Markets may witness a positive opening

Overnight the US stocks surged as sentiment about the global economy got a boost from a jump in the nation’s housing statistics, improving German business data and a better Spanish bond auction. The Asian markets have also followed suit in the early morning trades with the tech and other export-oriented stocks among the top gainers today.

The Indian companies’ ADRs traded in the American markets have closed on a positive note, indicating a good day ahead for them in the Indian markets. In the IT space, Wipro was up by 1.95 per cent, Infosys was up by 4.19 per cent and Patni was up by 1.6 per cent. In the telecom space, MTNL was down by 2.3 per cent but Tata Communications was up by 4.4 per cent. In the banking space, HDFC Bank was up by 3.85 per cent and ICICI Bank was up by 3.32 per cent. In the other space, Tata Motors was up by 2.78 per cent, Sterlite was up by 1.94 per cent and Dr Reddy’s Laboratories was up by 0.34 per cent.

Back home, the cabinet yesterday cleared the draft Lokpal Bill that would bring the prime minister under the ambit of the Lokpal. However, it has been decided to segregate certain areas which include foreign affairs, national security, atomic energy, space, etc which the Lokpal will not be able to investigate.

Moreover, in a move to take on the civil society and opposition head on, the cabinet decided to exclude the Central Bureau of Investigation (CBI) from the corruption ombudsman’s purview and keep it under the government’s control. This move was received with strong reaction from the Anna Hazare-led civil society, whose supporters have decided to continue with their agitation and hold a nationwide fast and protest against the bill. As for the opposition parties, their stand on the current issue is not very clear. While some opposition leaders have come out in support of the protest against the exclusion of the CBI from the Lokpal, a large number of prominent opposition leaders have merely dodged the issue.

As for its impact on the markets, we expect it to be met with a lot of mixed reactions. On one hand it’s commendable that such a bill is a very positive step and probably the only step taken by any government to tackle corruption upfront. But the exclusion of the CBI from the ambit of the Lokpal does seem to dampen the overall mood as concerns are raised over the logic behind not including the nation’s prime investigating agency to aid in fighting the war against corruption. We also believe that in light of the proposed agitation to be held by the civil society shortly, foreign investors may see this as another episode of policy paralysis for the government and may choose to stay away from the Indian markets.   

In conclusion, we expect the markets to remain volatile but with a positive bias as investors, traders and institutions wait and watch the last two days of the winter parliament session. We therefore advise our readers to stay cautious.

Stocks In Action

According to Economic Times, RIL has sought the oil ministry’s help to get approvals for the development of additional gas fields and price approval for sale of gas produced from coal seams (CBM). RIL late last month had written to the ministry and its technical arm, DGH, withholding approvals for satellite and the R-Series’ fields in the KG-D6 block that would help offset the decline in the output of the flagging main fields. RIL’s USD 1.529 billion plan for bringing four satellite fields around the flagging D1 and D3 gas fields to production has been awaiting approval since 2009 and now the ministry and the DGH want the costs to be reworked in view of the changed prices. If the approvals don't come, the company would lose the four-month weather window and would then be forced to wait for a full year to begin work. This will also worsen the supply scenario of gas in the country further.

According to Business Standard, the government has decided to take punitive action against debt-ridden Kingfisher Airlines for not depositing Rs 153 crore, which the company deducted as TDS from its employees, with the exchequer. The liabilities with regard to TDS default, as quantified from preliminary examination, was Rs 53.82 crore for 2010-11 and Rs 100 crore for the current fiscal. However the government has maintained that the airline has not defaulted on payment of dues towards provident fund of the employees and there are no cases pending against them in this regard. The airline has been facing financial problems on account of huge debts and is struggling to stay afloat. Recently it cancelled several flights and suspended operations of its budget carrier Kingfisher Red. One may expect some further negative movement in the counter today.

According to Reuters, GTL’s group companies, including GTL Ltd and GTL Infrastructure, have received final approval from lenders for restructuring loans worth Rs 16,000 crore. Last year, GTL Infrastructure struck a deal to take over the telecom tower business of Reliance Communications, which would have created a company with an enterprise value of USD 11 billion. The deal collapsed when the companies failed to agree on terms. The new development has sent the stocks of GTL and GTL Infra soaring up by 8 per cent and 20 per cent respectively. Expect some further positive action on this front.

According to a press release filed with the BSE, Infosys BPO, the business processing unit of IT major Infosys, has announced the signing of a definitive agreement to acquire the Australia-based Portland Group for AUD 37 million (Rs 194.17 crore). Portland Group is a provider of strategic sourcing and category management services. The all-cash deal is expected to be completed by early January 2012, subject to certain closing conditions being met. Portland Group’s expertise in strategic sourcing and category management services will complement the global sourcing and procurement platform at Infosys BPO. It will have a positive impact on their clients’ business efficiency and effectiveness.

According to a press release filed with the BSE, L&T Construction has bagged new orders worth Rs 1,000 crore across various segments in the third quarter of 2011-12. The company secured an order worth Rs 200 crore from infrastructure firm GMR for the construction of an air traffic control tower and associated works at Delhi’s international airport in its buildings and factories segment. In its power transmission and distribution segment, the firm was awarded an order of Rs 334 crore from various clients for the construction of transmission lines and sub-stations in the country. During the quarter, L&T Construction also bagged an order worth Rs 185 crore for the construction of a sub-station and associated overhead transmission line works in Kuwait. The company also bagged orders valued at Rs 282 crore from the Greater Mohali Area Development Authority for the construction of utility facilities like water supply network, waste water collection network, storm water network, road works, electrical works and other development works in Aerocity, Mohali. The shares of L&T today crashed by 5 per cent to fall below the 1,000 mark.

According to an announcement on the BSE, the board of SREI Infrastructure Finance has decided to raise up to Rs 500 crore through a public issue of infrastructure bonds. The company did not provide any figure on the rate of interest of the bond as it was not yet finalised and an application has not been filed with the market regulator. However, our market sources believe that the rate of interest would range between 8-9 per cent. Also the company plans to tap the 30,000-plus client base of the group and its distribution network along with the normal capital market distribution channels for the issue.

According to a press release filed with the BSE, Ashok Leyland and its associate companies will increase their stake in the British bus maker Optare Plc to 75.1 per cent. The Hinduja Group company had acquired a 26 per cent stake in Optare in July 2010. The proposed hike follows a refinancing agreement which is subject to Optare shareholders’ approval and will enable synergy with Ashok Leyland’s global plans for buses. The re-financing has been achieved by Ashok Leyland facilitating a credit line to support Optare’s re-banking options and providing a substantially improved working capital facility for the business.