Volatility expected in the markets
Srujani Panda / 14 Oct 2011
Opening Bias
The markets may open negative in line with global cues. The SGX Nifty is trading down by 6.5 points at 5062.5 indicating a flattish gap down opening.
Overnight, U.S. stocks mostly fell, with the S&P 500 retreating after a three-day rise, after disappointing earnings from J.P. Morgan Chase & Co and concerns that equities rose too much on optimism about Europe’s debt crisis. Asian stocks are also seen trading in the red zone after China’s headline inflation came in at 6.1 per cent this morning limiting the country’s options to ease its monetary policy as Europe’s debt crisis cuts demand for exports and small businesses in China report a credit squeeze. Also the credit- rating downgrade of Spain’s long term sovereign credit to AA- from AA by S&P has fueled fresh concern over the euro region’s debt crisis which will hurt Asian economies and earnings.
Back home, the headline inflation data for the month of Sept is expected to be announced at noon today. 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.
Now with the dismal Aug IIP growth showing clear signs of continued sluggishness in the economy indicating towards a serious slowdown coupled with the primary and food articles inflation easing out for the week ended 24th Sept 2011 one may expect the RBI to take a pause in its rate hike.
But in realty this may not happen as the central bank has given a clear indication that it may not pause in its monetary stand as the 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 other major global headlines, there are some rising concerns that the United Kingdom may risk losing it prized AAA rating in the coming years as the Govt. debt in on an explosive path. The Govt. has come out with plans to implement one of the most stringent austerity programs the nation has seen since World War II. However, economists there believe that the Govt. growth forecasts of 2.5 per cent for FY12 and 2.9 per cent for FY13 are very unrealistic because of the European debt crisis and tough credit conditions for firms. The further believe that irrespective of what the Govt. does the budget deficit is likely to overshoot the forecasts. We would also like to remind our readers that recently around 9-11 UK banks had witnessed a downgrade of their ratings. This clearly indicates that there are problems brewing in the UK and one must wait and watch as the events unfold there.
In conclusion, we expect the markets to remain volatile for the day as investors wait for the Q2 results of respective companies and look forward to the headline inflation data for Sept which is due today as it will provide crucial cues on expectations from RBI monetary policy review on 25th Oct 2011.
Corporate News
India’s most valuable company in terms of market cap, RIL is expected to announce its results tomorrow. If market sources are to be believed, one can expect a health performance by the Mukesh Ambani led firm in Q2FY12. Cues for the same can be taken from the robust 37.6 per cent jump that the company posted in its Q2 advance tax numbers. The net sales are seen up by 39 per cent at Rs 79637 crore. PAT is seen up by 17 per cent at Rs 5752 crore. The OPM margins are however seen dipping and may come in at 12.7 per cent against 16.3 per cent.
Maruti Suzuki India (MSI) today said it would shut its main plant at Gurgaon for two days starting tomorrow due to component supply constraints from Suzuki Powertrain India (SPIL), where workers were on a stir in support of the striking colleagues at the country's largest carmaker's Manesar plant.Meanwhile, the Haryana labor department today has declared the strikes illegal and filed a civil suit in a Gurgaon court alleging that that unions of SPIL and SMIPL and representatives of MSI' Manesar plant workers had violated agreement and action must be taken against them.
The troubles for the debt-ridden Kingfisher Airlines seem to be never-ending. In latest developments, State-owned oil marketer HPCL had last night suspended fuel supplies to the airlines in Delhi on non-payment of dues. Sources confirmed that Kingfisher owes HPCL approximately Rs 100-130 crore. This caused the delay of six KFA flights out of Delhi airport and the airline had also stopped check-ins for the time being. However as of now the issue has been resolved and the services are back in motion.
According to sources, Offshore Ports & Shipbuilding Company Gateway Distriparks is expected to report net profit of Rs 33 crore for Q2FY12 against Rs 20.25 crores reported last year same quarter.
