Markets may remain range bound

Morning Update 14thNov 2011

Opening Bias

The markets may witness a positive opening in line with strong global cues. The SGX Nifty is trading up by 59 points at 5258.5 indicating a gap up opening to markets today.

Asian markets are also seen trading on a strong note in early morning trades as Italy announced a change in leadership with a passage of an austerity budget. Asian markets are also buoyed by reports that the Japanese economy rebounded sharply in the last quarter, helped by the reconstruction efforts after March’s devastating earthquake and tsunami. Japan’s GDP rose an annualized 6.0 per cent in the July to September period as against a contraction of 2.1 per cent in the April-June period, in the wake of a massive earthquake and tsunami that struck the country on March 11.

The Indian companies ADR’s traded in the American markets haveclosed on a positive noteindicating a great day ahead for them in Indian markets. In the IT space, Wipro was up 3.08 per cent, Patni and Infosys were up over 2 per cent. In the Telecom space, MTNL was up 3.51 per cent and Tata Communication was up 1.15 per cent. In the banking space, HDFC Bank was up 3.02 per cent and ICICI Bank was up 0.33 per cent. In the other space, Tata Motors was up 1.15 per cent, Sterlite and Dr Reddy’s Laboratories were up nearly 2 per cent each.

Back home, investors will closely watch data on inflation based on the wholesale price index (WPI) for the month of October 2011 due today. WPI inflation stood at 9.72 per cent in September 2011.

Judging by the recent set of inflation internals reported over the past few weeks (following Diwali), one can expect the October inflation to come in at a high and stubborn note, which will raise further doubts over the RBI’s proposed stance on policy reviews.

In conclusion, we expect the markets to remain range bound as investors shun risky assets as political events unfold in Europe, especially in debt-burdened Greece and Italy. Redemption pressure for foreign funds in developed markets will result in forced selling of Indian stocks by foreign institutional investors. Admittedly, investors are jittery and prone to hit the sell button at the slightest sign of trouble.
 
Stocks in Action

LIC Housing Finance reported a sharp decline of 58 per cent in its net profit at Rs 98 crore for the second quarter ended September 30, 2011 as against Rs 234 crore in the corresponding period last year. The fall in the net profit is, however, notional as the company had to make a provision of Rs 205 crore during the quarter, pursuant to the National Housing Bank's recent directive related to provisions on standard assets. This is in addition to the regular provision of Rs 519 crore for non-performing assets.The company's total income grew 37 per cent to Rs 1,515 crore for the quarter under review from Rs 1,107 crore.

Drug maker Sun Pharmaceutical Industries has reported a 19 per cent growth in net profit to Rs 598 crore for the quarter ended September 30 as against Rs 503.65 crore in the previous year, on account of robust performance across its businesses. The company's total income rose to Rs 1,894.60 crore during the July-September quarter of the current fiscal from Rs 1,331.42 crore in the year-ago period, registering a gain of 42 per cent.

State-run Coal India, the world's largest coal miner, posted a lower-than-expected quarterly net profit of Rs 2,593 crore as a price increase in February failed to boost profitability despite higher-than-expected sales.Coal India, which produces nearly 80 per cent of the coal in India, has been unable to meet growing power demand in Asia's third-largest economy from power and steel projects.The company has said it may miss production targets this year because of delays in environmental clearances at some of its mines.

Anil Ambani-led Reliance Communications posted a 43.49 per cent dip in net profit at Rs 252 crore for the second quarter ended September, 2011 as against Rs 446 crore reported in the previous year. This is the ninth straight quarter that the debt-laden telco has reported lower profits.Net sales for the quarter have reduced to Rs 4,689 crore, down 5.71 per cent from Rs 4,973 crore in the same quarter a year ago.

Drug firm Elder Pharmaceuticals plans to launch eight new products in the country in various therapeutic areas, including gynecology and pain management, in the remaining half of the current fiscal. The company has already launched seven new products in the current financial year, including three in the just-concluded second quarter. A total of 15 products are targeted [to be launched] this fiscal.

Drug firm Wockhardt reported a consolidated net profit of Rs 127.58 crore for the second quarter ended September 30, 2011 as against a net loss of Rs 96.68 crore for the quarter ended September 30, 2010, on improved sales in all markets led by the US.

Textiles’ major Alok Industries has started talks with major corporate groups and high net worth individuals (HNIs) to sell its property at Peninsula Business Park in central Mumbai, after a hiatus in talks with global real estate funds. According to sources, Alok is looking for a deal in the range of Rs 900-1,000 crore. Sources also added that the land bank sale is part of the company’s plan to retire its debt component which currently stands at Rs 9933 crore as on Sept 2011.

Kingfisher’s pain seems to be Jet Airways’ gain as the air-carrier plans to increase the number of its full-service flights to attract passengers affected by Kingfisher cancellations. Currently, about 60 per cent of Jet’s domestic flights operate under the Jet-Konnect brand, a no-frills service. The airline now plans to increase the share of full-service fights to 50 per cent. An increase in the number of full-service flights will help improve its yields and also make competition tougher for Kingfisher.

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