Markets may open positive on strong global cues

Morning Update 13thJan 2012

Opening Bias

The markets are likely to open positive in line with the strong global cues. The SGX Nifty is trading up by 13 points at 4,881, indicating a gap down opening to the markets today.

In other developments, for a second consecutive week, food articles’ inflation has managed to show negative growth, with the latest set of data suggesting that food articles’ prices grew at negative 2.9 per cent for week ended December 31 as against negative 3.36 per cent in the previous week. The primary articles’ inflation rose marginally but managed to stay at 0.51 per cent as against 0.1 per cent in the previous week. The fuel and power articles’ inflation fell and stood at 14.45 per cent as against 14.6 per cent last week.

In conclusion, we expect the markets to remain volatile with a positive bias as investors start taking positions before the Q3 numbers’ announcements and build-up to the RBI policy.We advise our readers 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 a press release filed with the BSE, Infosys reported a QoQ growth of 25 per cent in net profit to Rs 2,372 crore for the quarter ended December 31, 2011 as against Rs 1,906 crore in the previous quarter. However despite beating the market estimates, the stock priced tumbled by 6 per cent as the IT bellwether cut its full year revenue outlook because of the debt crisis in Europe, its second-biggest market. Infosys forecast dollar revenue growth of 16.4 per cent for the fiscal year ending March 2012, which is lower than 17.1 to 19.1 per cent projected in October.

According to press release filed with the BSE, Development Credit Bank (DCB) reported a 90 per cent rise in net profit at Rs 16 crore in the quarter ended December 31, 2011 as against Rs 8 crore in the corresponding year-ago period. Its net interest income increased to Rs 60 crore (Rs 49 crore) while the other income remained unchanged at Rs 26 crore. The net advances grew to Rs 4,306 crore (Rs 3,956 crore), projecting a growth rate of 9 per cent. Deposits grew by 10 per cent to Rs 6,191 crore (Rs 5,651 crore). Its net interest margin (NIM) increased to 3.37 per cent (3.13 per cent). The ratio of net non-performing loans to total loans fell to 1.03 per cent (1.3 per cent). This is good news for the stock and we expect some positive action on the bourses today.

According to a press release filed with the BSE, housing finance major HDFC Ltd posted a net profit of Rs 981 crore in the quarter ended December 31, 2011 - 10 per cent higher than in the year-ago period. This moderation in net profit is on account of lower profit on sale of investments, which declined to Rs 88 crore (Rs 167 crore in Q3 of FY11). Loan approvals and disbursements in the nine-month period grew by 19 per cent each compared to the corresponding period in the previous year. As on end-December, the loan book was at Rs 1,32,208 crore (Rs 1,09,051 crore) - an increase of 21 per cent. This is after considering the loans sold to HDFC Bank in the preceding 12 months amounting to Rs 4,221 crore. Including the loans sold, the growth in the loan book was 25 per cent. Over the September quarter, the loan book grew by 4 per cent.

According to Business Standard, Oil India Ltd (OIL) plans to spend Rs 5,000-6,000 crore and is in advanced talks to acquire an oil and gas producing asset in Africa. The production from the asset under discussion is likely to be of 15,000 to 20,000 barrels of oil per day (around 25 per cent of the current production). The management believes the acquisition is likely to be value-accretive as the company works with a minimum IRR (internal rate of return) of 14 per cent while examining the acquisition prospects vis-a-vis an interest yield of 10.5 per cent earned on cash with the company. Apart from the conventional oil and gas segment, OIL is also looking for assets in the non-conventional hydrocarbon segment, such as shale gas, for strategic benefits.

Corporate Action