Optimism Steers Trades This Week

Coming to the economic front, India's Manufacturing PMI for August 2013 fell below the psychological 50 mark after 4.5 years to stand at 48.5. The HSBC Services PMI for India for the same month came in at 47.6 against 47.9, which signals a contraction in the services sector and confirms that India's private sector output has fallen sharply on account of the slump in new orders.

In another development in the week, there was also a setback for the already ailing realty sector. The RBI issued a notification for the disbursal of housing loans sanctioned to individuals linked to the stages of construction of the housing project or houses instead of upfront disbursal in cases of incomplete or under-construction or greenfield housing projects. This notification may prove to be a big hurdle for real estate developers in future in selling their housing projects, as it may stop their funding, and thus create pressure on their financial statements. However, it may be good news for banks having housing loan exposure.

Taking a step forward in the reform process, the Lok Sabha has finally approved the Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011 on Wednesday, September 4, 2013. The bill had been referred to the Standing Committee twice already in 2005 and 2011. Apart from the fact that the bill was passed, the crucial fact to note is that the government has accepted most of the recommendations provided by the Committee.

In his budgetary speech this year, the Finance Minister P Chidambaram had proposed to provide an amount of Rs 14000 crore to public sector banks, thus infusing capital to shore up their capital adequacy ratio. However, a leading financial daily has recently reported that the Finance Ministry has deferred this plan. With the kind of pressure on the economy, the proliferating expenditure caused by the announcement of recent populist measures and the inability of the government to raise funds, infusion of an amount of this quantum seems to be getting difficult.

The end of the week brought some positive news for the government. Direct Tax collection grew by 14.43% in April to August 2013-14, and the exchequer was able to collect Rs 1.88 lakh crore in the initial five months of FY14 as against Rs 1.64 lakh crore collection of during the same period last fiscal. The net Direct Tax for the aforesaid period for FY14 has jumped by 15% to stand at Rs 143138 crore as against Rs 124019 crore collected in the previous fiscal. This growth was in spite of the economic slowdown and lower GDP growth rate.

Precious metals witnessed some selling during the week, with gold declining more than 3%.

The markets seem to be welcoming the new RBI Governor, Dr Raghuram Rajan. All eyes are now on him, as the expectations are huge. However, many experts and industry leaders are of the opinion that the worst is over for the markets. Therefore, we expect to see some positive trades in the next week. However, intermittent volatility cannot be ruled out. Also, the global cues, especially the stance that the US takes on Syria, will be watched closely by the world.