Market may open negative in line with weak global cues

Morning Update 23th Nov 2011

Opening Bias

The market seems to have slipped back into its selling mode and open negative today in line with weak global cues. The SGX Nifty is trading down by 42 points at 4761 indicating a gap down opening to markets today.

The Asian shares have also declined in early morning trades, as investors, already wary over Europe’s debt woes react to weaker-than-expected U.S. economic growth, while awaiting a key manufacturing survey from China due later in the day.

Back home, as the government struggles to keep its fiscal deficit within the targeted level of 4.6 per cent of GDP in the current financial year, Finance Minister Pranab Mukherjee has cautioned against going overboard to somehow achieve the target as it may hurt the economy.

After previously maintaining that the fiscal deficit target would be comfortably met, yesterday’s statement made by the finance minister has come across as the first real assessment of fiscal deficit situation.

However with growth having already slowed down considerably over the past few months and inflation not wiling to cool-off, the timing of this statement by the finance minster has come very late. If not anything, the cutting down of govt. expenditure will have further impact on a slowing economy.

A main area of focus should be the revenue generation through meeting its disinvestment targets and spurting up its tax collections. However both these seem to currently be in jeopardy as a result of slowdown.

In conclusion, we expect the markets to remain negative for the day as the investors are very jittery to invest in such volatile markets, which fail to provide any concrete direction. We advise our readers to stay cautious.

Stocks in Action

After getting a nod from the Gujarat Govt. to raise Rs 2000-2500 crore through private placement of equity, Gujarat State Petroleum Corp (GSPC) is said to be holding talks with Singapore's sovereign wealth fund, GIC, for the same purpose. Government of Singapore Investment Corporation (GIC) is one of the world's leading sovereign wealth fund, established by the Singapore government. However the details of the deal have not yet been divulged.

Expect some negative movement in the RIL counter as the oil secretary G C Chaturvedi has said that the govt. is likely to initiate action against the oil & gas major to limit the amount of expenditure it is allowed to recoup from the flagging KG-D6 gas fields.

Beleaguered tour operator Thomas Cook has said that it had instigated fresh talks with its banks after a further deterioration in its trading performance and cash position left it in danger of defaulting on the terms of its borrowing.The company was looking to borrow around 100 million pounds to tide it over during December, when trading is traditionally quiet, and give it sufficient headroom to be in no danger of breaching banking covenants.

State-owned Oil and Natural Gas Corp is likely to give its 'no-objection certificate' to Cairn Energy Plc's stake sale in its Indian unit to Vedanta Resources by the year-end. The NOC will be given after Cairn Energy, its Indian arm Cairn India and the mining group signs a legally binding agreement accepting to share royalty and pay cess on the most important Rajasthan oilfields.

Bharti Airtel's two senior officials have sold a total of 1.15 lakh shares of the company worth Rs 4.60 crore through open market transactions. According to a BSE disclosure, Akhil Gupta, Director, Bharti Airtel, has sold 65,500 shares worth over Rs 2.61 crore and Manoj Kohli, CEO (International) and Joint Managing Director of the company sold 50,000 shares of the company worth over Rs 1.99 crore through open market transactions.

In order to help the Govt. meet its disinvestment target of Rs 40000 crore, PSU major Coal India Ltd (CIL) has said that it was open to utilization of up to a fourth of its cash reserves, about Rs 15,000 crore, if asked by the government, its main shareholder.The government is considering various options, apart from the public offer route, to achieve the disinvestment target for the fiscal by way of share buy-back, private placement of shares or asking cash-rich PSUs to buy equity in their peers.

The government today allowed one million tonnes of sugar export and removed curbs on traders to hold stocks of the sweetener-- a decision the industry said would help improve their cash flow and enable them to make timely payment to cane growers. An Empowered Group of Ministers on Food, approved exports as the country's sugar production is expected to exceed the domestic demand by 3-4 million tonnes in the 2011-12 marketing year.

After Jet airways, auditors of debt-ridden Kingfisher Airlines have yet again maintained caution that the company will have to infuse more funds if its wants to stay afloat, even as the carrier hoped that government would reduce ATF prices and taxes which will help it improve its finances.

Heavy vehicles major Ashok Leyland and its US partner, John Deere, announced their entry into the construction equipment industry with its first product, earth mover 435 Backhoe Loader at Rs 23.5 lakh. The equal partnership joint venture has roped in companies like TVS Logistics for the distribution of Leyland Deere in the southern states. Ashok Leyland will supply the engines.

Pipavav Defense and Offshore Engineering Company, which owns the shipyard, said that the company's board has decided to issue 81.88 crore equity shares representing 10 per cent of the paid-up capital of the company to an international strategic investor on a preferential basis at a price not less than Rs 110 per share. The preferential issue price is nearly double the current market price of Rs 58.15 per share. The company has not disclosed the name of the investor but has gone on to say that the investor is a leading and extremely reputed global conglomerate with strong interest in the defense sector

Corporate Action