On a positive note

Jan 28, 2013, 08:42 IST | Alex K Mathews

Moody's maintains sovereign rating for India while RBI increases limit for foreign investment in government securities

The markets closed with weekly gain of 0.3 per cent again. Midcap and smallcap sectors were down around 3 per cent. In the midcap sector, HDIL lost around 32.6 per cent in the week and IVRCL Infra lost around 19 per cent. The FMCG were the gainers with a weekly close of 1.4 per cent. Nifty has support at 6002 and 5988 and resistance from 6110–6125.

International Monetary Fund (IMF) chief Christine Lagarde attends a session of the World Economic Forum. The IMF lowered its estimate of India’s growth in 2013 from 6 per cent to 5.9 per cent. Pic/AFP

Rating retained
Credit rating agency Moody’s maintained its sovereign rating for India with a stable outlook, which came as a huge relief to the government. It retained its Baa3 rating which is the lowest level in the investment grade. However, it expressed its concerns that the high fiscal deficit may pull down the growth in the coming year. The rating agency also said that the recent diesel price hike is a “credit positive” move for government oil marketing companies such as IOC and BPCL. On the other hand, the IMF cut its projections for India’s economic growth from 4.9 per cent to 4.5 per cent for the 2012 calendar. It also said that the economy might grow at a faster pace in 2013 at 5.9 per cent which was also slightly lower from the 6 per cent estimated earlier.

New limits
In order to boost the investments by FIIs in government securities, the RBI has hiked the limit by USD 5 billion to USD 25 billion. The central bank also enhanced the investment limit in corporate bonds by USD 5 billion to USD 50 billion. But RBI restricted foreign investors from buying certificates of deposits and commercial paper.

Of profits
Mortage lender HDFC Ltd revealed its third quarter standalone profit, where the profit rose 16.2 per cent, driven by strong loan growth. The net profit of the company rose to R1,140.1 crore in the quarter-ended December 31, 2012 from R981.25 crore a year ago. The total loan book also grew by 21.7 per cent to Rs 1,60,941 crore from R1,32,208 crore in the year ago period.
Media giant Zee Entertainment Enterprises delivered a 40.5 per cent jump in the consolidated net profit to R193.31 crore for the quarter-ended December, 31, 2012 as against R137.61 crore for the same period last year. The total income from operations also rose to R509.38 crore as compared to R395.50 crore last year.

Stake sale
The government has initiated talks for starting the divestment programme for the next fiscal. It is seeking approval from the respective cabinets for divestment in companies such as NHPC, REC, Coal India, IOC and Power Grid. In the current fiscal, the government raised around R6,900 crore from the stake sale of Hindustan Copper and NMDC. Also it is planning to announce the stake sale of Oil India, NTPC, NALCO, MMTC and Neyveli Lignite.

Global front
The US markets swung between the positive and negative territory with mixed earnings. The US factory data grew in January and the number of new jobless benefits also dropped to a year’s low. The Chinese HSBC Purchasing Managers’ Index (PMI) rose to 51.9 in January against a reading of 51.5 in December.

Looking ahead
The major trigger for the Indian markets may be the RBI policy meet which is scheduled for January 29, 2013. Rupee is strong but some amount of selling pressure can be expected in the short term, especially before the RBI policy meet. If RBI reduces the repo rate by 50 basis points then one can expect a level of 55 for rupee. The major companies expected to reveal their earnings in the coming week include ICICI Bank, Bharti Airtel, Lupin, Union Bank, JSW Steel, V-Guard, Reliance Capital, Sobha, Whirlpool, Godrej Properties, Sterlite Industries and Jet Airways. Stocks of Aurobindo Pharma, L&T, Jindal steel, HCL-Tech and Sun Pharma can give decent returns in the short term. Investors can create fresh long positions at these counters.

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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