Sunday 28 July 2013

Weekly Outlook

The RBI policy meet on July 30 may turn out to be a non-event given the fact that it has
already taken number of measures at addressing the immediate troubles facing the
economy.

Nifty, for the coming week, may find it difficult to trade above 5960 -- 5980 range.
However, the sentiment will continue to remain bearish with an eye on the upcoming
results.

Despite the various measures taken by the RBI,  INR is failing to close below Rs.59.
The past week saw rupee trading in the range of Rs. 59 -- Rs. 59.70 vis a vis the USD.
A close above Rs. 59.90, which seems to be unlikely at least for the near term, would
indicate fresh weakness.

Wednesday 24 July 2013

Market Synopsis

It seems that the RBI has lost sleep over the outlook on INR going forward.    At least,
the spate of measures undertaken by the RBI in a short span of time to shore up the INR,
at the cost of economic growth, seems to suggest so.    These measures may at best arrest,
if not reverse, the sharp depreciation of the INR going forward.

Some steps taken by the RBI -
1.  Banks barred from proprietary trading in currency futures and exchange traded options.
2.  Lenders allowed to trade only on behalf of clients.
3.  Borrowing under liquid adjustment facility (LAF) capped at Rs.75000 cr.
4.  The lending rate for marginal standing facility (MSF) hiked by 200 bps.
5.  Open market sale of bonds worth Rs.12000 cr.
6.  LAF borrowing cap further tightened to 0.5% of every bank's deposits.
7.  Banks are required to keep CRR balance of 99% (up from 70% earlier).

Sunday 21 July 2013

Outlook on INR

According to a study by one of the rating agencies, about 45% of India Inc.'s forex debt
is short term in nature.    This amounts to approximately $100 billion.    Further, as per
the report, this forex debt is unhedged.    Come September, the US Federal Reserve bank
may tighten it QE3 programe.

Imagine a scenario when these corporates suddenly rush to the markets to hedge their
exposures coinciding with the Federal Reserve's decision to scale down its QE3.
It will not be a pretty sight to be watched by the faint hearted person.

No wonder, the RBI and the government of India woke up before the nightmare.

Thursday 18 July 2013

Weekly Review

The RBI took measures at curbing volatility in the INR by tightening liquidity and hiking
the interest rate on marginal standing facility by 200 bps.    The government of India in
its effort to shore up the rupee, opened foreign direct investment in 13 sectors, including
100% FDI in telecom.

Ironically, the markets did not cheer the developments.    Today's session in the USD -
INR trade corroborates the pessimism surrounding the INR.    Failure to convincingly
close sub Rs.59 levels vis a vis the USD, indicates weakness for the INR.

Sunday 14 July 2013

Weekly Outlook

In the wake of Mr. Bernanke's outlook on scaling down the QE3, market nervousness
has been soothed.    But how long?

Locally, IIP data for June at -1.6% and CPI for June at 9.87%  look dismal.    Markets
on Monday may not receive the data well.
Trade deficit narrows to $12.24 billion for June versus $20.14 billion for May.
INR may see some respite.

                                            Nifty
Resistance    2          :           6090
Resistance    1          :           6075
Support         1          :           5940
Support         2          :           5890

Outlook                    :            Stable

           

Tuesday 9 July 2013

Advent of Earnings Season

The earnings season is about to kick off.    How will the panorama of Q1 results unfold?
What lies ahead for the markets?    How will the 'second coming' of Mr. Narayanamurthy
affect the outlook on Infy?

One may find answers to many more such questions in the coming days.
So,  wait and watch.

Saturday 6 July 2013

Market Synopsis

Yesterday, the jobless rate in the US stood at 7.6% for the month of June.    It seems the
jobless data is forming a bottom at these levels.    Further, 195,000 new jobs were created
in the previous month, much better than what the market was anticipating.    On the back
of these developments, speculations are rife in the market that tapering of the monetary
stimulus program is just around the corner.

Locally, the President of India has approved the Food Security Ordinance.    It is
anticipated that the Food Bill is likely to put pressure on the government exchequer to the
extent of Rs.125,000 crore.

In the light of these developments, equity markets in India for the coming week are
likely to remain under pressure.

Wednesday 3 July 2013

Spectre of an earnings downgrade?

According to a recent RBI assessment, bank credit to most of the major sectors
continued to grow at a slower pace than last year, reflecting the continuing slowdown
in the economy.    Further, one of the broking houses has cut FY 14 EPS for 34
companies.

Development such as the above, raise one question.  
Is an earnings downgrade imminent?