Week Ends Positive, Q1 Results Next Trigger

Helped by the positive closing in the last two days, the Indian markets managed to close the week on a positive note. Both the Sensex and Nifty closed with gains of over 3% each.

Meanwhile, data published by the RBI indicated that India’s external debt was at USD 390 billion as of March 2013, marking a YoY increase of 12.9%. The rise in the total external debt in FY13 was the result of a rise in short-term trade credit. The central banker has also said that there has been a significant increase in external commercial borrowings (ECBs).

Another development seen in this week was the rush for banking licences as the July 1 deadline arrives near. Almost every day a couple of companies are announcing their interest. More than 18 companies from the listed space have applied for the banking licenses already, including Goldman Sachs. M&M Financial Services has said that it will not apply for a banking license, while UBS has said that it will surrender its existing licenses.

On the stock-specific front, Ranbaxy saw some negative developments earlier this week, fanning the flames in this counter. After news that the Indian drug regulators would investigate the company's facilities, its woes seemed to have abated. Then came the news of UK's drug authority imposing a penalty on the company for having delayed entry of a drug around 10 years ago. In what was the latest blow, the USFDA is now investigating its Mohali-based manufacturing facility.

In a late development on Thursday, June 27, the Cabinet Committee for Economic Affairs (CCEA) approved the Rangarajan Committee’s recommendation to raise the price of natural gas to USD 8.4/mmbtu. This is an extremely positive development for upstream oil and gas companies from the public and private sectors. The existing price of USD 4.2/mmbtu for KGD6 gas will be valid till March 31, 2014, and the new price will be applicable from April 1, 2014. It will be valid for all producers, private as well as PSUs, unlike the existing practice, where an Administered Price Mechanism (APM) is used for gas pricing for PSU companies.

Money inflows from the FIIs remained subdued, as they sold equities worth Rs 9126 crore during the week. The DIIs ended in the red, selling equities worth Rs 531 crore.

The next near-term trigger for the markets is the Q1FY14 results that will start coming in later next week. However, we believe that the overhang of the rupee will be in focus, and hence, volatility cannot be ruled out next week too.