The markets may open sideways in line with global cues.

Opening Bias

The markets may open sideways in line with global cues. The SGX Nifty is trading up by 3 points at 5108.5 indicating a flattish gap up opening.

Overnight U.S. stocks closed on a mixed not amidst choppy trading sessions, finding some support in a commitment by Germany and France to produce a comprehensive plan to bolster the region’s banks and expand a sovereign rescue fund. The Asian shares have also posted some modest gains in early trading, as investors cautiously welcomed a statement from France and Germany promising to provide firm details of a rescue plan for the euro zone in the next few days.

Back home, India's food price index rose 10.60 per cent and the fuel price index climbed 15.17 per cent in the year to Oct. 8. In the previous week, annual food and fuel inflation stood at 9.32 per cent and 15.10 per cent, respectively. The primary articles index was up 11.18 per cent, compared with an annual rise of 10.60 per cent a week earlier. After lingering tantalizingly close to 10 per cent for about a month-and-a-half, food inflation finally climbed into the double digits, signaling that RBI may persist with its tight monetary stance in its policy review later this month despite the economy showing signs of a slowdown in growth.

In conclusion, we expect the markets to remain volatile for the day, as the forthcoming Q2 results season may give rise to market speculation on the outcome of individual company results. Also we expect the market to start discounted the possibility of another rate hike, although various unconfirmed reports suggest that the markets may have already discounted such rate hike.

Corporate News

Tata Motors, India’s largest automotive company, is looking to raise USD 750 million (Rs 3,675 crore) via overseas borrowing to meet working capital requirements and reduce debt. According to company sources, the external commercial borrowing (ECB), with a spread of six years, would be priced about 350 basis points above the London Interbank Offered Rate (LIBOR). Tata Motors had a consolidated net automotive debt (excluding vehicle financing) of Rs 14,500 crore at the end of June. This will be the second big-ticket fund raising the company could do this year after it made a bond issue of Rs 7,500 crore ($1.6 billion) for Jaguar and Land Rover.

Ingersoll Rand Q3 net profit fell by 63 per cent yesterday as the company announced its earnings in the US markets. The company has owed this sharp decline to lower US sales and has sharply cut its yearly targets. The stock was heavily beaten down by investors, which saw an intraday fall of 8 per cent on the American bourses. Now with the company expected to announce its results today, we raise caution over the company’s Q2 performance.

SEBI is investigating whether an associate company of DLF duped an investor by using a maze of intermediary companies while purchasing land. The Delhi High Court had directed the SEBI to investigate the issue. The regulator will further probe whether DLF violated norms by not disclosing the same while filing the revised draft document in 2007. The development comes on the back of a complaint by Kimsuk Krishna Sinha, alleging that Sudipti Estates Private Limited, an associate company of DLF, duped him of Rs 34 crore. It is alleged that Sudipti along with its directors/agents compelled the complainant to transfer a part of his land and then failed to develop the same and generate higher returns, as promised. They further cheated by neither delivering the property nor returning the money.

Bharti Enterprises, the parent of top mobile phone carrier Bharti Airtel, and Japan's Softbank Corp have formed an equal joint venture to focus on mobile Internet, the Indian group said on Thursday. The joint venture will invest in social media, gaming and e-commerce, according to sources. However the companies did not disclose financial details.

IDBI Bank has posted a 20 per cent rise in net income at Rs 516 crore in the second quarter ended September 30 on the back of lower provisioning. Net profit stood at Rs 429.10 crore in the same period last year. Total income rose 24.10 per cent to Rs 6,291.42 crore in the July-September quarter of this fiscal. Company hopes that it will maintain this performance in the rest of this fiscal. The bank, is also trying to ramp up its Casa base and is hopeful of attaining 25 per cent Casa portfolio in the future.

Lupin hopes to finalize two marketing alliances to market adult vaccines and enhance its market share in chronic diseases segment in India.  These tie-ups will lead to a revenue upside of about 15 per cent in the long term as per company estimates. Lupin has also decided to move away from the acute therapy, anti infective segment to lifestyle diseases like cardiovascular diseases, diabetes, Gynecology and respiratory like disorders. Company sees lot of value in these therapeutic segments. We think this is good news for the company.

Thermax Ltd has posted a 14 per cent rise in net profit for the second quarter of FY12. Net profit rose to Rs. 101.68 crore. Thermax has also signed technology transfer agreements with Tecnochem Italiana and Gruppo Chimico Dalton for construction chemicals, in view to offer advanced chemical technology for infrastructure development projects. It has further signed a technology and partnership agreement with Amonix Inc. of USA to bring concentrated photovoltaic (CPV) technology for power generation in India. We see little upside in the stock.

Cairn India net profit halved to Rs 763 crore in the quarter ending September 30 mainly on account of the company making provisions for one-time royalty payment of USD 294 million, which Cairn will have to bear for its 70 per cent share in the Rajasthan oilfields. Besides royalty, Cairn has also agreed to pay Rs 2,500 per ton cess on its share of 70 per cent and will withdraw arbitration initiated disputing this liability. However Cairn India has assured that it will hike Rajasthan crude oil output by 40% to 175,000 barrels per day by the end of this fiscal as it sees strong support from partner ONGC and government post resolution of the royalty issue.

Varun Industries, which is present in in steelware, oil & gas and mining sectors, is in talks to acquire the kitchenware plant of Kishco Group. More details are not available at this hour however it is said that Varun will run the manufacturing unit and will continue to supply the products to the seller and export the rest of the production. This acquisition will increase Varun's capacity and will provide it access to high margin export market. We are positive on the stock.

Moser Baer’s Italian subsidiary Moser Baer Clean Energy and GE would set up a solar power project at Sardinia in Italy. Moser Baer Clean Energy has also got an investment of Rs. 300 crore from GE that will help to tap the solar energy as to grow crops while generating electricity also. The first phase of the project will have 20 MW capacities. MBCEL expects to have an operating capacity of 100 MW power of Solar Plants by the end October, 2011

Srei Infrastructure Finance reported a lower net profit of Rs 24.60 crore for the second-quarter (Q2) ended September, 2011, compared to Rs 78.15 crore net in the corresponding quarter last fiscal.

Profits have declined due to the sudden and sharp depreciation of rupee against dollar and also continuous increase in interest rates.

Exide Industries yesterday reported lower net profit of Rs 51.15 crore for the second-quarter, compared to Rs 212.93 crore in the previous corresponding period. This comes mainly on account of lower OEM offtake of automotive battery and lower replacement sales volume. Lower OEM off take together with the lower replacement sales volume increased per unit cost of production and consequential drop in the profit levels.

Corporate Action