Markets may open flat with positive bias

Morning Update 23thJan 2012

Opening Bias

The Indian markets are likely to open positive ahead of a crucial week when the RBI is expected to review the monetary situation of the economy. The SGX Nifty is trading up by 12 points at 5,070, indicating a gap up opening to the markets today.

On Tuesday, January 24, the RBI will announce its monetary policy review and put an end to all the speculation that’s been lurking on the streets with regards to a cut-back in the interest rates or CRR and put the economy back on the path of growth. We at DSIJ expect the central bank to either cut the CRR or reverse the interest rate cycle, keeping in mind the steep fall in inflation and the immediate need to keep the economy growing at the projected rate of 7.5 per cent for the second half of the year.

Moving to the global front, the US stocks closed near a six-month high last Friday, extending gains into a third week, as results from Microsoft Corp and International Business Machines Corp set off a rally in tech stocks. However, disappointment over Google Inc dragged the NASDAQ benchmarks. Going forward, the mood on Wall Street suggests that the robustness that’s been seen in the month of January is likely to continue ahead as there has been an improving trend seen in both the macro economic data as well as individual corporate data.

The European cues will also play a very crucial role mid-week. Media reports there suggest that Greece has been progressing very well indeed over its dialogue with the private lenders there to resolve its debt woes. It is believed that the country was close to clinching a deal with international creditors, who could be looking at a write-down of 65 to 70 per cent of the value of their holdings of Greek debt. Any development on this front will have an effect on the global stocks as investors will keenly watch the event unfold.

The Asian markets of Hang Seng and Shanghai are closed for trading today and the Japanese index Nikkei is seen trading on a very flat note in early trades, as investors cheer some encouraging corporate earnings and raise caution over Greece’s negotiations with its private sector creditors.

In conclusion, we expect the markets to remain volatile with a positive bias. Larsen & Tubro and Maruti Suzuki are amongst the key results to be announced today. Investors will keenly watch the earnings and the management guidance. 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, Ultratech Cement has posted a whopping 93.4 per cent rise in net profit at Rs 617 crore during the quarter, compared with a net profit of Rs 319 crore in the year-ago period. Higher realisations, coupled with better demand, helped the company counter the impact of rising input costs in the third quarter. The net sales rose by 23 per cent to Rs 4,572 crore from Rs 3,715 crore in the year-ago period. Foreign institutional investors raised their stake in the company to 16.10 per cent as on December 31. The company’s net realisation stood at Rs 3,900 a tonne, a rise of 17 per cent over the same period last year.

According to a BSE press release, state-owned Syndicate Bank reported 32 per cent rise in net profit to Rs 338.12 crore for the third quarter ended December 31 as compared to Rs 256.19 crore for the corresponding quarter last fiscal i.e. 2010-11. The total income of the lender rose to Rs 4,214.35 crore during the October-December quarter from Rs 3,156.84 crore in the same period last year.

According to a BSE press release, Mahindra and Mahindra Financial Services has posted a rise of 28 per cent in its consolidated net profit of Rs 159.3 crore for the quarter ended December 31, 2011 as compared to Rs 124.3 crore for the quarter in the year-ago period. The company’s total income has increased by 42 per cent to Rs 776 crore in the third quarter of FY12 from Rs 547 crore in the corresponding period last year.

According to a BSE press release, Godrej Consumer Products has posted a 40.34 per cent rise in net profit at Rs 167 crore for the quarter ended December 31, 2011 as against Rs 119 crore in the same period last year. The total income is Rs 1,368.85 crore for the quarter ended December 31, 2011 as compared Rs 997.44 crore for the quarter ended December 31, 2010 - a rise of 37 per cent. Godrej Consumer has declared an interim dividend of Re 1 per share.

According to Economic Times, Tata Power is in talks to pick up a 15 per cent stake in MEC Coal, the Dubai-registered company that owns more than two billion tonnes of coal reserves in Indonesia. The Tata Group is said to be negotiating with MEC co-promoter Ras-al-Khaimah Investment Authority and is keen on augmenting its foreign coal assets to reduce power generation costs at its plants in India, where fuel shortage often leads to outages. This is positive for the counter.

Expect some profit taking in the scrip of RIL today as the company’s net profit in the third quarter fell below the street estimates. Even the 12 crore share buy-back aimed at boosting investor confidence in the stock is unlikely to allay concerns over the poor results.

The scrip of Gujarat Gas Company could witness some negative action as according to media reports, the government’s move to regulate the marketing margins charged by gas companies has had a negative impact on the valuations of BG’s stake in the company. It is believed that buyers for its stake are not willing to pay a premium in such circumstances.

Corporate Action