Closing on a positive note

Published: 23 December, 2013 06:58 IST | Alex K Mathews |

The Reserve Bank of India expressed it concern over high inflation, as the markets remained positive

Last week, on the back of FIIs buying and the positive domestic and global cues, markets closed in a positive zone. The Nifty and the Sensex closed at around 1.8 per cent each. Barring the banking sector, which closed down at around 0.5 per cent, all other sectors ended in green and the gainers for the week were IT and Pharma sector which closed at around 5.6 per cent and 5.3 per cent respectively. Nifty may revisit 6363 levels in the next month, ahead of December futures and options expiry. Going forward, the Nifty has a support at 6230 and 6197 levels.

The December quarter advance tax collection figures were a bit encouraging as most banks paid higher tax comparing with the same period last year. A 33 per cent fall was seen in the payout by State Bank of India (SBI) at Rs 1130 crore as against Rs 1700 crore last year. Private sector lender, Yes Bank gave nearly a doubled payout of Rs 105 crore, as compared to Rs 58 crore in the same period last year.

Whereas HDFC paid 25 per cent more tax, at Rs 400 crore against Rs 320 crore, paid earlier. Advance tax is a system of staggered payments of income taxes across the year in four quarterly installments, which is considered as a barometer of a company’s performance, for a particular quarter. The government had extended the deadline for the tax payment to December 17 as December 15, the last day for payment, fell on Sunday.

The Reserve Bank of India (RBI) in its December 2013 mid quarter monetary policy meet in the week came out with a surprise, to support the markets. The central bank during the monetary meet kept its interest rates unchanged. RBI kept the repo rate and the cash reserve ratio unchanged at 7.75 per cent and 4 per cent respectively. The reverse repo rate was at 6.75 per cent and the marginal standing facility and bank rate was at 8.75 per cent. The RBI expressed it concerns over the high inflation, but wants to wait for more data before a rate hike. RBI hopes that high vegetable prices, the cause for high inflation, may come down sharply.

Based on market capitalization and profitability, the Securities and Exchange Board of India (Sebi) has loosened the trading criteria for the illiquid stocks. Call auctions will be not applied to shares, where the company is profitable in at least two of the past three years, and not more than the 20 per cent of promoters’ holding is pledged in the latest quarter and the book value is three times or more than the face value.

Also, companies with a market capitalization of at least Rs 10 crore or those who have paid a dividend in at least two of the past three years are, excluded from the call auction. Earlier the market regulator had decided to impose the periodic call auction rules to all stocks with average trading volume of less than 10,000 and quarterly average daily number of trades of less than 50 which had reduced volumes in the concerned stocks.

On the global front, the US markets were trading lower, at the start of last week. Concerns of the Federal Reserve (Fed), on reducing its stimulus on economy, made the markets around the world trade lower. In its two day meeting, the US central bank revealed its plan to start the quantitative easing in January. Fed said it would pare purchases of the government, backed by bonds worth $ 10 billion to $ 75 billion a month.

The central bank also said to keep the interest rates low, to support markets and help US markets, rise to new highs. But some sorts of tensions were seen in the Chinese markets on the cash crunch, but the Chinese Central Bank conducted a short term liquidity operation, to provide enough credit to banks.

Counters like TCS, Tata Elxsi, Tata Motors, CIPLA, ONGC and APLLTD are looking very strong. More buying interest may emerge in capital goods sector stocks like L&T, BHEL and ABB in coming days.

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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