Little reason for cheer

Sep 30, 2013, 01:09 IST | Alex K Mathews

Two global rating agencies in the week downgraded India's top three public sector banks citing worsening credit quality

Nifty last week ended at 5833 with a weekly loss of around 3 per cent. The Bank Nifty also ended with a weekly loss of around 7.2 per cent. If nifty fall below 5811 and 5793 then we can expect further down trend in Nifty. Nifty has resistance at 5925 and 5950 level.

In the sectors space, the major gainers were Media and Pharma sector which closed up around3.2 per cent and 1.7 per cent respectively. Realty and Oil &gas were the losers closed down around 7 per cent and 5 per cent respectively.

Two global rating agencies in the week downgraded India’s top three public sector banks citing worsening credit quality and recapitalisation concerns. The rating majors Moody’s and Fitch cut the debt rating of SBI, Bank of Baroda and Punjab National Bank. Fitch downgraded viability ratings of PNB and bank of Baroda by one notch to “bb+” from “bbb-” but retained their long term issuer default ratings at “bbb-”. While Moody’s slashed SBI’s senior unsecured debt and local currency deposit rating by a notch to Baa3 from Baa2 citing asset quality concerns.

For the period April- August of the current fiscal, the indirect tax collections were up 4.1 per cent. Total collection of indirect taxes which includes excise, customs and services tax stood at about R 1,67,000 crore during the first five months of the 2012-13 fiscal. In August, total indirect tax collections stood at R 31,200 crore, up 9 per cent from the same month last year. Government has set indirect tax collection target of R 5.65 lakh crore for 2013-14, up from R 4.73 lakh crore in the last fiscal.

The September F&O expiry saw a huge rollover which shows a positive approach. The Nifty in the September month saw a rollover of around 62 per cent as compared to 40 per cent in the previous month. Large rollovers were seen in the stocks United Phosphorous (94 per cent), Aurobindo Pharma and Jubilant Food each 93 per cent. The least rollovers were seen in the stocks ICICI Bank (54 per cent), Voltas (57 per cent) and Federal Bank (58 per cent).

In order to support the rupee the RBI relaxed the minimum maturity tenure of banks’ foreign currency borrowings to one year from three years in order to use the central bank’s swap facility. It said that the relaxation will only be available while the swap window remains open till November 30. The RBI set up the swap window in the beginning of this month saying banks can borrow overseas up to 100 per cent of their Tier 1 capital level. Under the plan the central bank will offer to exchange foreign currency for rupees at a rate below market rates for banks which raise these funds through overseas borrowings.

Shedding last week’s gains the US markets mainly remained in red on the concerns of the budget for the new fiscal year starting from October 1, 2013. The US economic data also remained mixed. The consumer confidence data fell while the fewer jobless claims give little reason for the markets to cheer up. All other markets were simply tracking the footsteps of the US markets in the week.

In the coming week initial jobless claims and continuing jobless claims may be a major trigger for the US markets. Also the Nonfarm payrolls, Factory orders and Markit manufacturing PMI-final will be other data to watch. In the Asian front, Japanese unemployment data, Bank of Japan interest rate decision and Chinese NBS manufacturing PMI will in focus.

For the Indian markets the major trigger may be the quarterly numbers which may begin in the second week of October.

Crude is weak, and it has last support at $101.20 (100 DMA), if it trades below then it may find support at $97.25 in the near term per barrel.

Investors with aggressive nature can sell both call option and put option of Nifty at 5800. Investors with low risk appetite can sell 6000 call options and can buy protective call option at above 6200.

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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