Wait and watch

May 26, 2014, 09:15 IST | Alex K Mathews

With the election of a new government in India, the action at Dalal Street will be influenced by the allocation of portfolios to ministers in New Delhi

At the beginning of last week, the markets were seen opening higher but profit booking made it to pare its gains. But buying seen in the beaten-down stocks supported the markets. Nifty closed at 7367 up around 1.7 per cent on a weekly basis.

NDA leaders come together to address the media
NDA leaders come together to address the media

The market mood is positive and Nifty is all set to cross 7456 to 7625 and investors can buy 7400 call options of the May series. Nifty has support at 7215 and 7152. Kanoria Chemicals & Industries came out with its earnings for the quarter that ended March 2014, where the net profit rose 246.84 per cent.

The net profit stood at Rs 8.22 crore in the quarter under review as against Rs 2.37 crore during the same period last year. The sales also rose 57.34 per cent to Rs 106.88 crore in the quarter that ended March 2014 against Rs 67.93 crore during the previous quarter that ended March 2013.

For the full year, the net profit rose 472.33 per cent to Rs 27.30 crore in the year that ended March 2014 as against Rs 4.77 crore during the previous year that ended March 2013. Sales rose 40.61 per cent to Rs 366.55 crore against Rs 260.68 crore during the previous year that ended March 2013.

Dhanuka agro came out with a strong performance; posted a 26 per cent increase in the net profit. For the quarter that ended March 31, 2014, the net profit of the company stood at Rs 22.46 crore against Rs 17.86 crore in the same quarter in 2012-13. The total income from the operations during the quarter under review stood at Rs 151.88 from Rs 131.17 crore a year ago.

For the full year period, the net profit rose 44.52 per cent to Rs 93.14 crore as compared to Rs 64.45 crore during the previous year that ended March 2013. Sales also rose 26.81 per cent to Rs 738.41 crore in the year that ended March 2014 as against Rs 582.31 crore in the previous year that ended March 2013.

Reversing the trend, the FIIs turned buyers in the debt markets, invested around R 6000 crore on the hopes of policy initiatives by the new government. According to SEBI, till May 15, the FIIs net buying in debt securities stood at Rs 6130 crore. The foreign investors were net buyers in debt markets for four month in a row but changed to sellers in April as they were barred from investing in short term securities.

The FIIs can purchase a total of Rs 180,000 crore government securities and the Reserve Bank of India (RBI) has restricted them to invest in government securities to dates ones with maturity of a year or more, in order to encourage longer term flows and reduce volatility.

In order to boost exports, RBI has eased gold import norms by allowing select trading houses in addition to already permitted banks to procure the precious metals. RBI in the last week allowed Star Trading Houses (STH) and Premier Trading Houses (PTH) to import gold under the 20: 80 schemes.

According to the guidelines of the scheme, importers can buy gold provided a fifth of the imported quantum is exported as finished products like jewellery. The central bank also permitted banks to provide Gold Metal Loans (GML) to domestic jewellery manufacturers out of the eligible domestic import quota to the extent of GML outstanding on their books as on March 31, 2013.

Rebounded small cap index made the US markets to turn to green again. Also the economic data were mixed. The investors were also waiting for the Federal Reserve’s minutes for April. In its minutes the US central bank said that the policy makers were seeing a muted risk of inflation from continued US stimulus.

Gold is weak and is likely to test $1285 and $1265 and resistance is at $1299 and $1305 per troy ounce. For the Indian markets, the portfolio of the ministers in the new government and the expiry of the May F&O will have an impact in movements.

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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