Markets expected to remain negative

The markets may open negative in line with global cues. The SGX Nifty is trading down by 68 points at 4863 indicating a gap down opening.

Last week U.S. stocks fell this week, capping the worst quarterly loss for the S&P 500 since the end of 2008, as the sovereign debt crisis in Europe and fears of a global slowdown overshadowed improving economic reports in the U.S. Asia stocks have also dropped in early morning trades, as the euro fell to an eight-month low against the dollar before European finance ministers gather to weigh the threat of a Greek default. 

Back home, we believe auto and cement shares will be in focus as companies from these two sectors start unveiling monthly sales data for September 2011. Cement sales is likely to pick up as monsoon withdraws. Higher interest rates and recent petrol price hike is expected to adversely impact sales of cars and two-wheelers during the festive season. However with the festive seasons of Navaratri and Diwali coming ahead one may expect the sales to pick up during this period.

Also with the Q2FY11 earning season coming close we recommend our readers to closely watch the management commentary at the time of announcement of Q2 September 2011 results, which will provide cues on futures earnings outlook.

The advance tax payment by top 100 companies rose a modest 9.9% in Q2FY12 from a year ago against 19% growth in Q1FY12 suggesting corporate profit growth is likely to be muted in the second quarter. Among the big companies that have paid lower advance tax, indicating a drop in profits, include SBI, Maruti Suzuki and Neyveli Lignite Corporation. But, RIL advance tax payment jumped 37.6% to Rs 1800 crore, hinting at good Q2 results from the diversified firm.

Cairn India has discovered natural gas reserves in the very first well it has drilled in the offshore Mannar Basin of Sri Lanka. The Mannar basin in Sri Lanka is a frontier petroleum province that is yet to be explored. Based on the 3D seismic interpretation, several prospects and leads have been identified by the company and it will drill a total of three wells in the block using drillship 'Chikyu'. The drilling campaign will cost $110 million.

According to reports, Coal India’s profitability would be eroded by about Rs 2,000 crore per annum post enactment of new mines legislation which mandates coal miners to share 26% of their profits with project affected people. Coal India, which accounts for about 80% of the country's total production of coal, had reported a consolidated net profit of Rs 10,867 crore in FY11. This indicates that if the current levels of profits are to be sustained the company may have to resort to price hikes which will further put pressure on its consumer industries. The domestic coal prices range between Rs 770 and Rs 1,700 a tonne at present.

In auto sales news, Tata Motors has reported 22 per cent increase in total sales during September 2011 to 78,786 units against 64668 units in Sept 2010. However, the country’s largest car maker, Maruti Suzuki reported a 20.8 per cent decline in sales for September to 85,565 units against 108006 units in Sept 2010 due to labour unrest at its Manesar plant that severely affected production. 

The CBI has given a clean chit to RADAG chief Shri Anil Ambani in the structuring of different firms and transfer of funds relating to Swan Telecom. According to CBI top officials, the investigation did not reveal any evidence, either oral or documentary, to implicate Anil Ambani in the structuring of different companies and transfer of funds. One may expect some bounce back in the RADAG stocks which witnessed heavy selling pressure last Friday.