Kumar Mangalam Birla seems to have finally agreed to go ahead with the long-awaited merger of the cement business of Century Textiles, owned by his grandfather B K Birla, with UltraTech. According to sources, the merger process had started and the deal was likely to be inked in a few months. The B K Birla group led Century Textile has a total cement capacity of 7.8 MTPA and if the deal goes through, it will mark the Aditya Birla Group’s third consecutive cement deal in recent years after its overseas acquisition of ETA Cement and merger of Grasim’s cement division with UltraTech last year. Currently, Aditya Birla group has an overall capacity of 52 MTPA and is neck and neck with the Holcim group (ACC and Ambuja Cement). However, on a stand-alone basis, UltraTech is India's largest cement maker and the eight largest in the world. If Century's cement assets come to Aditya Birla group, it will surpass Holcim with a wide gap of over 5MT.
The government is planning a single common holding company to unite 21 state run banks which would eliminate ad hoc, last-minute infusion of resources that has been the practice so far. Holding company structure will allow the parent firm to raise debt at home and even abroad. The government will transfer all its shares in state-run banks to this holding company, which will resemble an investment special purpose vehicle for public sector banks. To maintain control, the government is considering innovations such as differential voting rights, golden shares or shares with zero voting rights to preserve the public sector nature of these banks. This is an interesting move from the government and would be positive for PSU banks which at present are finding it difficult to raise funds on concerns that government stake would come down.
The agitating workers of Bosch today called off their 16-day ''Tool Down'' strike with the protesters claiming that the state government has conceded to their demand of referring the "outsourcing" issue to a Karnataka Industrial Tribunal. On the other hand, Bosch claimed that the strike was called off by Micro Employees Association (MEA) after the government issued prohibitory orders. The workers were on strike since September 28 and later decided to go on fast from October 2 protesting the company's decision to outsource manufacturing of some products. Work will be resumed from October 14, with the first shift of production which could be positive for the scrip.
Economy News
As per the Foreign Trade Policy, Govt. may offer 1 per cent duty credit to engineering, pharma and chemical companies till the end of this financial year. Govt. may also additionally offer Rs 1700 crore export subsidy and 2 per cent duty credit to exporters dealing with US, UK and other major European countries.
Corporate Actions
Shares of Tijaria Polypipes would get listed on BSE and NSE today with an issue price of Rs 60 per share. We would like to remind our readers that we had recommended an avoid rating on the stock raising concerns over its business outlook and financial performance.
The markets may open negative in line with global cues. The SGX Nifty is trading down by 6.5 points at 5062.5 indicating a flattish gap down opening.
| Benchmark Indices | ||
| Index | Closing | % Change |
| SENSEX | 16883.92 | -0.44 |
| NIFTY | 5077.85 | -0.42 |
| Dow Jones | 11478.13 | -0.35 |
| S&P 500 | 1203.66 | -0.30 |
| NASDAQ | 2620.24 | 0.60 |
| Bovespa | 54601.1 | 1.42 |
| FTSE | 5392.23 | -0.91 |
| DAX | 5901.41 | -1.55 |
| CAC | 3179.51 | -1.56 |
| LIVE | ||
| Hang Seng | 18588.32 | -0.90 |
| Nikkei | 8764.69 | -0.66 |
| Shanghai | 2435.65 | -0.13 |
Overnight, U.S. stocks mostly fell, with the S&P 500 retreating after a three-day rise, after disappointing earnings from J.P. Morgan Chase & Co and concerns that equities rose too much on optimism about Europe’s debt crisis. Asian stocks are also seen trading in the red zone after China’s headline inflation came in at 6.1 per cent this morning limiting the country’s options to ease its monetary policy as Europe’s debt crisis cuts demand for exports and small businesses in China report a credit squeeze. Also the credit- rating downgrade of Spain’s long term sovereign credit to AA- from AA by S&P has fueled fresh concern over the euro region’s debt crisis which will hurt Asian economies and earnings.
