The markets may witness a negative opening in line with global cues.

Morning Update 20thOct 2011

Opening Bias

The markets may witness a negative opening in line with global cues. The SGX Nifty is trading down by 46 points at 5100 indicating a gap down opening.

Overnight U.S. stocks fell sharply after indications showed the U.S. economy was growing at a weak pace and on disappointing earnings from Apple Inc., and as investors assessed European efforts to fix the region’s debt problems. This decline marks the ninth straight session where Dow Jones Industrial Average has closed in different directions from the prior trading days. The Asian indices are also seen trading in the red tracking cues from a weak US and uncertain situation in the Euro-zone.

Back home, the week-on-week inflation numbers for food, fuel and primary articles are expected today. Last week the combined inflation had eased out hinting towards an easing in the headline inflation. However the fall was not very significant and we believe RBI to persist with its monetary tightening policy. One must closely watch out the data today because it will provide very important cues for RBI’s monetary stance expected on 25th Oct 2011.

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.

In conclusion, we expect the markets to remain negative for the day, as the forthcoming Q2 results season may give rise to market speculation on the outcome of individual company results. Also there are concerns over the health of the Euro zone debt crisis.

Corporate News

Hyderabad-based real estate company IVRCL Ltd has won projects worth a total of Rs 552.3 crore across its buildings, transportation and water divisions. Of these, three construction projects account for Rs 418.5 crore, and involve building a low-cost housing project at Delhi, a civil and steel work facility at Bhilai Steel Plant and a facility for Central Industrial Security Force at Sivagangai in Tamil Nadu. A road project in Orissa worth Rs 74.5 crore and a drinking water project in Bihar valued at Rs 59.3 crore comprise the rest, according to a company release.

Japanese stationary major Kokuyo, which recently acquired a 50.74 per cent stake in city-based Camlin Ltd, has put in place a blueprint that will see the largely school stationary company evolve into a diversified player. The endeavor is to triple the Rs 358-crore-firm’s turnover to Rs 1,000 crore in a span of five years. For this, the USD 3-billion Japanese major has identified three key areas to push its India business that includes colour products, paper stationary and writing instruments. Kokuyo Camlin will primarily push the Camel brand in colours, Camlin in writing instruments and Campus in notebooks. The firm has also reconstituted its board and has refurbished its corporate logo to reflect the change in ownership.

Hathway Cable & Datacom yesterday said it would invest Rs 1,000 crore in digitisation of cable TV and enhancing broadband services by 2015 through a mix of debt and equity. The new investments would be made in digitisation and enhancing broadband services. The company is also set to launch high definition set-top-boxes within this month which will give better picture and sound quality. We are positive on the stock.

Essar Ports yesterday posted a consolidated net profit at Rs 40.84 crore for second quarter on the back of current fiscal on higher realisation, which stood at Rs 233 per tonne so far in the current year against Rs 174 a tonne in the last fiscal. It will invest Rs 2,800 crore over two-and-a-half years to fund expansion. Company also posted 34 per cent growth in its bottom line. Revenue of the company rose by 56 per cent during the quarter to Rs 279.14 crore compared to Rs 178.96 crore in the same period last fiscal.

IT firm Mastek yesterday reported a consolidated net loss of Rs 27 crore for the quarter ended September 30, 2011 on the back of economic scenario in Europe. The company had posted a net loss of Rs 13.46 crore in the July-September quarter last year. Even on standalone basis, the company posted a net loss of Rs 25 crore, against a net loss of Rs 14.77 crore in the same quarter previous fiscal. We are negative on the stock.

Bajaj FinServ's net profit zoomed to 127 per cent to Rs 158 crore for the second quarter ended September 2011 as compared to Rs 69 crore a year ago. Company also reported income from operations to Rs 714 crore as against Rs 470 crore in September 2010. We believe this will be positive for the investors.

Drug maker Lupin has received final USFDA approval for a generic version of UCB's Keppra Oral Solution. Commercial shipment of the product shall commence shortly. According to IMS Health sales data for the twelve months ended June 2011, Keppra Oral Solution 100 mg/mL had annual sales of nearly $63 million in the US market. Company has also received USFDA's nod to sell a generic version of UCB's Keppra XR tablets. Keppra XR tablets had annual sales of nearly $161 million in the US market. This is impressive in the current market. Company can also look forward to grow its export revenues.

GVK Power & Infrastructure Ltd has informed that Bangalore Airport & Infrastructure Developers Private Ltd, a subsidiary of the company has acquired 53,844,000 equity shares of Rs.10 each (amounting to 14 per cent) in Bangalore International Airport Limited (BIAL) from Siemens Project Ventures GmbH (Siemens) at a cost of Rs. 613.82 Crores. With this acquisition, GVKPIL would now have an effective stake of 43 per cent in BIAL. The stock closed in green yesterday and we believe there is further scope of positive today.

Oil India is considering buying a stake in the Gabon Assets of French Oil producer Maurelet prom.  Financial details are not available at this moment however we are positive on the stock.

IPO Listing

M and B Switchgears IPO (Avoid)

Listing Date: Thursday, October 20th, 2011
BSE Scrip Code: 533644
NSE Symbol: MBSWITCH
Listing In: 'B' Group of Securities
ISIN: INE899L01014
Issue Price: Rs. 186.00 per Equity Share
Face Value: Rs. 10.00 per Equity Share