Positive opening expected for the markets

The markets may open positive in line with global cues. The SGX Nifty is trading up by 16.5 points at 4131.5 indicating a gap up opening.

Overnight U.S. stocks climbed on expectations that Europe would manage its debt trouble by laying out a plan to shore up the debt-embattled banks, issue the sixth loan to Greece and a speed up the process for setting up a permanent-rescue fund. Separately, Slovakia was readying for another vote on a revised bailout fund for the region, the last of 17 euro-zone countries to do so, after political factions reached agreement to approve the enhanced rescue fund. The Asian markets have also followed suit and are seen trading in the green zone, with export firms among the biggest gainers.

Back home, the Aug IIP data which came in at a dismal 4.1 per cent showed clear signs of continued sluggishness in the economy indicating towards a serious slowdown. Finance Minister Shri. Pranab Mukherjee has also expressed his disappointment over the IIP growth and has raised concerns over the growth slowing down considerably in the second quarter.

Now all eyes will turn towards the headline inflation data for the month of September, which is expected to be announced on 14th Oct 2011. The street estimates the Sept inflation to come at 9.7 per cent against 9.78 per cent in Aug, which is still twice the RBI’s desired comfort level for inflation.

So this gives quiet a clear indication that RBI may not pause in its monetary stand as the Central Bank’s key objective is to arrest inflation, even if it comes at the cost of contraction in economic growth. The RBI governor D Subbarao has also come out and indicated towards the same. According to him, the central bank was conscious of the need to bring down interest rates to boost the economy, but this might take time. He also expressed concern over the rising inflation, but said it could be controlled by the end of this year.

In conclusion, we expect the markets to remain volatile for the day as investors await for the Q2 results of respective companies and look forward to the headline inflation data for Sept which is due on 14th Oct 2011 as it will provide crucial cues on expectations from RBI monetary policy review on 25th Oct 2011.

Corporate News

L&T General Insurance, a wholly-owned subsidiary of engineering construction major Larsen & Toubro (L&T), will see a capital infusion around Rs 500 crore from its parent over next three to four years. L&T General Insurance has started its operations last year with an initial investment of Rs 175 crore and has set a target of collecting a premium of Rs 1,000 crore in its first five years of operations. It also aims to be break-even in five to seven years. Referring to business growth, the company has indicated that there is vast scope in the general insurance space as its penetration is very low. However, the company has no plans to enter into partnership in this space in the near future.

State Bank of India is likely to defer its overseas fund-raising plans on account of unattractive yields and moderation in growth. The country’s largest lender had planned to raise $1-billion funds through medium-term notes in November, but is now waiting for economic stability.

A tussle between the management of Coal India Ltd (CIL) and its workers’ union over the demand for increased bonus is set to intensify as the state-owned miner rejected the employees’ demand for an increase in annual bonus payment. Coal India, the country’s largest listed employer with current employee strength of 397,000 offered an annual bonus of Rs 17,000 each. However the workers went on a strike on Monday protesting against the fewer bonuses, and demanding an additional Rs 6,500 for each. This additional amount would increase the company’s burden by Rs 240 crore. Not satisfied with the management’s argument, the unions have threatened to go on a strike soon. If the management continues to be rigid, then the workers would be forced to go on a second strike of “not less than 72 days”, according to Left Front-backed All India Coal Workers Federation (AICWF).

In what could be a relief to Bharti Airtel, Vodafone and Idea, the DoT has asked the TRAI to reconsider its pricing recommendation for excess spectrum holders. Earlier TRAI had recommended that companies having extra spectrum should be made to pay a one-time charge. The three telecom service providers are prominent private firms that have spectrum in excess. A one-time charge in the case of Bharti Airtel would have been in the range of Rs 3,200 crore to Rs 4,400 crore, for Idea in the range of Rs 1,500 crore to and Vodafone in the range of Rs 2,000 crore.

