Economy
RBI and CMIE capex data is grim

The outlook for capex, beyond FY13, seems to be even grimmer as projected capex spending is likely to decline to just 38% of FY12 levels, according to Nomura Equity Research based on RBI & CMIE data

 
Latest corporate capex data from the RBI (Reserve Bank of India) and CMIE (Centre for Monitoring Indian Economy) depicts further fall in likely capex in FY13 and beyond, according to Nomura Equity Research. The broking house has analysed the latest data on corporate capex from the RBI. As per the RBI data:
Capex in FY13 is likely to be only 61.5% of FY12 levels.
The outlook beyond FY13 seems to be even grimmer as projected capex spending is likely to decline to just 38% of FY12 levels.
Project sanctions in FY12 were just 54% of the level seen in FY11.
 
Overall, Nomura predicts negative trends for the order environment in the medium-term from the RBI data on bank sanctions and disbursements. While new sanctions on the back of the recent reform euphoria could change sentiment positively, Nomura is yet to see any significant pick-up in greenfield/brownfield project activity.
 
According to Nomura, September 2012 data from CMIE depicts continued decline in project starts across key sectors in the economy. It notes the following key takeaways from the latest dataset from the CMIE (September 2012) on project starts, completions and outstanding projects:
Project starts data continue downhill and is now at almost similar levels as 2004 (pre-reform era).
Similarly, projects outstanding data is at June 2003 levels, while project completions also continue to go down.
Sectorally, manufacturing, power, construction and real estate are key drivers of the downhill trend.
 
According to Nomura, while much of the data is historical, the projects data indicates that capex activity is heading towards the pre-reform era (i.e. before FY05) in contrast to L&T’s (Larsen & Toubro) valuation which is much higher at about 20 times one-year forward price-to-earnings ratio P/E (versus pre-FY05 1-year forward P/E of less than 14 times). In the previous cycle, L&T’s order inflow in the domestic E&C (engineering and construction) segment started picking up only 12 months after the pick-up in project starts data. Moreover, margins lagged the overall demand environment by almost three to four years. As such, a case for revival in earnings growth could be too optimistic at this point, predicts Nomura. 
 

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Nifty Market View: Trade worth Rs6.5 billion brings the NSE on its knees!

Volatility is likely to remain high as a move on either side is likely

 

S&P Nifty close: 5,746.95

Market Trend

Short Term: Up                 Medium Term: Up                        Long Term: Down     

After a flat opening the Nifty rose for four consecutive trading sessions during which it briefly crossed the R2 level of the week before a weird sell-off (worth Rs6.5 billion or $125.3 million and 59 erroneous orders) saw the Nifty hit a low of 4,880 points. If the 2G and Colgate were not enough, Friday’s NSE fiasco has added another blot on this government’s functioning as the National Stock Exchange (NSE) is its brainchild. The much-touted systems of the NSE were floored in no time and one hopes that stringent action will be taken against the exchanges too as they flouted the Securities and Exchange Board of India (SEBI) norms laid down after circuit filters are hit. Anyway, there have been these stray incidences of prices hitting vague levels in individual stocks for the past few years but this time it was blown up because most of the heavyweights were hit at the same time. How can 59 erroneous orders be placed? It’s high time the exchanges look at solving this problem seriously and mischievous elements are kept at bay. Despite this ridiculous event the Nifty closed 43 points (+0.77%) in the green this week. Volumes were significantly lower as compared to the previous week. The histogram MACD, which is above the median level, moved higher indicating that the bulls remain in control even though the short-term oscillators have ventured into overbought territory.
 

The sectoral indices which outperformed were CNX Realty (+6.21%), CNX FMCG (+4.13%), CNX MNC (+2.34%), CNX Media (+2.24%), CNX PSE (+2.14%) and CNX Infra (+2.05%) and while the underperformers were CNX Pharma (-1.62%), CNX IT (-0.34%), CNX Service (-0.08%) and CNX Finance (-0.07%).

 

Here are some key levels to watch out for this week

 As long as the S&P Nifty stays above 5,752 points (pivot) the bulls will be in control.

 Resistance levels on the upside are pegged at 5,810 and 5,873 points.

 Support levels in declines are pegged at 5,688 and 5,630 points.

 

Some Observations

1.      The Nifty has completed the 61.8% retracement level of the decline from 6,338-4,770 points pegged at 5,740.

2.      The 78.6% retracement level of the fall from 6,338-4,770 points is pegged at 5,951 points, which also coincides with the top of the channel (in brown).

3.      The Nifty is now moving within a sharp up sloping channel (in blue), support from which is pegged around 5,453 points and resistance is pegged around 5,860 points, this week.