Back home, the headline inflation data for the month of Sept is expected to be announced at noon today. 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.
Now with the dismal Aug IIP growth showing clear signs of continued sluggishness in the economy indicating towards a serious slowdown coupled with the primary and food articles inflation easing out for the week ended 24th Sept 2011 one may expect the RBI to take a pause in its rate hike.
But in realty this may not happen as the central bank has given a clear indication that it may not pause in its monetary stand as the 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 other major global headlines, there are some rising concerns that the United Kingdom may risk losing it prized AAA rating in the coming years as the Govt. debt in on an explosive path. The Govt. has come out with plans to implement one of the most stringent austerity programs the nation has seen since World War II. However, economists there believe that the Govt. growth forecasts of 2.5 per cent for FY12 and 2.9 per cent for FY13 are very unrealistic because of the European debt crisis and tough credit conditions for firms. The further believe that irrespective of what the Govt. does the budget deficit is likely to overshoot the forecasts. We would also like to remind our readers that recently around 9-11 UK banks had witnessed a downgrade of their ratings. This clearly indicates that there are problems brewing in the UK and one must wait and watch as the events unfold there.
In conclusion, we expect the markets to remain volatile for the day as investors wait for the Q2 results of respective companies and look forward to the headline inflation data for Sept which is due today as it will provide crucial cues on expectations from RBI monetary policy review on 25th Oct 2011.
Corporate News
India’s most valuable company in terms of market cap, RIL is expected to announce its results tomorrow. If market sources are to be believed, one can expect a health performance by the Mukesh Ambani led firm in Q2FY12. Cues for the same can be taken from the robust 37.6 per cent jump that the company posted in its Q2 advance tax numbers. The net sales are seen up by 39 per cent at Rs 79637 crore. PAT is seen up by 17 per cent at Rs 5752 crore. The OPM margins are however seen dipping and may come in at 12.7 per cent against 16.3 per cent.
Maruti Suzuki India (MSI) today said it would shut its main plant at Gurgaon for two days starting tomorrow due to component supply constraints from Suzuki Powertrain India (SPIL), where workers were on a stir in support of the striking colleagues at the country's largest carmaker's Manesar plant.Meanwhile, the Haryana labor department today has declared the strikes illegal and filed a civil suit in a Gurgaon court alleging that that unions of SPIL and SMIPL and representatives of MSI' Manesar plant workers had violated agreement and action must be taken against them.
The troubles for the debt-ridden Kingfisher Airlines seem to be never-ending. In latest developments, State-owned oil marketer HPCL had last night suspended fuel supplies to the airlines in Delhi on non-payment of dues. Sources confirmed that Kingfisher owes HPCL approximately Rs 100-130 crore. This caused the delay of six KFA flights out of Delhi airport and the airline had also stopped check-ins for the time being. However as of now the issue has been resolved and the services are back in motion.
According to sources, Offshore Ports & Shipbuilding Company Gateway Distriparks is expected to report net profit of Rs 33 crore for Q2FY12 against Rs 20.25 crores reported last year same quarter.
Kumar Mangalam Birla seems to have finally agreed to go ahead with the long-awaited merger of the cement business of Century Textiles, owned by his grandfather B K Birla, with UltraTech. According to sources, the merger process had started and the deal was likely to be inked in a few months. The B K Birla group led Century Textile has a total cement capacity of 7.8 MTPA and if the deal goes through, it will mark the Aditya Birla Group’s third consecutive cement deal in recent years after its overseas acquisition of ETA Cement and merger of Grasim’s cement division with UltraTech last year. Currently, Aditya Birla group has an overall capacity of 52 MTPA and is neck and neck with the Holcim group (ACC and Ambuja Cement). However, on a stand-alone basis, UltraTech is India's largest cement maker and the eight largest in the world. If Century's cement assets come to Aditya Birla group, it will surpass Holcim with a wide gap of over 5MT.
