Game changers

Jul 28, 2014, 09:44 IST | Alex K Mathews

A number of factors have influenced the Sensex from tensions in Ukraine and Gaza to change in taxation patterns in India

At the beginning of last week, geo-political tensions were seen ruling the markets, but the markets hit fresh highs in the latter part due to sustained buying by FIIs. On a weekly basis, Nifty closed up around 1.4 per cent. In the short term Nifty has support at 7700 and 7662 and resistance is at 7885 and 8015.

TRAI recommended a new licensing regime for DTH TV service providers under which the tenure of permits will be doubled to 20 years, renewable for 10 years at a time and the licence fee on adjusted gross revenue will be reduced to 8 per cent from 10 per cent.

The broadcasting and telecom regulator also suggested that the adjusted gross revenue should be calculated excluding service tax, entertainment tax and sales tax or value added tax paid to the government from the gross revenue. The regulator further specified that all the DTH providers should be allowed to migrate to the new licensing regime at any point of time during their current licence tenure.

TRAI made recommendations on cross holdings and control of the broadcasting and distribution sectors, which suggests that vertically integrated broadcasters must be subjected to a set of additional rules and they should be allowed to control only one of distribution platform operator including cable and DTH firms.

The telecom company IDEA, last week came out with its earnings where it posted a 57.4 per cent rise on account of growth in both voice and data services. The company's net profit stood at Rs 728.2 crore for the quarter ended June 30, 2014 as compared to Rs 462.7 crore during the same period last year.

During the period, the net revenue of the company rose 15.6 per cent to R 7561 crore from R 6538.8 crore, last year in the same period. On sequential basis, the company posted a 23.47 per cent rise in the net profit at Rs 589.8 crore on total revenues of Rs 7043.8 crore. As of June 30, the company has also reduced its net debt by R 5208.7 crore to Rs 13976.9 crore.

Paint company - Kansai Nerolac Paints reported a 19.77 per cent increase in its standalone net profit for the quarter ended June 30, 2014. The net profit of the company stood at Rs 72.98 crore as compared to Rs 60.93 crore in the same period last year.

Net sales for the period under review were at Rs 921.07 crore, an increase of 16.61 per cent from Rs 789.81 crore in the same period, last year. The overall expenses during the first quarter stood at Rs 823.17 crore against Rs 705.75 crore in the same quarter last year.

The investments through participatory notes (P - notes) to the Indian shares have surged to its highest level in more than six years on the optimism on the ruling government.

According to the data by SEBI, the total value of the P note investments to the Indian markets (equity, debt, derivatives) rose to Rs 224248 crore at the end of the June from Rs 211740 crore in May. This is highest inflow since May 2008 where the cumulative value was at Rs 234933 crore.

The US markets were trading lower at the start of last week because of concerns about the developments in Ukraine and Gaza. But better economic data and earnings supported the markets later in the week.

On the economic front, the US consumer price rose in June and the home re-sales rose in June at its fastest pace in eight months. All other markets were following the foot steps of the US markets.

In the options space, long strangle positions can be created by buying Nifty 7600 put options along with 7800 call options. Stocks like Edelweisis, Bayer Cropscience and Century Textiles have come out with better earnings which can be considered for short term buying.

In this week, the earnings will remain a major trigger for Indian markets and also HSBC manufacturing data will be in focus.

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.

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions.

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