4.      We have closed above the previous weekly top of 5,629 points (24 February 2012) which is a sign of strength as long as it stays above it.

5.      The weekly chart above also shows a channel (in brown) the resistance line of which is pegged around 5,965 points. This should be closely watched in the week ahead.

6.      We have completed 89 weeks (Fibonacci number) from the top of 6,338 points (05 November 2010) hence one has to keep a close watch whether the market starts correcting from around current or slightly higher levels.

7.      The volumes were significantly higher as compared to the previous week which was also the case a week prior to the previous significant top of 5,629 points (24 February 2012). Hence one needs to be alert for the slightest sign of a break of support.

 

Strategy

We expected volatility to increase (as mentioned last week) but no stretch of imagination 4,880 points being hit could be dreamt of. The trend continues to be up and we might finish this rise with a spurt close to the 78.6% retracement levels as well as the resistance line of the channel in brown. If the bears have to turn things around they have to ensure a daily close below 5,694 points. Till then the bulls are very much in control even though the oscillators have reached overbought territory. We are at an inflection point so keep the seat-belts on as the volatility is likely to remain high as a move on either side is likely.


(Vidur Pendharkar works as a consultant technical analyst & chief strategist at www.trend4casting.com.)

 

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COMMENTS

Dipesh Dagha

4 years ago

We have completed 89 weeks (Fibonacci number) from the top of 6,338 points (05 November 2010) hence one has to keep a close watch whether the market starts correcting from around current or slightly higher levels.

This statement is being carried since last four weeks!! I dont understand the point of repeating it again and again even after the index has already surpassed that Fibo number of week. No significance to that now and its irrelevant!!!

Kejriwal targets Sonia Gandhi's son-in-law and DLF this time

Arvind Kejriwal alleged that Robert Vadra received undue benefits from several quarters and in just three years wealth of the Gandhi family's son-in-law has grown 600 times

Anti-corruption activist Arvind Kejriwal has alleged that Robert Vadra, the son-in-law of Congress chief Sonia Gandhi has amassed huge wealth and in just three years his (Vadra's) wealth has grown to over Rs300 crore from Rs50 lakh.

 

In a release, Kejriwal and his India Against Corruption (IAC) said, "In the last four years, Robert Vadra has gone on a property buying binge and has purchased at least 31 properties, mostly in and around New Delhi, which even at the time of their purchase were worth several hundred crores."

 

"An analusis of the balance sheets and audit reprots of five companies set up by him (and owned exclusively by him and his mother) on or after 1/11/2007 show that the total share capital of these companies was just Rs50 lakh and thse companies together had no income from any legitimate business activity (except by way of interest derived fron interest free loans obtained from DLF). Yet during 2007-2010, they have acquired properties which were worth well over Rs300 crore at that time and are worth more than Rs500 crore as of today," Kejriwal said.

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COMMENTS

TIHARwale

4 years ago

DLF has adopted old trick of amuse the Bachda if you can't befriend gowmata, by granting 65 Crore Clean overdraft to Robber Vadra. This is similar to loan availed by Kalaignar TV except that their the Rs 200 crores was transacted just immediately as a payment for Soectrum allotment whereas DLF with deep pockets was ready to wait longer befire the second leg of transaction was put to use. When it comes to stripping the Nations asset Dam projects in Maharashtra showed Pawar and Gadkari are together in looting while Shivsena blames baiyyas of U.P.and Bihar are responsible for miserable living conditions of Maharashtrians in Maharashtra but the fact is it is the blue blooded Marathas like Pawar and Gadkari who are responsible for farmer deaths due to scamsters in failure of completing dams for irrigation.

UPA Ghotala

4 years ago

Robert Vadra, DLF and Congress SCAM http://www.upaghotala.com/2012/10/robert...

M G WARRIER

4 years ago

Media is just ‘celebrating’ such episodes of allegations and counter-allegations. Yesterday, a congress spokesperson was countering this allegation by asking about a plot of land allotted to Bhushan long back! People just give entertainment value to these serious issues. Time is running out. Beyond targeting individuals, high time for a cleaning process in public life. Who will bell the cat? Like the consumer awareness ad goes, awake, Indians, awake!

MOHAN

4 years ago

Maino-Maureen LOOT?

Maureen is of Scottish origin (her maiden name was McDonagh)- wikipedia

sreeram boppana

4 years ago

now the batallion of pet dogs will be unleashed to protect the maino empire

M G WARRIER

4 years ago

A politician who appeared on a channel to respond to the allegations, found fault with the manner in which the exposure was made by Kejriwal and was of the view that if someone has done something wrong, there are courts and other authorities that can be approached and talking to media is not the appropriate way. I was wondering why the gentleman opted to tell this before the camera, instead of whispering his views in the ears of Kejriwal !

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