Plans for profit

May 06, 2013, 07:11 IST | Alex K Mathews

Initiatives aimed at increasing foreign and domestic investments are being undertaken to stimulate growth

The markets last week closed higher, up around 1.5 per cent. The Midcap and small cap sectors closed up around 2.4 per cent and 0.2 per cent respectively.

European Central Bank (ECB) President Mario Draghi signs a new five-euro banknote on May 2, 2013 in Bratislava, Slovakia. The ECB  reduced its key interest rate to 0.5 per cent. Pic/AFP

The Finance Bill was passed in the Lok Sabha with certain key amendments. One amendment was the dropping of sub section 5, which means that now Tax Residency Certificate (TRC) is enough documentation for foreign investors who wish to claim tax benefits in India.

In order to attract more foreign investment, the Finance Minister (FM) also reduced the withholding tax on long-term infrastructure bonds to 5 per cent from 20 per cent. Another change made was that it is no longer necessary to hold a PAN Card in order to be eligible to claim 5 per cent in long term infra bonds. The FM also said that the government has no plan to impose wealth tax on agricultural land.

Meanwhile, RBI cut the repo rate by 25 basis points to 7.25 per cent and the CRR was left unchanged at 4 per cent. The Reverse repo rate was adjusted towards 6.25 per cent. The RBI expects the GDP growth for the current fiscal at 5.7 per cent as against 5 per cent in 2012-13. The central bank also expects the inflation to come down to 5.5 per cent in the current fiscal and will use monetary instruments to bring it down to 5 per cent by next March.

Hindustan Unilever came out with its numbers for the quarter ended March 31, 2013. It showed a rise of 15 per cent as lower costs for raw material boosted the margins. Net profit stood at R787 crore for the fourth quarter from R687 crore a year ago; this was above market estimates. The company reported a 20 per cent jump in operating profits, with operating margins improving to 14 per cent. Also, the parent company Unilever PLC announced an open offer to raise its holding in the company up to 75 per cent for R600 per share; this is 20.6 per cent premium to Monday’s closing price.

The index of eight core industries rose 2.9 per cent in March against a contraction of 2.4 per cent in February. These core sectors have a combined weight of 37.9 per cent in the IIP, which may act as a relief for the investors to an extent on the upcoming IIP data. Out of the eight industries, only Natural Gas’s output fell in the period under review by 17.7 per cent. Steel and cement showed 6.6 per cent rise in output each.

In the US, the weekly unemployment data fell to its lowest levels since recession. Trade deficit narrowed more than expected in March to USD 38.8 billion from USD 43.6 billion in February. The FED, in its meeting, left its benchmark interest rate unchanged and stood with its USD 85 billion monthly bond purchases. The ECB also reduced their key interest rate by 25 basis points to 0.5 per cent and said it will act further if necessary.

This week, one should watch out for Chinese trade data, the Chinese inflation data and outstanding loan growth data. Major companies expected to reveal their earnings in India include HDFC, Lupin, Tata Coffee, Adani Ports, Apollo Tyre, NTPC, Union Bank and Glaxo.

Nifty has support at 5891 and 5864 levels and has immediate resistance at 6064 and 6126. Aggressive traders can sell 6100 call options of the Nifty. Call options of stocks Kotak Bank, Hindalco and Bank of Baroda can be bought for a short period. Rupee eased marginally against dollar, and is likely to test 54.26 and 54.36. It has resistance at 53.63 and 53.60.

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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