertilizers and the acknowledgment of receipts of fertilizers by the retailers. This will make direct transfer of cash subsidy into the farmer's account.
The Finance Ministry is likely to take a final view on the retrospective amendments relating to the taxation of indirect transfers by November 15 and may present it in the winter session of Parliament. The Shome panel on its draft had suggested waiver of interest and penalty in case of retrospective application. India's exports slipped for the fifth straight month in September while the imports rose slightly, taking the trade deficit to an 11-month high of $ 18.1 billion. Exports contracted 10.8 per cent to $ 23.7 billion from a year ago and the imports rose 5.1 per cent to $41.8 billion, on the 31 per cent rise in oil imports. The non-oil imports contracted 4.5 per cent, which clearly shows that the increasing crude consumption is widening the trade deficit.
This week, the markets may wait for the WPI for the September 2012, which is to be announced today. The CPI data coming out on October 18 is also awaited. After the outcome of IIP data and inflation, the market's focus will shift towards the RBI policy meet, which is scheduled on October 30. International gold is weak below $1775; the immediate major resistance will be at $1785. Support for the gold lies at $1762 and $1745. The outlook remains subdued due to weak macroeconomic fundamentals. The immediate support for the Nifty lies at 5635 level and if trades below it may test 5550 and 5520 levels in the short-term. Call options of L&T, Reliance Communication and HCL Tech are good for taking long positions with a holding period of two working days, which can give decent returns.
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