Markets may witness a negative opening

In other developments, after inflation showing significant signs of easing out over the past one month with the latest set of data suggesting food inflation at 1.8 per cent for week ended December 10, the eight core industries have now seen an unexpected sharp rise in production to 6.8 per cent in November 2011 as against a mere 0.3 per cent in October 2011. Given that the eight core industries have a 38 per cent weightage in the IIP data, we expect some improvement in the IIP data going forward. The IIP data was last seen contracting to negative 5.1 per cent in the month of October 2011.

Moving on, it has come to light that the government plans to borrow additional unscheduled Rs 15,000 crore through sale of bonds in a bid to fund an ‘emerging cash requirement’. This move shows that the government is seriously short of cash and this, coming on the back of advance tax payments, is a double whammy on the liquidity front. We expect such a development to push up the bond yields and pressurize the banking sector.

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

Stocks In Action

According to Economic Times, after facing a series of obstacles in the past the government is set to approve Reliance Industries’ long pending proposal to develop four satellite discoveries in the D6 block with some conditions, which will fast track the reversal of dwindling output from India’s biggest gas fields by adding additional 10 million metric standard cubic meters per day output. The approval will be conditional in that the development cost would not fluctuate by more than 10-15 per cent than the original estimates. RIL has estimated an expenditure budget of about USD 1.5 billion in developing the four smaller discoveries spread around the giant D1 and D3 producing fields on the basis of prices in the year 2006. This is not only a very positive development for the oil and gas major but also in terms of the overall demand for gas in India. The additional gas from these fields will be used to fulfill the demands of the fertiliser, power and other core sectors on a priority basis.

In a statement filed with the BSE, the board of directors of Bharti Shipyard has approved a Rs 2,854 crore corporate debt restructuring (CDR) programme as part of its efforts to optimize costs. Bharati Shipyard’s total debt currently stands at Rs 3,250 crore. The restructuring pertains to ‘term/working capital debt’. The company, which is in advanced stages of the completion of its two greenfield shipyards at Dabhol and Mangalore, said that it has a Rs 6,800 crore order book which would be executed by 2014.  The company would undertake various initiatives to optimise the current resources in view of the overall sectoral slowdown and the challenging economic scenario. The shipping industry in India is presently under tremendous pressure.

According to Business Standard, state-run ONGC and the oil ministry’s technical arm, the DGH, have given Cairn India the go-ahead for commencement of production from the Bhagyam oil field, the second-largest find in the prolific Rajasthan block. Cairn, which was recently taken over by the London-based mining group Vedanta, will begin oil production from Bhagyam at the level of 20,000-25,000 barrels per day sometime next month and it will reach the approved peak output of 40,000 bpd by April. This is a very positive development for Cairn India.

According to a press release from the BSE, Havells India along with a Chinese partner will invest up to US 100 million (nearly Rs 530 crore) in the next three years to set up a manufacturing facility in the Jiangsu province in China. The new facility will come up as a 50:50 JV between Jiangsu Havells Sylvania Lighting and China’s Shanghai Yaming Lighting Co. The plant will start initial commercial production in April 2012 and will have full swing output by November next year. The JV firm will produce lighting products like HID lamps, LEDs, CFLs and lighting fixtures. Initially the company plans to export products wherever the Sylvania brand is sold (mainly Latin America and Europe) and later would also cater to the Chinese market. The JV expects revenues of USD 30 million in the first year itself and USD 100 million in the next three years.     

According to press release from the BSE, JBF Industries’ subsidiary - JBF RAK LLC - has signed a MOU with the Industry and Commerce Ministry of Bahrain to establish a project in Bahrain for manufacturing polyester film. So far there have been no further details shared by the company in this regard but keeping in mind the company’s dominant position in the domestic polyester industry along with the growth in its end-user markets and a fair 32 per cent revenue contribution from the UAE operations does suggest this to be a positive development for the company.