Markets expected to open in the green

Back home, as reported by us yesterday, the country’s largest OMC, IOC, has finally hiked its petrol prices by another Rs 1.8 per litre. According to sources, the other OMCs like HPCL and BPCL may also follow suit shortly. The hike was a much expected event as the OMCs were bleeding heavily, suffering as they were an estimated loss of Rs 319 cr daily on a subsidised sale of diesel, kerosene and domestic LPG. Moreover, a depreciating rupee also played spoilsport by hurting the liquidity position of these companies.

This is the second hike in petrol prices in less than two months and it came on a day when the fuel inflation stood ‘dangerously’ at 14.5% for the week ended October 22

Talking on the inflation front, food inflation continued to surge, climbing to its highest level in close to ten months in the third week of October. This was mainly on account of a sharp surge in the price levels of vegetables, pulses, poultry items and milk during the week, which marked the festival season across the country. Data released by the government on Thursday showed food inflation, as measured by the WPI, at 12.21% during the week ended October 22 as against the previous week’s annual rise of 11.43%.

Inflation in the primary articles was recorded at 12.08%, compared to 11.75% in the previous week. Inflation in non-food articles, including fibres, oil seeds and minerals, was recorded at 6.43% during the week under review, as against 7.67% in the week ended October 15. Fuel and power inflation stood at 14.50% during the week ended October 22, compared to 14.70% in the previous week.

Commenting on the latest food inflation numbers, Finance Minister Pranab Mukherjee said the rise in rate of price rise was a matter of “grave concern”, but attributed this partly to the festive season. “Inflation is still a matter of grave concern. This is also the effect of the festive season. November onward, the real trend for the remaining four months of the fiscal will be available.” We at DSIJ also affirm the same. The prices of food articles are expected to ease towards the end of the festive season, which could help cool inflation in the coming weeks.

The base effect should also come into play in the second week of November, which could further exert downward pressure on the food inflation estimates. Food inflation was recorded at 13.55% in the corresponding week of the previous year. In conclusion, we expect the markets to remain positive for the day, tracking strong cues from the global markets. Nevertheless we shall update our readers on a timely basis on the expected direction of the markets.

Stocks In Action

In a regulatory filing, private sector iron ore miner Sesa Goa will acquire 100% stake in Goa Energy from Videocon Industries and other shareholders for an all cash deal amounting to Rs 53.72 cr. The agreement includes taking over an existing debt of Rs 47.28 cr of Goa Energy, which owns and operates a 30 MW waste heat recovery power plant in Goa. The acquisition will enable Sesa Goa to exploit synergies with the pig iron and coke making operations at Amona in Goa and to secure further cost reduction on its own power requirements. Sesa Goa has a 0.28 million tonne per annum metallurgical coke plant and 0.25 million tonne pig iron plant in Goa. Besides this, the company also has operations in Karnataka and in 2010-11 it had produced over 18 million tonnes of iron ore.

In a move that may bring the two Ambani brothers closer, Mukesh Ambani-led RIL is in talks to hire the infrastructure of younger sibling Anil Ambani’s firm RCom for its telecom foray. According to sources in the know, RCom will be providing the entire infrastructure - towers, fiber and backhaul as well as its national and international long distance facilities - to RIL’s high-speed broadband services. RCom has 50,000 towers, an optical fiber network of 2.77 KM and over 1 million retails outlets (including company-owned franchisee and distributors). According to market reports, RIL is initially looking at about 30,000 towers. If this deal goes through, it will positively impact the valuation of RCom’s tower arm, for which the company is in talks with PE firms to sell its majority stake of 95%.

Oil and Natural Gas Corp (ONGC) is likely to see a 75% jump in natural gas production in the next five years when the state-owned company will bring its Krishna Godavari basin gas discoveries into production. ONGC’s natural gas output is projected to rise from about 52 million standard cubic meters per day during the current year to 91.09 mmscmd by 2016-17, according to the gas supply projections made by the Ministry of Oil.

State-run Power Grid Corporation (PGCIL) has set aside around Rs 5,000 cr for setting up a transmission network in Gujarat by October next year. PGCIL’s network would then connect Bhachau, Morbi, Lalpar and Halvad at Gujarat’s Kutch district. The company has already commissioned a transmission system for two units of the Mundra Ultra Mega Power Project in Gujarat. These are part of the transmission system associated with Mundra UMPP, being implemented by Power Grid at an estimated cost of about Rs 5,000 cr. PGCIL has planned a capital investment of Rs 55,000 cr for the development of inter-state transmission system during 11th Five Year Plan of which an investment of more than Rs 42,000 cr has already been made till September 2011.

According to sources, state-owned NMDC’s exports of iron ore may fall by over 61% to less than 1 million tonne this year from 2.6 million tonne last year. The sources added that the drop in exports will not impact the financials of the company, as domestic demand and prices are encouraging. The plunge in exports is primarily due to the delay in issuance of a notification by the government, permitting overseas shipment of the mineral resource even after Cabinet approval.

Kerala-based private sector lender Dhanlaxmi Bank is looking to secure an infusion of fresh capital within the next two-three months, a top official of the bank has said. Managing Director and CEO Amitabh Chaturvedi said that the capital infusion would be finalised within the next 2-3 months, though he declined to give any figure on the amount that would be pumped into the company.

L&T Oman, a subsidiary of the domestic engineering and construction giant Larsen & Toubro, has bagged two orders worth Rs 875 cr from the Muscat Municipality and Ministry of Transport and Communication of the Sultanate of Oman. The orders are for the construction of two road projects on the Wadikabir-Darsait Road and Mahlah-Ghubbrat al Tam-Ismaiyah Road. The Wadikabir-Darsait project is scheduled to be completed in 24 months and involves the design and construction of flyovers and underpasses along the road. The Mahlah-Ghubbat al Tam-Ismaiyah project will be completed in 41 months and involves 45 kms of road work, four bridges and cross-drainage work.

Kiri Industries Ltd, which manufactures dyes and dyes intermediates, has acquired SMS Chemical Co Ltd based in Taiwan. However, the financial details were not disclosed by the company.

The Income Tax Department is carrying out search and seizure operations against Raymonds Ltd in Mumbai, Thane, Nagpur, Bangalore, Kolkata and four other cities across the country. No further details are available at this point of time. Meanwhile, in a statement, the company said: “The Income Tax Department has been on Raymond Ltd’s premises this morning. As a responsible corporate, we are cooperating with the authorities in their search. It would be premature to discuss details at this point in time.”