Negative outlook

Aug 05, 2013, 01:27 IST | Alex K Mathews

With the Reserve Bank of India reducing its GDP forecast for the fiscal year, it remains concerned over rising inflation

The markets last week closed on a negative note. Nifty closed down around 3.6 per cent and Sensex at 3 per cent on a weekly basis. The major sectoral losers for the week were Realty and Power sector which closed down around 14.2 per cent and 11 per cent respectively. The consumer Durables sector closed up around 3 per cent.

In the stocks sector JP Associates and DLF were the major losers, which closed down around 29 per cent and 26 per cent respectively. Nifty has support at 5600 and the resistance stood at 5850.

On July 30, the Reserve Bank of India (RBI) came out with its monetary policy. In its first quarter policy review, the Central Bank kept all the key interest rates unchanged. The repo rate remained at 7.25 per cent and Cash Reserve Ratio (CRR) stood at 4 per cent. But the Central Bank reduced its GDP forecast for the fiscal year 2014 to 5.5 per cent from 5.7 per cent, which was earlier estimated. During the meeting, the RBI Governor remained cautious on the rising inflation and widening current account deficit. The next RBI monetary review policy is likely to be scheduled on September 18.

Arvind LTD came out with earnings, where the standalone net profit grew 75 per cent over the same period last year. The standalone net profit of the company stood at R 79.35 crore for the quarter, which ended on June 30, 2013, as compared to Rs 45.46 crore. On consolidated basis, the net profit rose 108.25 per cent at Rs 67.62 crore for the quarter under review, as compared to Rs 32.47 crore in the same period last year. The revenue grew by 28.82 per cent, from R 1156.63 crore to Rs 1490.53 crore.

To save the rupee and boost foreign currency inflows, Finance Minister P. Chidambaram announced a set of measures. In his meeting, he hoped for growth rates of 5.5 to 6 per cent in the fiscal year 2013 -- 14 as compared to 5 per cent in the year 2012-2013. The government also relaxed investment norms in multi-branded retail and raised FDI caps in several sectors, while it was made 100 per cent in telecom. According to new norms, the multi-branded retailers will now have to source 30 per cent of their products from small and medium enterprises, only at the start of business.

The previous week, the government raised Rs 101 crore from the sale of 3.74 crore shares in National Fertilisers LTD. The government before OFS held 97.64 per cent stake in the company and the paid-up equity capital of the company on March 31, 2012. The indicative price was Rs 27 per share, which was also the base price for the offer. The government also cleared 10 per cent disinvestment in IOC this week. The government holds a 78.92 per cent stake in IOC and the issue will fetch around Rs 3750 crore to the exchequer at the current market price.

On the global front, investors all around the world were waiting for the Federal Reserve’s two day meeting, in which the central was to decide, the fate of the US bond buying programme. In the meeting the Central Bank said, there is a need for continuing the stimulus plan, and made no indication that it is planning to reduce its bond buying. On the Asian front, the Chinese official manufacturing activity data came out, which beat the estimates that stood at 50.3 for the July month as compared to a level of 50.1 in the previous month. The ECB said, the interest rates will remain same or at a lower level, which will also lend support to markets.

For Indian markets, Alembic Pharmaceuticals, HMT, Fortis, Neyveli, MOIL, Lupin, Tilaknagar Industries, Tata Power and Gulf Oil are the companies which may announce their quarterly numbers. The rupee has support at 60.50 and 60.22 against the dollar. It has resistance at 61.21, and if that level has breached, more selling can be expected. Investors can consider buying put option of DLF, TISCO and Sesa Goa for a period of one day.

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).

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 and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

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