The government is planning a single common holding company to unite 21 state run banks which would eliminate ad hoc, last-minute infusion of resources that has been the practice so far. Holding company structure will allow the parent firm to raise debt at home and even abroad. The government will transfer all its shares in state-run banks to this holding company, which will resemble an investment special purpose vehicle for public sector banks. To maintain control, the government is considering innovations such as differential voting rights, golden shares or shares with zero voting rights to preserve the public sector nature of these banks. This is an interesting move from the government and would be positive for PSU banks which at present are finding it difficult to raise funds on concerns that government stake would come down.
The agitating workers of Bosch today called off their 16-day ''Tool Down'' strike with the protesters claiming that the state government has conceded to their demand of referring the "outsourcing" issue to a Karnataka Industrial Tribunal. On the other hand, Bosch claimed that the strike was called off by Micro Employees Association (MEA) after the government issued prohibitory orders. The workers were on strike since September 28 and later decided to go on fast from October 2 protesting the company's decision to outsource manufacturing of some products. Work will be resumed from October 14, with the first shift of production which could be positive for the scrip.
Economy News
As per the Foreign Trade Policy, Govt. may offer 1 per cent duty credit to engineering, pharma and chemical companies till the end of this financial year. Govt. may also additionally offer Rs 1700 crore export subsidy and 2 per cent duty credit to exporters dealing with US, UK and other major European countries.
Corporate Actions
Shares of Tijaria Polypipes would get listed on BSE and NSE today with an issue price of Rs 60 per share. We would like to remind our readers that we had recommended an avoid rating on the stock raising concerns over its business outlook and financial performance.
| Results Today | |
| Scrip Name | Action |
| Asian Flora | Q2FY12 |
| Balaji Tele | Q2FY12 |
| Centrum Cap | Q2FY12 |
| Eskay Knit | Q2FY12 |
| Explicit Fin | Q2FY12 |
| Gateway Distr | Q2FY12 |
| Geojit Bnp | Q2FY12 |
| Heidelbergcement | Q2FY12 |
| Infomedia 18 | Q2FY12 |
| KLIFESTYLE | Q2FY12 |
| Reliance Indl Infra | Q2FY12 |
| RS Software | Q2FY12 |
| Stocks Paying Dividend (Ex-Date) | ||
| Scrip Name | Action | Rs |
| Mobile Telecom | Dividend | 0.06 |
| BSE Institutional Turnover | ||||||
| FII | DII | |||||
| Trade Date | Buy | Sales | Net | Buy | Sales | Net |
| 13-Oct-11 | 2,529.14 | 1,859.06 | 670.08 | 902.87 | 1160.23 | -257.36 |
| 12-Oct-11 | 2,653.35 | 2,058.34 | 595.01 | 1,287.40 | 1,393.95 | -106.55 |
| 11-Oct-11 | 2,821.63 | 2,707.48 | 114.15 | 1338.5 | 1,230.33 | 108.17 |
| Oct , 11 | 19,732.66 | 20,456.37 | -723.71 | 9,717.80 | 8,817.73 | 900.07 |
| FII DERIVATIVES STATISTICS FOR 13-Oct-2011 | |||||||
| BUY | SELL | OI (End of Day) | Net Position | ||||
| No. of contracts | Rs (crore) | No. of contracts | Rs (crore) | No. of contracts | Rs (crore) | Rs (crore) | |
| INDEX FUTURES | 89799 | 2268.77 | 80586 | 2037.62 | 524879 | 13141.93 | 231.14 |
| INDEX OPTIONS | 507055 | 12746.19 | 501817 | 12602.41 | 1813854 | 46046.95 | 143.78 |
| STOCK FUTURES | 73231 | 1857.92 | 73638 | 1907.09 | 1120791 | 27308.68 | -49.18 |
| STOCK OPTIONS | 20947 | 526.81 | 20982 | 524.76 | 45147 | 1151.26 | 2.05 |
| Total | 691032 | 17399.69 | 677023 | 17071.89 | 3504671 | 87648.82 | 327.80 |
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