Markets may open positive in line with strong global cues

Opening Bias

The markets may open positive in line with the strong global cues. The SGX Nifty is trading up by 27 points at 4,780, indicating a gap up opening to the markets today.

Overnight, the US stocks climbed up with the S&P 500 extending gains after the weekly jobless claims fell to a multi-year low and consumer sentiment rose in Dec 2011. In other developments, the economy in the US grew less than previously estimated in the third quarter, reflecting a smaller gain in consumer spending that is giving way to a pick-up in demand this quarter as the job market improves. As per the revised figures released by the Commerce Department in Washington, the gross domestic product climbed at an annual rate of 1.8% from July through Sept, down from the 2% estimated last month. The Asian markets have also shown signs of a rebound in early trades, taking cues from an upbeat session for the US stocks as an improving economic picture encouraged the investors.

The Indian companies’ ADRs traded in the American markets have closed largely on a positive note, indicating a relatively good day ahead for them in the Indian markets. In the IT space, Wipro was up by 1.62%, Infosys was up by 3.49% and Patni was up by 1.39%. In the telecom space, MTNL remained unchanged but Tata Communications was down by 1.12%. In the banking space, HDFC Bank was up by 0.93% and ICICI Bank was up by 4.51% as a continuation of their respective performance on the Indian bourses. In the other space, Tata Motors was up by 5.37 per cent, Sterlite was up by 1.43% and Dr Reddy’s Laboratories was down by 0.3%.

Back home, yesterday the government announced the inflation internal for the week ended December 10. According to initial data, food inflation fell sharply by 1.81 per cent for the week ended December 10 as against 4.35 per cent in the previous week on the back of a decline in the prices of essential items like vegetables, onion, potato and wheat. If compared to last year’s corresponding period, the same stood at 13.22 per cent then. The sharp fall in food inflation internals, which was in double digits till the first week of November, comes as a big relief to both the government and the Reserve Bank of India who have been battling high prices for quite some time now. In others, inflation in the overall primary articles’ category stood at 3.78 per cent during the week ended December 10 as against 5.48 per cent in the previous week. Fuel and power inflation for the week ended December 10 remained unchanged as compared to the previous week.

In other developments, the government plans to borrow as much as Rs 50,000 crore using land and shares as collateral to bridge a budget deficit, according to sources. The government is said to be mulling over the idea to set up a fund manager that will pledge stocks it holds in non-state companies including ITC Ltd, Axis Bank Ltd and Larsen & Toubro Ltd. The company will then use the proceeds to buy the government’s stakes in state-run firms. Its is believed that Finance Minister Pranab Mukherjee is exploring options to bridge a widening budget deficit after raising just 3% of the Rs 40,000 cr disinvestment target. The decision is expected to help the government utilise assets and narrow the gap that has fanned inflation and driven the rupee to a record low. The new holding company will pledge the stakes and real estate properties transferred to it from the specified undertaking of the Unit Trust of India, an agency formed in 2003. The state-run firm will be wound up within three weeks and the assets will be transferred to the new company.

In conclusion, we expect the markets to remain positive today with some volatility towards the day’s end 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 release filed with the BSE, Strides Arcolab has received approval from the US health regulator for its Bangalore-based manufacturing plant which manufactures lyophilized, liquid, dry powder injectables and pre-filled syringes. Besides, the company has received approval from the USFDA for marketing fludarabine phosphate injection, used for treating cancer, in the American market. According to IMS data, the US market for fludarabine is nearly USD 15 million. It is a part of the oncology portfolio licensed to Pfizer in January 2010 for the US market and expected to be launched shortly.

According to Business Standard, Computer manufacturer HCL Infosystems has increased prices of desktops, laptops and servers by 10-15% Sept onwards as the depreciating rupee has pushed up its imports bill. The company, however, has not increased the price of its tablet PCs. In nearly four-and-a-half months, weak economic conditions, inflation, high interest rates, increased capital outflows and trade deficit have weakened the rupee by about 20% against the US dollar. Since the PC industry relies heavily on the import of IT components for product manufacturing, the price of the finished goods is hugely impacted by the currency movement. The depreciation of the Indian currency against the dollar has significantly pushed up the input costs for PC makers over the last few months, resulting in PC manufacturers hiking the prices.

According to Reuters, GVK Power and Infrastructure plans to sell a minority stake in its Australian unit to raise funds to retire part of its debt and fund operations. The shares of the company, which are down by 74.1% so far this year, jumped as much as 5.23% on the breaking of this news. The firm has hired Citigroup (CN) and Macquarie (MQG.AX) to raise USD 300 to 500 million, the report added. However, the management of GVK or Citigroup and Macquarie declined to comment on the matter.

According to the Times of India, Force Motors plans to launch a hybrid variant of its commercial vehicle ‘Traveller’ by the end of 2012 after unveiling to the public at the upcoming Auto Expo next month. The company will also launch a nine-seater multipurpose vehicle, being developed under license from German auto giant Daimler by 2013 with the price ranging around Rs 12-15 lakhs. Besides, the company will also showcase a CNG version of the Traveller during the auto show at the national capital from Jan 5-11. 

Yes Bank has raised its savings rates from 6 to 7 per cent for domestic customers with immediate effect. It has also raised the non-resident Indian savings account deposit rate by 200 basis points to 6% for deposits up to Rs 1 lakh. The lender also raised interest rate for deposits by non-resident Indians by 300 basis points to 7% for balances above Rs 1 lakh.

According to Reuters, Shoppers Stop expects the weak rupee to reduce non-apparel sales starting in February, but this will be offset somewhat by stronger demand for apparel as cotton prices soften. Apparel, which is mainly sourced locally, accounts for about 58% of the company’s sales. The non-apparel segment largely depends on imports. A weak rupee is expected to reduce the non-apparel sales as the cost of importing products such as watches, cosmetics and hand-bags continues to rise. The company’s apparel sales have taken a hit as result of high cotton prices and a new excise duty that pushed up the prices by 15-17%.

According to press release filed with the BSE, MBL Infrastructure has been awarded projects worth Rs 315.8 cr across various segments, including road infra, building infra, rail infra and urban infra. The receipt of this order takes the company’s total order book size to Rs 1,565.8 cr which is 1.5x its consolidated FY11 revenues of Rs 1,001.6 cr, providing a revenue visibility of 1-2 years.

According to the Economic Times, coming down heavily on operators for violating license norms, the telecom ministry has asked service providers to discontinue their 3G roaming agreements and is also contemplating imposing a penalty on them. The decision comes after the unanimous view of telecom regulator TRAI, the law ministry and the DoT that such a roaming agreement was in violation of the telecom licenses. This will come as a major set-back to the three biggies – Bharti Airtel, Vodafone and Idea – who have roaming pacts and offer pan-India 3G mobile services without having spectrum in several circles. In an internal note, the DoT had said that the roaming agreement among telecom companies for 3G services would lead to a significant loss of revenue to the government. Expect negative action in the listed telecom stocks today.

Corporate Action