Hope in bleak times
While the possibility of price rise looms large and trade deficit widens, foreign investors continue to purchase stocks
The markets remained in a tight range during the week but surprised watchers by closing positively with a weekly gain of 1.1 per cent. Oil and Gas sector and the Realty sector were the sectoral gainers with a weekly gain of 2.33 per cent and 1.89 per cent respectively. In the Midcap section, Punj Lloyd and Uniphos closed with a rise of around 5.99 per cent and 4.84 per cent, while MTNL and Bajaj Hindustan closed with a fall of around 4.53 per cent and 3.84 per cent respectively.
The service sector saw an increase of nearly 5 per cent to reach USD 3.6 billion in the FDI inflows in the April-October period of this fiscal. This was despite the decline in the overall FDI by 27 per cent during the same period. In 2011-2012, the FDI inflows to the above sector rose to USD 5.21 billion from USD 3.29 billion. The financial and non–financial services sector attracted FDI worth USD 3.42 billion during the same period last year.
During the week, the government approved selling 12.5 per cent stake in RCF. It has a shareholding of 92.5 per cent in the company. The sale is likely to fetch around R360 crore. The government is also planning to divest its stake in other PSU companies like NTPC, Oil India, SAIL and BHEL for achieving its disinvestment target.
Prime Minister Dr Manmohan Singh hinted at possible increases in fuel prices and power tariffs and reduction in subsidies to achieve the target of 8 per cent growth in the 12th Five-Year Plan. But he also cautioned that if the policy logjam continues, the growth may fall to 5.5 or 5 per cent during the plan period.
FIIs on a high
Foreign investors continued to be buyers of Indian stocks as the net flows crossed R1.2 lakh crore in 2012, taking their cumulative investment in the equity market to USD 125 billion. The net inflow was the second highest in a year since their entry into the Indian capital market in 1992. In 2012, at a gross level, FIIs purchased stocks worth around R6.5 lakh crore and sold shares worth R5.3 lakh crore, creating a net flow of R1,21,652 crore.
Trade deficit widens
The government came out with more incentives for exporters to avoid further fall in the exports. The fall had led to a dangerous widening of the trade deficit and depreciation of the Indian Rupee. The government has extended the interest subsidy for some sectors by 2 per cent until March 2014, including sub-sectors of engineering goods and provision of incentives on incremental exports made to the US and the EU. Due to declines in the exports and imports for the April-November period, the trade deficit increased to USD 129.5 billion from USD 122.6 billion last year.
Around the world
On the international front, the US markets remained in negative territory during the week as the deadline for year-ending budget draws near. US President Barack Obama has planned to meet lawmakers to resolve the issue of fiscal cliff before atleast USD 600 billion in spending cuts and tax increases begin in January. The Asian markets were trading higher on the speculations that the Bank of Japan may implement more stimulus measures.
The auto sector and cement sector stocks may be in focus as they are likely to announce monthly sales next week. After that, the major trigger for the Indian markets may be the revelation of corporate earnings, which are likely to begin the coming week.
Rupee is trading sideways, having support at 55.25 and 55.45. It has resistance at 54.65 and 54.07. There are fair chances that the rupee may tank towards the 55 mark in the short term.
Market has entered into the consolidation mode and it may face resistance at 5940 and support at 5838. Nifty traders can buy one lot of 5900 January call options and can sell two lots of 6100 Nifty February call options. Investors with low risk appetite can buy Hero Honda, Wipro, HDFC, Bajaj Auto and BPCL call options.
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 email@example.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).