Outlook for Week Ahead                                                             Jan 12, 2013

Q3 December 2012 corporate results and inflation data for December 2012 will dictate near term trend on the bourses. The start to the result season has been good with Infosys reporting better than expected results in Q3FY13. Some of the other major companies due to announce their results next week include TCS, Axis Bank, Bajaj Auto, Hero MotoCorp, HCL Technologies, Reliance Industries, Wipro, HDFC Bank and ITC. Investors and analysts will closely watch the management commentary that would accompany the result, which could cause revision in their future earnings forecast of the company for the current year and or next year.  

The Central Statistics Office (CSO) will unveil data on inflation based on the combined consumer price index CPI) for urban and rural India and also inflation based on the wholesale price index (WPI) both for December 2012, on Monday, 14 January 2013. WPI inflation is projected to rise to 7.3% in December 2012 from 7.24% in November 2012, as per the median estimate of a poll of economists carried out by Capital Market. 

 

The Reserve Bank of India (RBI) undertakes Third Quarter Review of Monetary Policy 2012-13 on 29 January 2013. The RBI has said that the overall recent inflation patterns and projections provide a basis for reinforcing its October guidance about policy easing in the fourth quarter. Hence there is a hope of a rate cut. On the global front, a key event later this month is the Federal Open Market Committee (FOMC) two-day meeting on interest rates in the United States on 29 and 30 January 2013. Bank of Japan holds a two-day meeting on interest rates in Japan on 21 and 22 January 2013. 

We expect some more consolidation in the Indian markets with a mild negative bias. The Sensex is likely to trade in a range of 19200-19800 during next week. 

The Week Gone By                                              Jan 12, 2013 

Indian Markets 

The market edged lower in the week ended Friday, 11 January 2013 on poor macroeconomic 

data and tension between India and Pakistan. The 50-unit S&P CNX Nifty failed to hold the 

psychological 6,000 mark during the week. The BSE Mid-Cap and the BSE Small-Cap indices 

underperformed the Sensex. IT major Infosys rallied after reporting Q3 earning before market hours on Friday, 11 January 2013. The BSE Sensex slipped 120.4 points or 0.6% to 19,663.6, while S&P CNX Nifty fell 64.9 points or 1.1% to 5,951.3 in the week. The BSE Mid-Cap & SmallCap indices both underperformed the Sensex, falling 2.2% & 2.1% respectively. 

Some key highlights during the week 

•  The RBI said on Monday it has relaxed overseas borrowing limits for infrastructure finance companies, a move that will enable companies in the investment-hungry sector to raise funds more easily. The RBI said that the infrastructure finance companies will no longer need to seek approval for raising funds overseas equivalent to up to 75% of their owned funds. The limit had been 50%. 

•  Fitch Ratings reiterated on Tuesday its "negative" outlook on India's sovereign credit rating, citing concerns about slowing  economic growth, persistent inflationary pressures and an uncertain fiscal outlook. The comments from Fitch sovereign analyst Art Woo sent the rupee lower, reinforcing worries that India is still at risk of losing its investment-grade rating from the credit agency. 

•  Credit Suisse has lowered India's growth forecast for the current fiscal to 5.7%, but said the economy has bottomed and will see a moderate recovery during 2013. It has made a small further downward adjustment to our 2012-13 GDP growth forecast to 5.7% from 5.9%, while opting to leave our 2013-14 forecast at 6.9%. 

•  India cut its forecast for fuel demand in the current fiscal year by nearly 1% to 155.6 million tonne, government data showed, due to a slowdown in economic activity. The economy, 

which grew at 6.5% in the year ended March 2012, is expected to grow 5.7% to 5.9% this 

fiscal, the slowest since 2002-03. Local fuel sales, a proxy for oil demand in India -- are now expected to grow at 5.2 compared with 5% in the previous fiscal year, when India consumed 148.13 million tonnes of fuel, according to  data released by the Petroleum Planning and Analysis Cell (PPAC), a unit of the oil ministry. 

•  The industrial production contracted to 0.1%, a four month low, in November from a year earlier, government data showed on Friday.  It was 8.2% in October 2012 which has been revised to 8.3%. Manufacturing, which constitutes about 76% of industrial production, rose 0.3% from a year earlier, the federal statistics office said. Factory output growth was 1% in April-Nov period this fiscal, down from 3.8% in the same period in 2011-12. 

•  India's merchandise exports fell 1.9% year on year to $24.877 bn in Dec 2012, data released by the government on Friday, 11 Jan 2013, showed. Imports rose 6.26% to $42.549 bn in Dec 2012. Oil imports jumped 23.56% to $14.429 bn  whereas non-oil imports fell 0.87% to $28.119 bn. Trade deficit surged to $17.671 bn in Dec 2012 from $14.678 bn in Dec 2011.