Markets to remain volatile with negative bias

Morning Update 24thNov 2011

Opening Bias

The markets may open negative in line with weak global cues. The SGX Nifty is trading down by 48 points at 4656 indicating a gap down opening to markets today.

The Indian companies ADR’s traded in the American markets have closed on a negative note indicating yet another weak day ahead for them in Indian markets. In the IT space, Wipro was down 2.88 per cent, Infosys was down over 2.69 per cent and Patni was down by 1.67 per cent. In the Telecom space, MTNL was down 3.96 per cent and Tata Communication was down 3.71 per cent. In the banking space, HDFC Bank was down 3.82 per cent and ICICI Bank was down 3.31 per cent. In the other space, Tata Motors was down 2.57 per cent, Sterlite was down 3.55 per cent and Dr Reddy’s Laboratories was down 1.12 per cent.

India currently allows 51 per cent foreign investment in single-brand retailers and 100 per cent for wholesale operations, a policy that the world's top retailer Wal-Mart and Carrefour among others have lobbied to change for years.

We believe that in the backdrop of a slowing economy and the government struggling to shake off an image of policy paralysis, momentum to open up the multi-brand sector appears to have picked up.

When compared to the inflation internals of week ended Oct 29th 2011, all the major indicators expect fuel inflation witnessed a cool-off in price rates. The markets expect an easing out of inflation this week, providing the RBI some head room to take a pause in its December monetary policy review. 

In conclusion, we expect the markets to remain largely volatile with a negative bias as today is the expiry day for the November contract of the F&O segment. We advise our readers to stay cautious.

Stocks in Action

Putting an end to speculations, Tata Sons have announced the successor to Ratan Tata, naming Shapoorji Pallonji Group Managing Director Cyrus P Mistry as the head of over USD 80 billion conglomerate Tata Group. Commenting on the appointment, Ratan Tata, Chairman of Tata Sons, said "The appointment of Cyrus P Mistry as Deputy Chairman of Tata Sons is a good and far-sighted choice.He has been on the Board of Tata Sons since August 2006 and I have been impressed with the quality and calibre of his participation, his astute observations and his humility."

Founder and chairman of the only listed microfinance institution SKS Microfinance Vikram Akula has resigned from the board with immediate effect in the wake of huge losses suffered by the Hyderabad-based firm. The company had reported a net loss of Rs 384 crore is the Sept 2011 quarter as against a profit of Rs 84 crore reported last year during the same period. Ever since the departure of CEO Suresh Gurmani in October last year, who was at the helm of the micro finance lender at the time of its dazzling IPO, the company has found itself in all sorts of trouble.

ICICI Bank is open to buying loan portfolios of European banks according to its chief executive, Chanda Kochhar, as banks in the euro region look to deleverage and offload loans to shore up capital base. European banks are struggling to raise their capital cushions to become more resilient against future shocks, which they can do by increasing equity they hold or by shrinking their asset base. She also added that ICICI Bank expects net interest margins to rise by 20 basis points in the financial year starting April.

Bajaj Hindusthan, the country's largest sugar company, has reported a 48 per cent decline in its consolidated net profit at Rs 21.45 crore during 2010-11 fiscal as against a net profit of Rs 41.19 crore in the previous fiscal, mainly due to higher interest outgo. The company paid Rs 550.72 crore as interest in 2010-11 fiscal against Rs 368.12 crore in the previous year.

Idea Cellular, India's fourth-biggest mobile phone carrier by subscribers has launched two low-cost smartphone models as it strives to boost usage of third-generation (3G) wireless data services in a price-sensitive market. Idea, part of Aditya Birla conglomerate, will sell the smartphones at Rs 5,850 and Rs 7,992, respectively. Idea will also bundle free data services as an introductory offer.

In a bid to shore up the revenue receipts and stay within the fiscal deficit target for the year, the Finance Ministry has asked cash-rich oil PSUs like Oil and Natural Gas Corp (ONGC) to consider special dividend over and above the 30 per cent interim dividend they anyway have to pay. As per norms, all profit-making state-owned firms are required to declare a minimum 20 per cent dividend on equity or a minimum dividend payout of 20 per cent of post-tax profits, whichever is higher. The Finance Ministry has written to the Oil Ministry saying the minimum dividend payout for PSUs in oil and gas, chemical and other infrastructure sectors would be 30 per cent this year.

Polaris Software has announced that it has acquired the balance 49 per cent shares in IndigoTx Software Private Limited, a Service player with niche products to cater brokerages. The company, in March 2010, acquired 51 per cent of equity shares of Chennai-based IndigoTx Software. However, it did not announce the terms of transaction.

Corporate Action