Slow but not steady
Between FIIs' huge investments, the RBI's new rules regarding gold and Mario Draghi's comments on the Euro, the market closed on a weak note
Last week, the market witnessed a weak closing. Nifty closed down around 1.4 per cent and Sensex down around 1.3 per cent. Healthcare and FMCG sectors were down around 2.3 per cent and 1.8 per cent respectively. In the large cap session, TCS and HDFC Bank were the gainers with a rise of around 5.5 per cent and 4.3 per cent respectively. The losers were JP Associates and Sesa Goa which closed down around 12.2 per cent and 7 per cent respectively.
The major earnings for the week were of distiller United Spirits whose net profit jumped 71 per cent on the back of cost control and strong volume growth. The company posted a net profit of Rs 80.55 crore for the third quarter ended December, 2012 as compared to Rs 47.06 crore for the same period last year. The net sales of the company also rose to Rs 2,174.01 crore as against Rs 1,953.94 crore on a year on year basis. The stock prices rose to its highest level as it recently got SEBI’s nod for the open offer for acquiring 26 per cent stake from public share holders of the UB Group by Diageo.
The HSBC services’ PMI data, which was released during the week, showed that rising foreign orders were the main drivers. The data jumped to 57.5 in January from a level of 55.6 in the previous month. The new business sub-index rose to 58.3, which is the highest level since August 2011. On the other hand, PMI data related to manufacturing fell to its slowest pace in three months.
In order to discourage investments in physical gold, the RBI suggested a mandatory quoting of Permanent Account Numbers (PAN) for high value purchases. The central bank committee also proposed a cheque payment for gold purchases above a certain limit. The RBI put forward a proposal of setting up a Bullion Corporation in order to discourage gold imports and making use of idle gold reserves.
In the month of January, foreign investors pumped around Rs 22,000 crore (USD 4 billion) into Indian stock markets. According to SEBI, the FIIs were buyers of shares worth Rs 77,859 crore, while they sold equities amounting to R55,800 crore which in turn translated into a net inflow of Rs 22,059 crore (USD 4.05 billion). Apart from equities, they invested around Rs 2,947 crore in the debt market in January. In 2012, FIIs made a net investment of Rs 1.28 lakh crore (USD 24.4 billion) in Indian equities making it the second best year for the market after a record inflow of Rs 1.33 lakh crore (USD 29 billion) in 2010.
Meanwhile, the US markets continued to shift between green and red throughout the week. The better-than-expected jobs data and ISM data helped the US markets to open on a green note in the beginning of the week. However, European Central Bank (ECB) president Mario Draghi’s comment that the rising Euro may impact the growth of economy dragged markets all over the globe into negative territory. China reported a better-than-expected trade data. The exports were seen up around 25 per cent in January on a year-on-year basis and also the imports surged 28.8 per cent.
In the coming week, the release of inflation data might act as a trigger for Indian markets. The revelation of corporate earnings will also be watched. Companies that may announce their quarterly numbers include Tata Steel, HPCL, Tata Power, GAIL, and CESC. Gold has support at USD 1662 and USD 1653.
Resistance for gold is at USD 1695. Movements above this level can lift international gold price. Nifty has support at 5873 and 5815 (100 DMA). Resistance lies at 5927 and 5959 (50 DMA) movements above these two levels can lift the sentiments further. Counters like L&T, BHEL and Tata Power are in the over sold region and these stocks can be utilised to create long positions with Nifty futures hedge.
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 firstname.lastname@example.org. 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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