Markets may witness a negative opening

The markets may witness a negative opening in line with weak global cues. The SGX Nifty is trading down by 20 points at 5130 indicating a gap down opening to markets today.

Overnight U.S. stocks retreated after a two-session surge after Italy’s borrowing costs rose at an Italian government bond auction and economic data in Europe pointed to a potential recession in the euro zone. The Asian markets have also opened in the red zone tracking the weak global cues as export stocks weaken over euro debt concerns and energy shares fall back tracking a lower Nymex crude oil future.

The Indian companies ADR’s traded in the American markets have closed on a negative note indicating a sluggish day ahead for them in Indian markets. In the IT space, Wipro was down 0.2%, Infosys was down over 3% but Patni was up by 0.96%. In the Telecom space, MTNL was down 3.39% and Tata Communication was down 2.39%. In the banking space, HDFC Bank was down 1.17% and ICICI Bank was down 3.3%. In the other space, Tata Motors was down 4.05% on the back of weak set of results, Sterlite was down 3.5% and Dr Reddy’s Laboratories was down 0.37%.

Back home, successive RBI rate hikes notwithstanding, inflation yet again showed no signs of retracting and remained at an over nine% level for the 11th month in a row in October. The rate of price rise rose marginally to 9.73% from 9.72% in September, credited to the mounting inflation in food articles especially tomatoes (among vegetables) and pulses coupled with high demand in the festival season.

Going forward, inflation is expected to tame down a bit from November onwards. What remains to be seen is the quantum of ease-out in inflation which will determine the RBI’s proposed monetary policy stance that is expected in December 2011. The RBI has hiked interest rates 13 times since March 2010 to tame inflation, and had recently guided that it may take a pause in its stance in the Q3 review, if inflation is well within its projections.

One may also take some positive cues from RBI Deputy Governor Subir Gokran views on RBI’s projections and expectation from the economy. According to him, the decline in industrial output in September and the marginal rise in inflation in October would not affect the Reserve Bank of India’s (RBI) projections for the year. The RBI deputy governor said the inflation trajectory was in line with expectations and that the October policy guidance by RBI still held. He said the stance the central bank had factored in deceleration witnessed in September industrial output.

In conclusion, we expect the markets to remain negative 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

Riding on better realization and higher output, government owned Oil India Ltd (OIL) has reported 24.3% rise in net profit in the second quarter amounting to Rs 1,138.52 cr as compared to Rs 916.03 cr in the same period a year ago. Net sales rose nearly 38% to Rs 3,270 cr.The company realized $86.27 per barrel for the quarter after giving discounts, up 36.57% from same period last year.

GoI is considering a 10% stake sale in state-run explorer OIL India, likely in the next fiscal that begins in April, a company source said. The source also added that this stake sale would take place once ONGC's FPO is completed. The government owns 78.4% stake in OIL India.

Tata Motors on Monday said its profit for the second quarter of the current fiscal fell 16% at Rs 1,877, compared to Rs 2,233 cr in the year ago period. Lagging market estimates hit by higher costs and foreign exchange losses have been cited for the main reasons for the dismal quarterly results. Tata Motors, part of India's salt-to-software Tata conglomerate, whose range includes the ultra-cheap Nano and British luxury brands Jaguar and Land Rover, posted a rise of 26% in revenues at Rs 35,940 cr. The automaker incurred a foreign exchange loss of Rs 440 cr in the period compared with a gain of Rs 65,370 cr a year ago.

JSW Steel has reported Rs 669.32 cr consolidated net loss for the second quarter ended September 30 after taking a whopping Rs 662 cr hit due to foreign exchange fluctuation, coupled with the poor performance of associate firm JSW Ispat.JSW Steel's net sales jumped by 38% to Rs 8,134 cr during the July-September quarter from Rs 5,908 cr in the year-ago period.Net finance charges of the company was also higher, at Rs 307.62 cr, compared to Rs 261.40 cr in the corresponding quarter a year ago.The company's net total debt gearing stood at 0.99 and the weighted average interest cost of debt was 6.57%.

Maruti Suzuki, India's top carmaker has raised prices of its diesel models by Rs 2,000 to Rs 10,000, a spokesman said on Monday. For its Ritz hatchback, prices were raised by Rs 2,000, while for other models, prices were raised by Rs 10,000, the spokesman added. Rising costs of many raw materials have dented carmakers' margins in India, forcing them to raise prices further hurting demand already hit by high interest rates and fuel prices that are deterring potential customers.

After prolific oil discoveries in India, Cairn India has made a second natural gas discovery in the offshore Mannar Basin of Sri Lanka.This is the second well in a three-well frontier basin program. Cairn Lanka is the operator and has a 100% participating interest in the block.The company had on October 2 announced a gas discovery in the very first well it drilled in the block.It said the reservoirs are predominantly gas bearing, with some additional liquid hydrocarbon potential.

Petronet LNG, the country’s biggest LNG importer, has entered into a contract to buy 600,000 tonnes of liquefied natural gas (LNG) from Paris-based GDF Suez next year to help meet growing energy demand. GDF Suez holds a 10% stake in Petronet LNG, which operates a 10million tonnes a year LNG regasification terminal at Dahej in Gujarat.

The board of Mahindra & Mahindra, India’s biggest sports utility vehicle maker approved the consolidation of its shareholding in Swaraj Automotives (SAL) through a voluntary open offer. The company would be making an open offer for acquiring up to 6,47,382 fully paid-up equity shares of Rs 10 each, constituting 27% of the total voting equity share capital of SAL at an offer price of `90 per equity share, for a total price consideration not exceeding Rs 5,82,64,380 in accordance with the Takeover Code.