Weak is the Word
Varied concerns play on sentiments
The markets last week remained in weak territory due to the concerns regarding the US cliff. The markets closed with a weekly loss of around 0.50 per cent each. In the large cap session, Tata Steel and Jindal Steel remained the gainers of last week with a gain of 7.74 per cent and 7.5 per cent respectively. The losers were L&T and HDFC with a weekly loss of 3.19 per cent and 2.92 per cent respectively.
For attracting more investment in the banking sector, the Parliament cleared the Banking (Amendment) Bill, which gives the Central Bank more power to regulate banks. It also gave way to the RBI to issue new banking licences, raising voting rights for investors in banks and PSU banks to raise capital, through bonus and rights issues. Apart from this, the Parliament also approved the Enforcement of Security Interest and Recovery of Debt Laws (Amendment) Bill, 2012.
Despite the reforms, the Govt lowered its GDP growth forecast for the current fiscal to 5.7 to 5.9 percent range from the earlier projection of 7.6 per cent. It said it may be the slowest pace in a decade and matches the estimate made by the Central Bank in October. The Govt also said that the uncertainty in the stake sales on the PSUs and high subsidies are acting as challenges for reducing fiscal deficit. Foreign investments into Indian markets through the P-note route rose to an eight-month high of about 1.75 lakh crore rupees or USD 32 billion in October, which was the highest level since February. Foreign investors, who do not register themselves as FIIs with SEBI, use the P-note route for their investments.
Last week, Indian markets were waiting for the RBI policy meet, where the Central Bank left the key rates - repo and reverse repo rate unchanged and also the CRR was maintained at 4.25 per cent. RBI said that the policy focus is shifting towards growth because of recent reforms and also gave a clear indication of further easing in the January policy review. The major data the investors were waiting for last week was the Bank of Japan’s policy meet, where the central bank said it would expand the asset buying and lending programme from 10 trillion yen to 101 trillion yen. It also kept its benchmark interest rate at a range of 0 to 0.1 per cent. S&P raising Greece’s rating after the country's successful bond buyback plan and the increasing of the German business confidence for the second month, was other positive news. Despite this positive news and economic data, markets all over the world remained flat to negative, as talks on avoiding the US cliff were continuing.
Major Nifty stocks like SBI, Tata Steel, Hindalco, HDFC and Axis Bank are still looking positive. Investors can create long positions in the futures along with the purchase of appropriate put options, which can reduce the risk to a certain extent. In the week, investors may focus on the expiry of December 2012. After that, Indian corporates may start unveiling their quarterly numbers, which may be tracked for further direction to the market. Some major companies like Bajaj Auto are likely to come out with its third quarter number on January 16 and HDFC on January 21, 2013. IndusInd Bank's quarterly number is due on January 9, 2013.
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 email@example.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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