Markets may open lower on mixed global cues

Morning Update 06thJan 2012

Opening Bias

The markets are likely to open on a negative note in continuation of yesterday’s losses. The SGX Nifty is trading down by 15 points at 4738 indicating a gap down opening to markets today.

Overnight, the global markets have painted a mixed picture as the U.S. stocks recouped their losses, with banks leading the rise, as an improving labor market curtailed concern about Europe. However fresh fears about the health of European banks prompted steep declines for stock markets across the Euro zone, with Italy and Spain among the worst hit.  Asia stocks are seen treading lower, with Japanese exporters suffering from currency headwinds.

In conclusion, we expect the markets to remain negative as investors are still jittery to enter the markets and prefer to wait and watch the Q3 numbers before taking an investment call. We advice our reader’s to stay cautious and stick to cheaply available large cap bets as they are more likely to see some positive movements.

Stocks in Action

According to Business Standard, Maruti Suzuki India (MSI) today said it is considering increasing prices of its products from next week to offset the impact of rupee depreciation. It is believed that the company may hike the prices by 2-3 per cent. In recent times, rupee depreciation is putting severe pressure on companies that import a substantial amount of components from overseas. MSI has both direct and indirect exposure to foreign currencies while importing components. It imports about Rs 8,000 crore worth of parts annually. This is a positive development and we expect some action in the scrip today.  

According to sources, ONGC has discovered about 4 trillion cubic feet (Tcf) of gas reserves off the Daman coast, which can produce 7 million cubic meters a day of gas in four years’ time. The Daman cluster fields constitute the B-12 North & B-12 South, C-26 and SD. The exploratory efforts and drilling in the area is continuing and the company is currently working on a plan to develop the reservoir found in the Arabian Sea. ONGC may invest USD 4 billion in developing the reserves, the source added. ONGC currently produces about 51 mmcmd of gas and the new reservoir found in a block that the company had got on nomination basis, would help add over 13% to its output. This is a positive development as it will not only benefit ONGC but also help meet the high domestic demand.

According to Economic Times, the government said there is no proposal to increase coal prices at present even as Coal India has adopted a new system for pricing and excise duty on dispatches of fossil fuel has been raised. The scrip of Coal India fell by 4 per cent on the announcement of this news, but it recouped part of its losses when the miner came out and stated that the burden on account of increase in duty will be passed on to the consumers, adding that it would be negligible. What’s astonishing is that although coal prices have been de-regulated, it still continues to be under the dominance of the govt. Anyways for today we do not expect much of a negative action in this regard, but any downward revision of output targets will severely hurt the scrip on the bourses.

According to Economic Times, power distribution utilities could face severe financial disaster as a recent government directive allowing industrial consumers to buy electricity directly from generators and traders will wipe out a third of their revenue, leaving no room for cheap supplies to farmers and retail consumers. Expect some negative action in the scrip of power distributors.

According to Business Standard, in latest developments, the Kingfisher Airlines account became a non-performing asset for State Bank of India (SBI) while the aviation regulator gave the airline three days to come back with a detailed plan on financial recovery and safety. Expect some negative action in the scrip today as a result of these negative developments.

Corporate Action