Markets may open in the red

Overnight the US stocks swung to a slightly higher close, boosted by a bounce in investor sentiments due to some late breaking reports on Yahoo Inc. and Bank of America Corporation. The Nasdaq Composite, however, ended the day lower, weighed by unease over Oracle Corporation’s earnings that hit the IT and ITES sector. The gains for the other benchmarks were also limited by worries about the consequences of the European Central Bank’s recent lending programme. The Asia markets also fell in early trade amidst massive central bank lending in Europe and a soft lead from Wall Street.

The Indian companies’ ADRs traded in the American markets have closed on a mixed note, indicating a choppy day ahead for them in the Indian markets. In the IT space, Wipro was down by 0.5 per cent, Infosys was down by 4.12 per cent and Patni was up by 0.55 per cent. In the telecom space, MTNL remained unchanged but Tata Communications was down by 0.25 per cent. In the banking space, HDFC Bank was up by 1.17 per cent and ICICI Bank was up by 2.69 per cent as a continuation of their respective performance on the Indian bourses. In the other space, Tata Motors was down by 0.24 per cent, Sterlite was up by 2.34 per cent and Dr Reddy’s Laboratories was up by 0.68 per cent.

However, the global rating agency also said that the recently seen episode of policy paralysis coupled with global uncertainty is expected to pull down India’s GDP growth rate below 7 per cent in the current fiscal from 8.5 per cent a year ago. It also added that while a growth rate between 6 and 7 per cent this year would be lower than India’s 8.5 per cent average over the last five years, it would still be higher than the median for BAA3-rated countries. It finally concluded that the cyclical dip could reverse some time in 2012-13 as inflation cools from the current 9 per cent levels, allowing for a gradual reversal of 2011’s tight monetary policy stance.

In conclusion, we expect the markets to remain volatile with a negative bias as investors, traders and institutions start preparing and building up final strategies and positions as the expiry date nears. We advise our readers to stay cautious.

Stocks In Action

According to a press statement filed with the BSE, Manali Petrochemicals has entered into an agreement to set up a storage and handling facility at Ennore Port, Chennai for bulk import of Propylene Oxide, a major input for the derivative plants of the company. The facility is expected to be ready in about a year and will help the company to achieve and sustain capacity utilisation of the derivative plants at optimum levels.

According to Business Standard, engineering giant Larsen & Toubro (L&T) has expressed interest in setting up a super-critical thermal power plant in West Bengal. A team of L&T officials who met Chief Minister Mamata Banerjee and Power Minister Manish Gupta to discuss the possibility of putting up a power plant in the state have expressed their interest to set up 2x800 MW super-critical power plants. The officials said the plant would be constructed, erected and run by L&T, adding that the investment would be of about Rs 11,000 crore. The company would sign a power purchase agreement (PPA) in line with West Bengal’s buying rate of power.

According to Reuters, state-owned Oil and Natural Gas Corporation (ONGC) plans to buy 10 per cent stake of Cairn India in a gas discovery block that sits next to RIL’s prolific KG-D6 area in the Bay of Bengal. ONGC, which owns the balance 90 per cent stake and is the block’s operator, will pay about USD 47 million for Cairn’s stake, estimated on a cost basis.

According to Economic Times, Bhushan Steel has deferred its plans to build a new plant and raise USD 1 billion through a share issue because of problems acquiring land in West Bengal and the weak financial markets. But the company expects to maintain a 25 per cent margin and increase sales this year as the costs for inputs such as coking coal and iron ore ease. Bhushan Steel, which has the capacity to produce 2.2 million tonnes of hot-rolled steel per year, has not cut production and has no plans to do so. The company expects to increase sales by 25-30 per cent this fiscal year ending March. This development had no negative impact on the shares as they ended higher by around 2 per cent today.

According to The Hindu Business Line, a special court hearing the 2G spectrum case asked eight accused, including Essar Group’s Ravikant Ruia and Anshuman Ruia, to appear before it on January 27. This followed the court taking cognisance of the charge-sheet that the CBI had filed on December 12 on the alleged Essar-Loop transactions relating to the 2G spectrum. The eight accused who have been issued summons by the court include three companies viz. Loop Telecom, Loop Mobile India and Essar Teleholdings and five individuals, including the two Ruias, Vikash Saraf, Director (Strategy and Planning), Essar Group as well as Loop Telecom’s promoters Kiran Khaitan (reportedly related to the Ruias) and her husband I P Khaitan. The CBI had levelled charges of cheating and criminal conspiracy against all. Expect some negative action in the Essar pack today.

In a filing with the BSE, Amrit Banaspati Company, makers of the Gagan brand of vanaspati oil, plans to sell off its edible oil business to Bunge India for a total consideration of Rs 220.72 crore. Besides, Bunge India will also pay a non-compete fee of Rs 47 crore to Amrit Banaspati Co. Apart from the manufacturing plant, the acquisition also includes rights to Amrit Banaspati’s brands and trademarks, including the Gagan brand along with the sales and distribution business. The deal values the Gagan brand at Rs 104.5 crore. The scrips of Amrit Banaspati closed at Rs 245 per share, up by 6.52 per cent from its previous close on the BSE.

According to a press statement filed with the BSE, Mahindra Holidays & Resorts today has acquired a 106-room property in Goa for an undisclosed sum as part of its expansion at popular holiday destinations in India. With the new property, Club Mahindra now has over 330 rooms in entire Goa, which has become a very popular holiday destination and the latest acquired property will now operate as Mahindra Emerald Palms. The company is a leading player in leisure hospitality and offers vacation ownership membership. It claims over 1,35,000 member families and operates more than 34 resorts across India and Thailand. Expect some positive movement today.

According to Economic Times, India’s top IT firms plan to reduce up to 5 per cent of the work performed onsite by their staff travelling on temporary visas in the US over the next year as they battle increasing immigration scrutiny and push harder to increase profitability by shipping more work offshore. By shipping more work to offshore development centres in India, companies such as TCS, Infosys and Wipro aim to protect, and in some instances even improve, profit margins at a time when customers are negotiating hard. Currently, Indian tech firms execute anywhere between 25-30 per cent of projects onsite and deliver the remaining work from cheaper development centres in India. Onsite projects are billed at 3-4 times or higher than projects delivered out of India. But onsite costs too are high because of higher local wages in the US, making them less profitable than offshore projects. Expect some negative action.