Tata Steel, the world's No. 7 steelmaker, may cut production further in Europe in the next few months if steel orders weaken, Karl-Ulrich Köhler, CEO of Tata Steel in Europe said on Wednesday. The company had already cut production capacity from 85-90% in the first half this year to 80-85% currently. In September, Tata Steel's European unit shut down one of its four blast furnaces in Scunthorpe, United Kingdom. Another blast furnace at the site was idled a few years ago on a long-term basis, while the two remaining furnaces are currently operating.

Jet Airways, signed a deal with Vietnam Airlines to jointly operate services between India and Vietnam. Naresh Goyal, chairman of Jet Airways said "This agreement with Vietnam Airlines is an integral part of our strategy for increased international growth and providing seamless service for travellers between India and Vietnam. We look forward to the future of cooperation and collaboration with Vietnam Airlines, bringing greater benefits to our distinguished passengers".

ONGC Videsh Ltd (OVL), the overseas arm ONGC signed an agreement to take a 25 per cent stake in Kazakhstan's Satpayev offshore exploration block which can produce close to 3,00,000 barrels per day.The deals signed is completing a 16 year pursuit for the block which is estimated to have 1.9 billion barrels of crude oil reserves, valued at USD 92 billion at an average price of USD 50 a barrel. OVL paid USD 13 million as a signing amount to Kazakhstan. In addition, it will pay USD 80 million as a one-time assignment fee to KazMunaiGas (KMG). On top of this, OVL has committed a minimum exploration investment of USD 165 million and an additional optional expenditure of USD 235 million to the project.

Brigade Enterprises a real estate developer said they intend to develop 31 million square feet of residential, commercial and hospitality space in the next phase of growth. Company aims to develop this space in the next five years and half of that (approx 15 million square feet) in the coming 12 months of which 80 per cent would be residential and rest would be in the commercial space. The group has completed 25 years of its operations and has so far developed 20 million square feet.

Car maker giant Maruti Suzuki India Limited (MSIL)and its vendors have reported a combined loss of around Rs 3,000 crore since the start of the standoff earlier in June this year. MSILs suppliers include auto component majors Anand Automotive, Rico Auto Industries, Sona Koyo and Lumax Industries which had set up units in the region to supply to its plants in Gurgaon and Manesar. However since June this year, their suppliers have together incurred losses to the tune of Rs 1,300 crore. For MSIL, the disruption in production has meant a loss of a whopping 54,775 units and Revenue losses have mounted to Rs 1,643 crore.

Economy News

Maintaining a robust trend despite a slowdown in the US and Europe, India's exports registered a robust annual growth of 36.3 per cent to USD 24.8 billion in September. Total exports for the current fiscal may reach "striking range" of USD 290-300 billion, Commerce Secretary Rahul Khullar said today while releasing the provisional data. Though down from the 44.2 per cent growth recorded in August, the rise in exports in September can be considered robust, given the economic woes in the US and the debt crisis in Europe. Imports in September grew by 17.2 per cent to USD 34.6 billion vis-a-vis the same period last year, leaving a trade deficit of USD 9.8 billion.During the April-September period, India's exports grew by 52.1 per cent to USD 160 billion.

Private Investment in the country’s defense sector will rise to the tune of Rs 423000 crore in the next 10 years, throwing up huge opportunities for private sector companies like L&T, Bharti Shipyard and Pipavav Shipyard among others.

Govt. is finalizing an Rs 100 crore package for stepping up production and exports of tea through a ‘Triple Five’ promotion scheme. This is a huge positive development for companies like Jayshree Tea, Mcleod Russell and Tata Tea etc.

A group of ministers (GoM) has accepted the power ministry’s suggestions to allow utilities to undertake tariff revision periodically, rather than as a one-off exercise. Power distribution companies in the country are estimated to have incurred a whopping loss of Rs 70,000 crore in 2010-11. ICF International with assistance from Federation of Indian Chambers of Commerce and Industry (Ficci) and the power ministry said "Rising gap between tariff and cost of producing electricity as well as aggregate technical and commercial losses are the main factors for the losses".