Something to look forward to

Jan 08, 2013, 08:57 IST | Alex K Mathews

Closing with gains gives ground to optimism

Last week, the Nifty crossed the 6,000 mark and closed with a weekly gain of around 1.9 per cent on the back of positive cues from international and domestic markets. The sectoral gainers for the week were the Realty and the Oil & Gas sectors, which closed with a change of 7.3 per cent and 6.01 per cent respectively. In the Midcap sector, Indian Bank and Allahabad Bank remained gainers with a change of 11.44 per cent and 7.18 per cent respectively.

The data showed that India’s current account deficit rose to a record high of 5.4 per cent of GDP (USD 22.3 billion) in the July-September quarter which stood at USD 16.4 billion in the previous quarter and USD 18.9 billion in the same period last year. The reasons behind the widening deficit were cited as a sharp rise in gold imports and falling exports due to economic slowdown. Also, the country ran a balance of payments deficit of USD 158 million for the July-September quarter against a surplus of USD 521 million in the previous quarter and against a surplus of USD 276 million on a year ago period.

India’s services sector PMI, which came out on Friday, rose to its strongest pace in three months in December. The HSBC Services PMI data rose to 55.6 in December from 52.1 in November. Also, India’s HSBC manufacturing PMI rose in December to its fastest pace in six months, stood at 54.7 in December compared to 53.7 in the previous month. In the week, the outcome of the core sector consisting of eight key infrastructure sectors fell to 1.8 per cent in November from the level of 7.8 per cent in a year ago period and from 6.5 per cent in October. The reasons behind the fall were the negative growth in the sectors like coal, cement and natural gas. The eight sectors have a weight of 37.9 per cent, in the overall Index of Industrial Production, which also may reflect in the data. In addition to these sectors, electricity, steel and petroleum production also slowed. But the fertilizer and crude oil production showed a growth of 5 per cent and 0.8 per cent respectively in November.

Indian Prime Minister Manmohan Singh recently said some painful steps may be taken to put the economy back on the right track. In the week, the oil ministry proposed to hike fuel prices, particularly diesel by less than a rupee per month and also to reduce one-third of subsidy on kerosene by 2014-15 and on cooking gas by a quarter in this year. This move is expected to reduce the government’s subsidy burden on the fuels.

Major news from the global front was the much-awaited agreement on the US fiscal cliff. The bill suggested a tax hike for higher classes. But on the FOMC minutes, the US central bank said that it would slow down or halt its bond purchases in 2013, citing concerns about financial stability. This week, Indian investors may eagerly wait for the IIP data, the manufacturing output and the corporate earnings for the October–December quarter which will soon be unveiled. The earnings include Infy on January 11, 2013, IndusInd Bank on 09 and CMC on 11. Gold is weak after testing USD 1694.70 level and it reverted its journey on the backdrop of a firm dollar. Dollar is looking firm on news that US will stop monetary easing programmes in early 2013. The Nifty spot closed above 6,000 and is likely to test 6050, 6060 and more in the short term. Investors who wish to trade in the stock option segment can consider buying call options of PNB, Bank of Baroda, Wipro, SBI and Grasim.

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).

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