Markets may trade on a volatile note with a negative bias

Overnight, the US stocks tumbled for a second successive session after the Federal Reserve left rates unchanged and declined to signal another round of quantitative easing. Another negative development came in from the estranged Euro zone where German Chancellor Angela Merkel rejected the idea of boosting the ceiling of the European Stability Mechanism, or the permanent rescue fund for the Euro area. The Asian shares have also followed suit in tune with its global peers and have declined in early morning trades, with commodity sector firms under some pressure.

The Indian companies’ ADRs traded in the American markets have closed on a negative note, indicating a weak day ahead for them in the Indian markets. In the IT space, both Wipro and Patni were down by 0.48 per cent and Infosys was up by over 0.14 per cent. In the telecom space, MTNL was down by 0.96 per cent and Tata Communications was down by 0.68 per cent. In the banking space, HDFC Bank was up by 1.31 per cent and ICICI Bank was down by 0.38 per cent. In the other space, Tata Motors was down by 2.6 per cent, Sterlite was down by 1.86 per cent and Dr Reddy’s Laboratories was down by 0.17 per cent

Back home the headline inflation data for the month of November 2011 is expected to be announced today by noon. As a reminder to you, the October inflation stood at 9.73 per cent. We have observed a steady fall over the past month in the weekly inflation numbers with the latest set of data released for the week ended November 26 showing that primary articles and food articles’ inflation had pared down to 6.92 and 6.6 per cent respectively.

Judging by the steep fall seen in the weekly inflation data, we at DSIJ expect headline inflation to come in at around 8.7 per cent for November 2011. This, coupled with the slowdown in the overall economic growth as shown by the latest set of industrial output data contracting to negative 5.1 per cent levels, leads us to believe that the RBI may take a pause in its monetary stance on December 16 and adopt a dovish approach thereon.

In conclusion, we expect the markets to remain volatile today. One can expect some bounce-back during the latter half of the day post the announcement of the inflation data. A data below 9 per cent mark would really work as a positive trigger for the market in the short run. But with the rupee breaching the Rs 53 per dollar mark, the excitement would be short-lived. We advise our readers to stay cautious and apply the ‘wait and watch’ approach as the markets kick the dust ahead of the build-up to the RBI’s monetary policy review.

Stocks In Action

As reported in Business Standard, IOC’s borrowings have risen to over Rs 79,000 crore as it lost a record Rs 227 crore per day on selling diesel, domestic LPG and kerosene at controlled rates. The company is hoping to get about Rs 16,000 crore in compensation from the government by early next month to make up for part of the losses it incurred on selling the three fuels in the first half of the current fiscal.

According to a BSE press release, Larsen & Toubro’s (L&T) construction division has bagged new contracts worth Rs 2,164 crore in the infrastructure segment from GMR Infrastructure. The order is for the construction of stretches consisting of six-laning of the Kishangarh-Udaipur-Ahmedabad highway and would be executed on an EPC basis. This project is a part of Phase-V of the National Highways Development Programme (NHDP) of the National Highways Authority (NHAI) and is for upgrading the existing four-lane section of the Golden Quadrilateral to six lanes.

According to a BSE press release, a consortium led by Madhucon Projects Ltd has received a letter of intent to set up a 300 MW (2x150 MW) mine mouth, coal-fired power plant in the southern region of Sumatra in Indonesia. The power plant will come up close to Dawas, the existing coal mine owned by PT Madhucon Indonesia, a company of the Hyderabad-based Madhucon Projects. A special purpose vehicle shall be formed with Madhucon Projects holding a stake of 65 per cent with the remaining 35 per cent to be held by the Madhucon Group. A power purchase agreement for 25 years will be signed with PLN Energy, an Indonesian government company.

According to Economic Times, upstream regulator DGH has suggested USD 1.235 billion investments of Reliance Industries being disallowed over the firm’s failure to adhere to pre-stated drilling and gas production targets but the oil ministry is yet to agree on the numbers. The Directorate General of Hydrocarbons (DGH) in its recommendation to the oil ministry has suggested USD 457 million of the ‘profit petroleum’ accruing to RIL in 2011-12 and another USD 778 million should be disallowed in 2012-13.

As reported in Business Standard, Raghav Bahl-controlled Network18 Group is inching close to a deal with Ramoji Rao-owned Eenadu TV (ETV). According to the newspaper, the Network18 Group is likely to merge ETV’s bouquet of 11 regional channels and one Telugu news channel with itself through a share swap. In one sweep then the Network18 Group would get a nationwide regional platform to take on rivals STAR and Zee.

According to The Mint, state-run NTPC has inked a pact with Electricity Generation Company of Bangladesh (EGCB) to provide operation and maintenance services (O&M) for a power plant there. The contract is worth about Rs 43 crore. It is also the single-largest overseas order received by NTPC, marking its foray as an overseas O&M operator. NTPC would offer O&M services for the 2x120 MW gas-based Siddhirganj Peaking Power Plant near Dhaka.

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