Markets brace for another volatile day

Overnight, the US stocks fell for a third session in a row as investors fretted over the toll of Europe’s debt struggles on the global economy front and also due to a massive sell-off in gold, crude, metals and the Euro. Gold futures skidded nearly 5 per cent yesterday, sinking below the USD 1,600 level for the first time in nearly three months, as a drop in the Euro signalled a new level of anxiety about the region’s debt crisis and investors sought cash as the safest asset. Crude oil futures (NYMEX) also retreated by 5.2 per cent to settle at USD 94.95 per barrel.

The Asian shares are also seen trading in the red zone in the early market hours, with manufacturers and commodity-linked firms weak, ahead of the closely watched Chinese manufacturing data due for release later in the day

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, Wipro was down by 3.47 per cent, Patni was down by 1.74 per cent and Infosys was down by over 3.54 per cent. In the telecom space, MTNL was down by 4.35 per cent and Tata Communications was up by 1.52 per cent. In the banking space, HDFC Bank was down by 3.1 per cent and ICICI Bank was down by 2.59 per cent. In the other space, Tata Motors was down by 2.26 per cent, Sterlite was down by 2.3 per cent and Dr Reddy’s Laboratories was down by 1.47 per cent.

Back home, the November inflation data announced yesterday has came in at 9.11 per cent as against 9.73 per cent in October 2011 and 8.2 per cent in November 2010, much higher than what we had expected. In fact the markets too had expected the inflation to come below the 9 per cent mark. While the primary articles’ inflation retreated on a monthly basis, fuel, power and manufactured products’ inflation increased over the last month’s figures.

Though it’s positive to see the headline inflation showing signs of a cool-off, it still continues to hover stubbornly at the 9 per cent level which is above the RBI’s comfort zone. However, as for now, judging by the slowdown in economic growth and easing of inflation, we expect the RBI to take a pause in its monetary stance tomorrow.

In conclusion, we expect the markets to remain volatile today. With the rupee weakening further and treading close to the Rs 54 mark, our economy faces severe risks going forward. We advise our readers to stay cautious and apply the ‘wait and watch’ approach as the markets turn volatile ahead of the build-up to the RBI’s monetary policy review.

Stocks In Action

According to Business Standard, the Telecom Regulatory Authority of India (TRAI) is in the process of taking legal action against Bharti Airtel for violating the mobile number portability (MNP) guidelines. TRAI had earlier issued a show-cause notice to private telecom operator Bharti Airtel for violation of the MNP norms and investigated the rejection of MNP requests by various service providers, including Bharti Airtel, by sending a team of its officers. We expect some negative action in the counter today.

According to the Hindustan Times, the government is working on a new civil aviation policy and an economic regulatory mechanism for the pricing of air tickets as the industry has been passing through a turbulent phase despite growth in passenger traffic. This is because the airlines have been attributing their losses to the pricing of the air tickets below their cost price. However, the chances of regulation in airfare prices and fixed tariff are very less. Also, the ministry is planning to propose a set of recommendations to ease taxes on aviation turbine fuel. Expect some positive movement in the airline stocks today which otherwise have been facing heavy sell-off in recent times.

According to our sources, after two consecutive rounds of roll-back the OMCs might consider a petrol price hike of Rs 0.65 per litre by the end of this week. With the rupee weakening further to cross the Rs 53 level over the past fortnight and an increase in international crude oil prices, it was but obvious that the prices would have to be hiked to compensate for the losses. Expect positive movement in the OMCs today.

According to Economic Times, infrastructure company C&C Constructions is looking to raise about Rs 400-500 crore through a sale of 30 per cent stake in one of its subsidiaries, C&C Projects, to private equity investors. C&C Projects, a 100 per cent owned subsidiary of C&C Constructions, is engaged in road and highway sector projects and has also expanded into power transmission, rail freight corridor and urban infrastructure projects in recent years. The company is said to be sitting on an order book of Rs 5,400 crore, which is 4.21x its FY11 revenues of Rs 1,280 crore, providing revenue visibility of 3.5-4 years.

According to Business Standard, state-owned Indian Oil Corporation (IOC) is in talks with L&T-Tata Steel-owned Dhamra Port Co Ltd for setting up 5 million tonnes a year LNG terminal in Orissa. The LNG import and re-gasification facility at Dhamra port will be besides the Rs 4,320 crore terminals IOC is planning to set up at Ennore in Tamil Nadu. Situated between Haldia and Paradip, the port at Dhamra will be one of the deepest ports of India with a depth of 18 meters which can accommodate super cape-size vessels up to 1,80,000 DWT. Dhamra Port Co Ltd, a 50:50 joint venture of L&T and Tata Steel, has been awarded a concession by the Government of Orissa to build and operate the port. With domestic production lagging as a result of problems faced in the prolific KG basin, this is tipped as a good move to meet the growing demand in our country.

According to a press release filed with the BSE, Electrotherm (India) will sell its ductile iron pipe business and 100 per cent stake in a subsidiary company to French major Saint Gobain for a price consideration of Rs 950 crore plus the value of working capital on closing. This transaction will help Electrotherm to focus more on its core business of engineering and steel and further enable it to reduce its debt.

According to a report in Financial Times, two UBS bankers created Pleuri Emerging Companies, an obscure foreign portfolio investor, in Mauritius to allow Anil Ambani to illegally invest in Indian stocks. This evidence was presented by the Financial Service Authority (FSA), the UK market and financial services regulators before a London tribunal. Under the Indian law, Indian nationals cannot invest in stocks through overseas’ subsidiaries. However, FSA has maintained that Ambani has not been accused of any wrongdoing. The FSA alleges that in addition to trying to establish the offshore structure for Ambani, S Karpe made unauthorised trades on other clients’ accounts. To hide losses, Karpe allegedly arranged loans from other clients, falsely promising them that the loans would be guaranteed by UBS at an above-market rate. Media reports also say that ADAG has denied these allegations.

As reported in Wall Street Journal, tax authorities have lifted a freeze on Kingfisher Airlines’ 11 bank accounts after the carrier paid part of its service tax arrears. Kingfisher paid Rs 9 crore (USD 1.71 million) yesterday toward its service tax dues, and has agreed to clear its arrears in installments by March 31. The move comes as a much-needed relief to billionaire Vijay Mallya’s loss-making Kingfisher Airlines, which recently cancelled dozens of flights and stopped low-fare flights to drastically cut costs. India’s carriers have been hit severely by expensive jet fuel, high interest costs on debt and mounting losses in a slowing economy