Indian Markets May Flag Off On A Negative Note

Morning Update 30th Jan 2012

Opening Bias

Indian markets are likely to flag off the week on a negative note. The SGX Nifty is trading down by 41 points at 5171 indicating a gap down opening to the markets today.

Moving on, the week ahead would be led by a mix of global cues and the final leg of Indian corporate results. On the global front, Greece’s ability to resolve its debt woes by reaching at a positive outcome with its private lenders would do a world of wonders to improve global sentiments. A wealth of U.S. economic data, corporate earnings reports and the possible Facebook IPO is also likely capture investor attention.

On the domestic turf, we expect markets to turn volatile as investors and traders adopt a cautious approach. The mood on Dalal Street suggests that after witnessing a healthy 10-13 per cent rally over that past one month, the investor sentiments have turned cautious and we may witness some profit taking on the bourses soon. The uncertainty lurking over the euro-zone and countries therein just adds further reinforcement to our volatility conviction.    

The Iranian tension also seems to be escalating further as the country’s deputy oil minister was quoted saying that crude oil prices may zoom up to USD 150 per barrel in the aftermath of fresh bans imposed by European Union on Iran crude oil. Experts believe that the Iranian regime will soon vote to halt exports to the EU as early as next week in retaliation for EU plans to stop all Iranian crude imports by July. Rising tension between the western powers and Iran over the latter’s flamboyant nuclear plans have pushed up Brent crude prices since the past few months.

In conclusion, we expect the markets to remain negative for the major part of the day. We advise our reader’s to book some profits on counters that have yielded significant returns.

Stocks In Action

According to press release on the BSE, country's largest power generator NTPC reported a 10 per cent decline in net profit at Rs 2,130.39 crore for the quarter ended December 31, 2011 as against Rs 2,371 crore during the corresponding period last fiscal due to increase in coal prices. Cost of fuel (coal) witnessed a sharp jump of about 29 per cent at Rs 10,793.29, as against Rs 8,338.64 crore. Street estimates had seen the PAT dropping by 5 per cent only to Rs 2250 crore. However, streets did expect the company to face rise in input cost as seen above. Finally, net sales of the company rose 14 per cent to Rs 15,332 crore, against Rs 13,421 crore during the same period last fiscal.

According to press release on the BSE, GSFC has reported a 24 per cent (yoy) decline in its net profits for the quarter ended December 2011 at Rs 172.33 crore as against Rs 228.62 crore in the corresponding period of the previous year. The profitability of the company was heavily impacted due to rise in input costs and higher employee costs. The topline performance wasn’t too encouraging either. On a yoy basis the topline grew marginally by 3 per cent to Rs 1300 crore as against Rs 1265.14 crore in the corresponding period of the previous year. While we expected the industrial products segment to report lower performance, the performance of the fertilizer segment came as a positive surprise. However, we expect the counter to drop on the back of some profit taking today.

According to press release on the BSE, air conditioner maker Blue Star reported a net loss of Rs 32.76 crore for the quarter ended December 31, 2011, due to increase in input costs and forex losses. The company had posted a net profit of Rs 22.36 crore in the corresponding period last financial year. The total operating income of the company during the quarter also declined by 3.87 per cent to Rs 589.69 crore from Rs 613.41 crore in the year-ago period. Projects in the building electrical segment, long gestation infrastructure projects and a few other projects executed for builders and general contractors have been severely impacted. We expect some negative action on the bourses today.

According to press release on the BSE, Dr Reddy's Laboratories’ issue pertaining to its promotional material for fondaparinux sodium for injection, with the US Food and Drug Administration has been closed. The Hyderabad-based company said certain concerns expressed by the US regulator were fully addressed.

We expect some heavy action in the stocks to RIL and Reliance Power today, as according to report in The Economic Times, the two companies have held initial talks to jointly develop coal-bed-methane (CBM) assets in Madhya Pradesh. It is believed that executives of RIL and Reliance Power confirmed that the two companies had initiated discussions a few months ago to optimize costs by developing common infrastructure at the CBM blocks.