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Market Outlook-VRK100-18072011

Market Outlook-VRK100-18072011

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Rama Krishna Vadlamudi, Hyderabad, has published a brief analysis of the financial markets.
Rama Krishna Vadlamudi, Hyderabad, has published a brief analysis of the financial markets.

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Published by: RamaKrishna Vadlamudi on Jul 17, 2011
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Market Outlook 
Rama Krishna Vadlamudi, HYDERABAD July 18, 2011
MY BLOG: www.ramakrishnavadlamudi.blogspot.com 
 Driven by negative sentiment about Infosys’ first quarter results and weakindustrial growth numbers, the stock markets were volatile last week with the Sensex shedding close to 1.5 per cent and ended at 18,562 for the week. The Niftyclosed at 5,582. The industrial growth, represented by the Index of Industrial  Production or IIP, has dipped to 5.6 per cent in May 2011 due to a sluggishgrowth in manufacturing and capital goods sectors. The 5.6 per cent growth ismuch lower compared to 8.5 per cent growth recorded in May last year. Theinvestment cycle in India is experiencing a slowdown due to a variety of factors.
First Quarter results
For the April-June 2011 quarter, Infosys Limited has shown a revenue growth of 3.2 per cent and net profit growth of minus 5.3 per cent compared to January-March 2011 quarter. Even though the results matched the guidance given by thecompany, the market was clearly disappointed with the results and the stock wasdown 4 per cent the day the results were announced. The disappointmentstemmed from the fact the company did not revise its estimates for the full year2011-12. In contrast, TCS, India’s leading IT company, has posted good results with the net profit for the first quarter soaring by 27 per cent compared to thesame quarter last year. The first quarter revenues shot up by 31 per cent. UnlikeInfosys, TCS does not give any forecast of its revenues or profits. Among othercompanies, Bajaj Auto has posted good results for the first quarter with net profitrising by 21 per cent year-on-year. Sales turnover was up 23 per cent for thequarter.
Robust tax collections
Even as the industrial production is showing signs of weakness, the indirect taxcollections have gone up by 30 per cent during first quarter of this fiscal. Between April-June 2011, the indirect tax (customs duty, central excise, and service tax)collections were at Rs 95,800 crore compare to Rs 73,600 crore last year. Withsuch strong collections, the Government is confident of meeting this year’s taxtargets which augurs well for the fiscal situation. However, the tax collections will be adversely impacted by the Government’s latest decision to reduce taxes oncrude oil and petroleum products. Another negative could be the large increase intax refunds this year.
Rama Krishna Vadlamudi, HYDERABAD July 18, 2011
MY BLOG: www.ramakrishnavadlamudi.blogspot.com 
Page 2 of 3
Gold’s dream run continues
The rally in international gold prices continues unabated. Gold rose to $ 1,595 perounce on Thursday before closing at $ 1,583 at the weekend. Silver rose to $ 39.4per ounce before closing at $ 38.2. Gold prices are mostly driven by investmentdemand rather than jewellery. The sovereign debt crisis in Greece, Portugal andother countries is contributing to the gold’s investment demand. The LondonMetal Exchange (LME) has doubled delivery size for top warehouses with a view to easing backlogs in Detroit and moving aluminium faster. It is interesting tonote that many LME-approved warehouses in Detroit are owned by MetroInternational, a Goldman Sachs group company.
Money managers for EPFO
The Employee Provident Fund Organisation (EPFO) has appointed State Bank of India, ICICI Securities Primary Dealership, Reliance Capital and HSBC AssetManagement Company as fund managers to manage its Rs 3 lakh crore corpusfor the next three years. SBI will manage 35 per cent of the corpus, ICICISecurities PD 25 per cent, and the other two will manage 20 per cent each.
India is at 62
 According to the 2011 edition of the Global Innovation Index, India is ranked62
in innovation. For the year 2010, India’s rank was 56
and for 2009, it was41
indicating that India has been losing on innovation to other competitors.For 2011, Switzerland is at the top followed by Sweden, Singapore, Hong Kongand Finland. The important parameters for computing the innovation index are:institutions; human capital & research; infrastructure; market sophistication;and business sophistication.
Global cues
In the next few weeks, the US congress will decide on raising the US debt level.The present debt limit is $ 14.3 trillion. There are some differences over raisingthe debt level between the Republicans and the President. If they fail to sink theirdifferences, the country may plunge into an economic crisis. Meanwhile, Moody’sInvestor Services has warned that it would review the US rating, currently at Aaasince 1917, if the lawmakers do not raise the debt limit. Standard & Poor also gavea similar warning by putting the US on the negative watch list.

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