Mixed feelings

Feb 05, 2013, 08:36 IST | Alex K Mathews

Private firms reveal profitable earnings, while growth in natural gas and coal dips

NIFTY last week saw a weak closing; it was down around 1.2 per cent. The Midcap and small cap indexes were also down around 0.3 per cent and 1.2 per cent respectively. The large cap gainers for the week were Axis Bank and Coal India which were up around 9 per cent and 5 per cent respectively. The losers were Bharti Airtel and L&T, down around 8.7 per cent and 4.7 per cent respectively.

Traders work at New York Stock Exchange after the Federal Reserve said that it will keep interest rates near zero. Pic/Getty Images/AFP

RBI okays cut
After keeping markets waiting for nine months, the Reserve Bank of India (RBI) cut the repo rate by 25 basis points to 7.75 per cent. The RBI also revised the GDP growth forecast for the country to 5.5 per cent from the 5.8 per cent for the fiscal year ended March 2013. The central bank surprisingly reduced the cash reserve ratio by 25 basis points to 4 per cent which may infuse around R180 billion rupees in the banking system. The inflation projection was also lowered to 6.8 per cent from the 7.5 per cent level projected earlier.

Profits for many
Drug maker Lupin Ltd reported its earnings for the quarter ended 31 December 2012 and beat the street estimates on the back of strong overseas demand. The net profit rose 42.6 per cent to Rs 335.2 crore from Rs 235.1 crore a year ago period. The revenues of the company also rose 37.6 per cent to Rs 2,465.9 crore from Rs 1,791.7 crore. Titan Industries also came out with its numbers where the net profit rose 24.3 per cent to Rs 203.73 crore for the quarter ended December 31, 2012 as against Rs 163.91 crore in the same period last year. The standalone net income during the period under review rose 23.68 per cent to Rs 3,017.80 crore from Rs 2,440.10 crore in a year ago period.

Continuing with the stake sale in PSUs, the government is set to disinvest its 10 per cent holdings in Oil India through auction. By this move, the government hopes to raise around R300 billion. The auction took place on February 01, 2013, where the floor price for the auction was set at R510 per share as compared to the 5.6 per cent discount on the previous day’s closing value. At the floor price, the government is likely to raise about USD 575 million through stake sale.

Growth goes down
Growth in the eight core sectors fell to 2.6 per cent in December due to the negative growth in natural gas, coal and fertilizers’ sectors. The eight core sectors have a weightage of 37.9 per cent in the index of Industrial Production. The natural gas production slowed to 14.9 per cent in December 2012 against 10.8 per cent contraction a year ago. At the same time the coal production dipped by 0.2 per cent as compared to a 5.5 per cent growth in the same period last year.

News from US
The US Federal Reserve agreed to the continued purchase of mortgage-backed securities for USD 40 billion per month and long term Treasury securities for USD 45 billion per month.

Coming this week
As NIFTY has lost its key support level at 6000, it may test 5950 and 5900 in coming days. Gold has resistance at USD 1678 and USD 1696. Movements above these two levels can lift the gold price further north. Gold has support at USD 1660 and USD 1650. The HSBC Services PMI data for Indian markets is due today. The major firms that are likely to announce their numbers are United Spirits, Tech Mahindra, Godrej Industries, ACC, Bombay Dyeing and Mfg Co Ltd, M&M and Tata Chemicals. Investors with long-term perspective can buy Sun Pharma, Auropharma, Tube Investments and Reliance Industries at every decline.

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 alex@geojit.com. 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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