On a new high

Published: Dec 03, 2012, 06:48 IST | Alex K Mathews |

With international agencies projecting a stable outlook for India, markets in the country showed a 4.5 per cent gain this week

The week ended with a huge rally which was supported by the better outlook given by rating agency Moody’s and the investment banker Goldman Sachs. The Parliament's return to work was another reason. The markets showed a weekly gain of 4.5 per cent.

Moody’s projected a stable outlook for India and maintained the country's sovereign rating at Baa3 followed by healthy savings and investments rate. The agency raised its GDP target to 6 per cent from 5.4 per cent in FY 2012 and higher in FY 2014. But Moody's also expressed concerns over high fiscal deficit and inflationary pressure which may add pressure to the economy.

Money matters: Stock prices are visible on the Bombay Stock Exchange (BSE) building, as Asian markets tracked Wall Street higher with investors following US talks about the fiscal cliff welcoming positive comments from both sides of the political divide. Pic/AFP

Goldman Sachs also upgraded Indian stocks from ‘market-weight’ to ‘overweight’ setting a December 2013 target of 6600 points for Nifty, which is a 13 per cent upside from the current levels. Growth recovery and inflation moderation were cited as the reasons behind the upgradation. Earlier in the week, Morgan Stanley also set a probability weighted target of 23,069 points for Sensex for December 2013, a 26 per cent upside stating a recovery in broad earnings growth.

GDP declared
The GDP data for the second quarter came out on 30 November 2012, and showed that it grew 5.3 per cent against 5.5 per cent in the previous quarter and 6.7 per cent in the corresponding period last year which was pulled down by the weak performance of manufacturing and agriculture sectors. The manufacturing sector and agricultural sector grew 0.8 per cent and 1.2 per cent annually, whereas the mining sector showed some improvement — a growth of 1.9 per cent as against a contraction of 5.4 per cent a year ago.

The government has deferred its proposal to hike the sugar price sold in ration shops and is considering the recommendations made in the Rangarajan report on the decontrol of the sugar sector. According to the report, removal of the levy on sugar mills and the obligation of mills to supply 10 per cent sugar at cheaper rate to the government to meet the ration shops’ demand have been recommended. It also suggested that the states which want sugar to be supplied through ration shops may buy it directly from the markets according to their requirement and may also fix the issue price.

The winter session of the parliament, which began on November 22, was in a limbo till November 29, when finally the Lok Sabha Speaker agreed to allow voting on FDI in multi-brand retail. The debate is scheduled for December 4 and 5. The deadlock in the Parliament has delayed the tabling of key bills such as those on insurance, pension and banking.

Gold has corrected in the short term and it tested a low of $1705, and it is likely to test $1736. If it can stay above this level for more than two days, then it may test $1755 and thereafter it can test $1770 and more.

Nifty has immediate resistance at 5890; if Nifty closes above this level for atleast two days, then we can expect further uptrend and Nifty may move towards 6000 levels. The immediate support of the Nifty lies at 5750 and 5679.

Short term traders can buy Great Offshore and United Breweries. Nifty heavy weight stocks like Reliance Industries, M&M, AXIS Bank and Bank of Baroda are the few stocks which can give support to the market. Selling the 5600 put option of Nifty and buying protective OTM put option is a good strategy to adopt.

The markets around the globe were trading higher on the hope of a deal for cutting down the looming US fiscal cliff. This week saw a meeting of the Euro area finance minister to launch a bailout plan for debt-ridden Greece. Japan's industrial output unexpectedly rose 1.8 per cent in October for the first time in four months. The UK Consumer Confidence also rose to an 18-month-high in November.

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).

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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