Indian markets may open positive in line with strong global cues

Morning Update 19th Jan 2012

Opening Bias

The Indian markets are likely to open positive in line with the strong global cues. The SGX Nifty is trading up by 33 points at 4,980, indicating a gap up opening to the markets today.

Overnight, the US stocks rose on improved sentiment in housing and as Goldman Sachs Group Inc’s earnings beat expectations. The investor sentiment was also bolstered by reports that the Greek government might reach a deal with its private creditors over a debt swap in the coming days. Also, the International Monetary Fund is proposing hiking its lending capability by as much as USD 500 billion. The Asian stocks have pounded higher in early trading, as a stronger euro helped boost Europe-focused exporters, while overnight NASDAQ gains supported tech shares.

Back home, the street will keenly watch the Q3 earnings’ announcement of India’s top two-wheeler manufacturers Hero MotoCorp and Bajaj Auto. It is believed that the slowdown which has hit the passenger vehicle segment is slowly and steadily catching up with scooters and motorcycles. The key factor that investors should watch out for is the management guidance on the demand outlook going ahead, the impact of currency swings and the expected new launches.

In other developments, the government will announce the inflation internals for week ended January 7, 2012 today. After witnessing an easing trend over the past few months and the latest monthly data suggesting that inflation grew at merely 7.4 per cent in December as against 9.11 per cent in November, we expect this trend to continue ahead.

In conclusion, we expect the markets to remain volatile with a positive bias. 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 BSE press release, Bajaj Finance posted 58 per cent jump in net profit at Rs 120 crore for the quarter ended December 31 as against Rs 76 crore last year same quarter. However, Bajaj Finance is observing stress on margins and expects it to be in the current state of being compressed for the current quarter as well. As a conscious strategy, the company has decided to keep away from financing construction equipment due to the slowdown in the real estate and infrastructure sectors, it added. The company’s net non-performing assets (NPA) ratio came down to 0.25 per cent as against 1.10 per cent in the year-ago period. Bajaj Finance’s fund deployments during the quarter were up by 68 per cent to Rs 4,649 crore during the quarter and its total capital adequacy ratio stood at 14.7 per cent as on December 31.

According to Business Standard, the Income Tax (IT) Department has slapped a Rs 1,067 crore demand notice on telecom giant Bharti Airtel for non-payment of TDS dues in the last four financial years in connection with its overseas operations, even as the company said it was fully compliant with all the provisions. Expect some negative action in the scrip today.

According to a BSE press release, Jindal Steel & Power Ltd (JSPL) reported a 7 per cent rise in consolidated net profit at Rs 1,015.88 crore for the third quarter ended December 31, 2011 as against Rs 951.1 crore in the same period last fiscal. The net sales rose to Rs 4,357.69 crore during Q3 of the current fiscal, up by 37 per cent from Rs 3,173.99 crore in the year-ago period. The company also saw healthy growth in production numbers across its major products. Along with the results the company has also commissioned two units of 135 MW at Chhattisgarh and Orissa. 

According to a BSE press release, apparel maker Raymond reported a consolidated net profit of Rs 61 crore for the third quarter ended December 31, 2011, primarily on the back of strong growth in the textile segment. The company had posted a net loss of Rs 74.15 crore in the same period last year. The net sales of the company stood at Rs 952.08 crore for the third quarter ended December 31, 2011 while the same stood at Rs 852.23 crore in the year-ago period.

According to a BSE press release, Tata Coffee posted 51.67 per cent dip in net profit at Rs 24.03 crore for the quarter ended December 31 as against net profit of Rs 49.73 crore in the quarter ended December 31, 2010 due to poor performance of one of its coffee brand viz. Eight O'Clock. During the quarter under review, the firm’s total income was Rs 415.89 crore, up by 18.74 per cent from Rs 350.24 crore recorded in the year-ago period.

Expect some negative action in the phosphate and potash fertiliser producers like GSFC, Zuari, GNFC, CIL, etc as according to an article in The Hindu Business Line, the oil ministry has circulated a note to the EGoM suggesting certain changes in gas allocation, which reads that all the limited gas supply must be made available to the urea manufacturers only and that fuel allocation to other complex manufacturers must be stopped. Consequently we also expect positive action in the urea stocks such as those of RCF, Chambal, NCF, etc. However, we advise our readers not to press the panic button yet as this is merely an inter-ministerial recommendation and a final decision is yet to be taken. Also chances are very meagre that such an opinion will ever materialise into reality.

Corporate Action