Markets may open higher on strong global cues

Overnight, the US stocks climbed, lifting the S&P 500 back into positive turf for the year, after a report illustrating the healing of the US labour with the approach of the year 2012. Data from the labour department suggested that the US jobless claims came in at 3,81,000, up from 3,66,000 the prior week. But the four-week moving average fell to 3,75,000 last week, with fewer Americans filing for jobless benefits during the past month than at any time in the past three years. The Asia markets are also seen trading on a strong note in early trades, tracking the US stocks higher, while investors await China’s manufacturing data due out later in the day.

The Indian companies’ ADRs traded in the American markets have closed largely on a mixed note, indicating a choppy day ahead for them in the Indian markets. In the IT space, Wipro was down by 0.1%, Infosys was up by 0.63% and Patni was down by 0.97%. In the telecom space, MTNL was up by 0.59% and Tata Communications was up by 1.13%. In the banking space, HDFC Bank was down by 0.19% but ICICI Bank was up by 1.08%. In the other space, Tata Motors was up by 2.12%, Sterlite was up by 1.78% and Dr Reddy’s Laboratories was up by 0.1%.

Back home, food inflation eased for a consecutive ninth week to its lowest in nearly six years on improved supplies, bolstering hopes of a cooling in overall inflation that will prompt the RBI to cut rates going forward. Food inflation rose at a mere 0.42% in the week to December 17 as against 1.8% last week, as the prices of vegetables, potatoes and onions fell by up to 11% on new crop arrivals in the markets. Fuel inflation marginally eased to 14.37% in the latest week from 15.24% a week earlier. The inflation of primary articles also stood at 2.7% versus 3.78% last week.

However, in some negative news, India’s bonds seem to be headed for their worst year since 2009 as the slowing government revenue threatens efforts to cut the budget deficit and fuels concern that the nation will continue to sell a record amount of debt. The yields on benchmark ten-year notes jumped significantly in 2011 at a very alarming rate. The government’s goal to lower the revenue shortfall to 4.6% of the GDP by March will not be easy as in the current scenario a cooling economy has curbed tax collections and a slump in the stock markets have stalled its plans to sell stakes in the state-run companies.

In conclusion, we expect the markets to remain positive on this final trading day of 2011 as investors, traders and institutions gear up for the New Year and build hopes for better times to come ahead. We wish our readers a happy and prosperous New Year.

Stocks In Action

After the NHAI received an awesome response to its tax-free bond issue, state-run Power Finance Corp (PFC) will start selling tax-free bonds tomorrow to raise up to Rs 1,000 cr. The leading power sector lender has the approval to mop up Rs 5,000 cr through the issue of tax-free bonds. It already has raised Rs 967 cr through private placement of these bonds in October and November. The 10-year and 15-year bonds carry coupon rates of 8.20% and 8.30% respectively. The leading power sector lender also has regulatory approval for USD 1 billion (about Rs 4,900 cr) medium term note (MTN) programme that would tap the international bond market. PFC expects to raise around Rs 30,000 cr in the current fiscal. More than half of the target amount is estimated to have already been raised.

According to Economic Times, the US health regulator has granted approval to Lupin to market generic Fenofibrate tablets of 48 mg and 145 mg, a cholesterol lowering drug, in the American market. The company, however, did not comment on the issue and the possible launch date of the product. As of this moment we are unable to gather any further information about this development form the company, but according to a research done by Morgan Stanley, the sales opportunity for Lupin from this drug would translate to around USD 50 million, assuming a 20% market share on a conservative basis.

According to Business Standard, ONGC has drawn out some plans to set up a hydrocarbon-based urea fertiliser plant in Tripura after the completion of its Rs 3,950 cr power project at Palatana in South Tripura district. The company confirmed that a survey for the urea plant is being currently carried out and depending on the availability of gas from the Thobal plant in the North Tripura district and the positive feasibility report, the plant would be set up. As for the power project, the gas-based 726 MW thermal project at Palatana would start generation by May next year and would be commissioned in two stages. In the first phase, 363.3 MW would be generated by May 2012 and three months later another, an additional 363.3 MW would be generated.

According to The Hindu Business Line, Dr Reddy’s Laboratories Ltd has launched Supamove cream with in-license from the US-based Cymbiotics Inc. The cream is intended for reducing pain and inflammation in patients with joint pain, arthritis, bursitis, tendinitis and lower back pain. It would be available in a 30 gm tube. Dr Reddy’s also strengthened its emollients and protective product portfolio with the launch of the Venusia soft lotion. It provides sustained relief from dry and itchy skin (pruritis). The current market size of topical NSAID segment in India is over Rs 352 cr with an annual growth rate of 18%, according to ORG IMS data.

According to a filing with the BSE, NTPC’s board of directors, in a meeting held yesterday, has approved investment proposals worth Rs 18,346.59 cr for its two power projects. The country’s largest power producer would invest Rs 15,166.19 cr for the upcoming 3x800 MW Kudgi Super Thermal Power Project in Karnataka. The project is awaiting clearance from the Ministry of Environment and Forests. NTPC would also make an investment of Rs 3,180.40 cr for 500 MW Stage-V of the Vindhyachal Super Thermal Power Project in Madhya Pradesh. This unit is also awaiting environmental clearance. Currently, NTPC has an installed capacity of 36,014 MW and operates 15 coal-based, seven gas-based and six joint venture power stations. The power generation major expects to have a generation capacity of 1,28,000 MW by 2032.

According to Business Standard, the finance ministry has proposed to infuse Rs 15,000-16,000 cr in about 15 public sector banks by March 31, 2012, of which more than one-third of the amount (Rs 6,000 cr) is likely to go to the SBI, while the demand for most of the other banks is less than Rs 1,000 cr each. To shore up the capital base of PSU banks amidst rising bad loans, the Department of Financial Services is seeking an additional Rs 10,000 cr over the budgeted Rs 6,000 cr in the third supplementary demand for grants to be tabled in the budget session of the parliament in February, which might further disturb the fiscal consolidation story. The department has written to the banks asking them to take all the necessary approvals and be prepared for capital infusion after the parliament’s approval is received by the end of the financial year. We expect some action in the PSU packs today.