The foreign effect

Mar 11, 2013, 07:36 IST | Alex K Mathews

The rise of the US Dow Jones and foreign investors' inflows left their mark on the Indian markets

Tracking positive global cues, the Indian markets closed up 4 per cent. The gainers for the week were IDFC and Sesa Goa which were up around 9.8 per cent and 8.5 per cent respectively. Technology stocks HCL Tech and TCS closed up around 7.1 per cent and 5.3 per cent respectively.

Pedestrians pass before a share prices board in Tokyo on March 8, 2013. Japan's share prices rose 251.03 points to close at 12,219.11 points as the Tokyo Stock Exchange, took its cue from the Dow Jones. Pic/AFP

High inflows
Foreign investors were also active in the month of February 2013. They pumped in over Rs 24,000 crore (USD 4.6 billion) in the Indian stock market. This is the eighth consecutive month of inflows, bringing the investments to USD 8.4 billion so far this year. FIIs were gross buyers of share worth Rs 78,888 crore in equities, whereas they sold positions of Rs 54,449 crore which produces a net inflow of Rs 24,439 crore, according to SEBI data. Foreign investors also infused Rs 4,001 crore (USD 743 million) in the debt market in February, which brought the net investments by FIIs in the debt market to Rs 7,712 crore (USD 1.43 billion) this year.

PMI falls
The major economic data, IHSBC services Purchasing Managers’ Index data for India was released this week. With the industry unable to maintain the rhythm with new orders, the data fell to 54.2 in February from a one year high of 57.5 in January. This is also the biggest one–month fall in nearly a year. But the data still remained above the 50 mark that separates growth from contraction. Also according to the HSBC survey, India has expanded at a faster pace than China in February; even emerging economies are showing a moderation in growth.

To maintain a pre-determined level of affordability, the government said it will reduce the outgo on subsidies from 2.6 per cent of GDP in 2011-12 to 1.5 per cent by the end of the 12th Plan (2012-2017). Also, in order to curb the inflation, the Finance Ministry is likely to introduce inflation-indexed bonds.

Stake sale
The government, which holds 92.5 per cent stake in Rashtriya Chemicals and Fertilisers, proposed to sell 12.5 per cent of the total paid up capital of the company. The offer for sale in RCF took place on Friday at 9.15 am through stock exchange mechanism and closed the same day at 3.30 pm. The government has fixed the base for the stake sale at Rs 45 per share; which may fetch a minimum of Rs 310 crore. For the current fiscal year, the government was aiming at a disinvestment target of Rs 30,000 crore. It has managed to get over Rs 21,000 crore through selling its stakes in Hindustan Copper, NMDC, NTPC and NBCC. The other PSUs slated for disinvestment in the next few weeks include National Aluminum Company LTD, MMTC and SAIL.

World view
The US market surpassed its record highs, erasing the indexes’ losses during the financial crisis. Better-than-expected services sector data was the first to lead the rally. A strengthening economy and loose monetary policy by the central banks around the world have pushed the US markets this much higher. The major events to be watched are the revelation of the US Core retail sales, Retail sales and Import price Index. On the Asian front, the Chinese exports rose 21.8 per cent on a year on year basis against the estimates of 8.1 per cent. However, the imports fell 15.2 per cent leaving a trade surplus of USD 15.25 billion. In the recent ECB meeting, all the key rates were kept unchanged at 0.75 per cent.

Coming up
In the Indian market, the major events to be watched out for this week are the revelation of the Industrial Production data and inflation data. The Rupee is getting firm against dollar, and has support at 55 and 54.45 levels. Due to strong equity market the Rupee may remain firm and likely to test 54.2525 and 54.08 in the short term. Nifty may test 6015 and thereafter minor profit booking, around 5950-5900 levels can be expected. Investors with short-term perspective can buy Indiabulls Financial, Dewan Housing Finance, Godrej Industries and Tata Chemicals.

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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