Markets expected to be volatile

Opening Bias

The markets may open sideways in line with global cues. The SGX Nifty is trading down by 3 points at 4977 indicating a flattish gap down opening.

Overnight most U.S. stocks closed on a flat note, as optimism about third-quarter corporate earnings overshadowed concerns on Europe’s worsening debt crisis. The Asian markets are seen trading in the red zone, following disappointing results from U.S. aluminum giant Alcoa and Slovakia’s failure to approve an expansion of Europe’s giant financial bailout fund.

Back home, FIIs bought shares worth Rs114.51crore yesterday as per provisional figures. This was the third straight day of FII inflow which has come on the back of a period where they had dumped shares worth a net Rs 2806.19 crore in the first three trading sessions of Oct 2011.

The Govt. is expected to announce the Aug IIP numbers by noon today. According to unconfirmed govt. sources the Aug IIP growth data is seen close to 4.0 per cent vs. 3.3 per cent in Jul. The streets estimate growth at 4.8 per cent, reason being Aug IIP is seen up on growth in capital goods segment. Capital goods segment contracted 15.2 per cent in Jul. Govt source also added that 81 per cent items in IIP grew over 3 per cent in Aug. Consumer durables growth may see sharp dip in Aug IIP.

We believe that an Aug IIP growth figure between 5-6 per cent will not have much impact on the markets as the markets pretty much expect growth to remain subdued as a result of policy measures undertaken by RBI to arrest inflation by increasing interest rates.

In conclusion, we expect the markets to remain volatile for the day as markets await the IIP data figures and look forward to the headline inflation data for Sept which is due on 14 Oct 2011 as it will provide crucial cues on expectations from RBI monetary policy review on 25 Oct 2011.

Also the recent failure to by Slovak Govt. to vote for extending the Euro 440 billion ESFS schemes raises questions over the next course of action by the Euro leaders. The repayment dates for Greece are coming near and there still doesn’t seem to be concrete solution for the crisis there.

Corporate News

Country's second largest software services exporter Infosys is set to report a growth of 9 per cent QoQ in profit of Rs 1,876 crore for the second quarter of FY12, according to street estimates. Net profit for the previous quarter of current financial year was Rs 1,720 crore. Revenues are expected to jump 13 per cent to Rs 8,480 crore as against Rs 7,485 crore, QoQ basis. The EPS of Infosys is expected to rise by 9.1 per cent to Rs 32.6 in the quarter ended September 2011.

Tata Power has installed more than 300 MW wind power capacity, spread across four states, including Gujarat and Karnataka. The company further expects to commission 64.5 MW wind energy capacity in Tamil Nadu and Maharashtra by the third quarter of FY11 and is currently in the process of acquiring 20.95 MW operating wind assets in Maharashtra from Niskalp Energy. Tata Power would also shortly place an order for 150 MW wind capacity to be set up in Maharashtra and Rajasthan, and to be commissioned during the course of FY12 and FY13.

State-owned NMDC will conduct an e-auction on Friday for the sale of 300,000 tonne of iron ore to steel and allied industries in Karnataka, which are struggling to keep their units operational due to an acute shortage of the raw material.  NMDC is looking to increase the quantum of iron ore to be sold through the e-auction route in the coming days. This will be second auction conducted by the mining major in a span of 10 days, having sold about 200,000 tonne of ore on October 4.In addition, the company has also requested the apex court-appointed monitoring committee to "at least" double the number of auctions in a week, so that piling up of iron ore stocks can be avoided.

Aurobindo Pharma has become the first major generic drug maker to gain royalty-free production and supply rights for five AIDS medicines through an agreement with Geneva-based Medicines Patent Pool. The company will sell these medicines in 18 developing countries at a price less than that of the innovator’s products.

Rajesh Exports is looking at raising a debt of Rs 3,000 crore for expansion in the gold jewellery retail sector. Over the next three years, the company will spend Rs 7,500 crore for the retailing arm, a majority of which will be to buy gold bars. Rajesh Exports’ retailing arm has sales of around Rs 1,500 crore and is targeting to touch the Rs 5,000-crore mark during 2012-13. The company, which is fast emerging as a strong competitor to Titan's gold jewellery retailing arm Tanishq, hopes to cross Tanishq’s revenues by next year.

Life Healthcare a South Africa based company is acquiring a 26 per cent stake in Max Healthcare for Rs 516 crore. The deal is one of the largest foreign investments in the Indian healthcare sector. The fund raised will be used for Max Healthcare expansion program. At present the group has eight hospitals, and it plans to opens four more in the current fiscal year taking its total capacity to 1900 beds. Some of the debt also will be used for repayment of high-cost loans. Mr Khosla also said that with this investment, the company has dropped its plans for doing rights issue.

The Burman family, promoter of Dabur India, is likely to buy less than 26 per cent stake in the Indian unit of Portuguese investment banking and securities firm Espirito Santo. Mohit Burman, Director at Dabur India is the driving force behind the Burman family’s foray into financial services such as life insurance, pensions, annuities and asset management. The Burman family owns over 68 per cent stake in consumer products maker Dabur India.

Economy News

The country’s power scenario will continue to worsen further as the shortage of coal persists. The power ministry has estimated that the country has lost four billion units (bu) of power generation between April and September this financial year due to a severe dip in coal supply from Coal India and its arms. The coal shortage would continue to cripple the generation as there has been a -1.2 per cent growth in coal production this month, compared to what Coal India and its arms registered last year.

According to sources, abolition of roaming charges as proposed in the draft National Telecom Policy 2011 is expected to result in a revenue loss of around Rs 1,973 crore (about $400 million) for leading telecom service providers in India. However, the real impact could be assessed based on the elasticity of demand as falling tariffs have encouraged people in making calls while they are on roaming. Global rating firm Fitch has also said that draft National Telecom Policy's (NTP) indication to remove roaming charges is negative for Indian telecom companies as revenue from this segment accounts for 4-7% of overall revenue of the service providers.

Corporate Actions