Indian markets to snap back on yesterday’s gains and open sideways

MORNING UPDATE FEB 01, 2012

Opening Bias

The Indian markets are likely to snap back on yesterday’s gains and open sideways. The SGX Nifty is trading down by 3 points at 5,227, indicating a gap down opening to the markets today.

Back on the domestic turf, the month of January 2012 provided a much needed respite to a shattered and battered Indian equity market. The Sensex rallied by a hefty 11-13 per cent, the rupee strengthened by nearly 7 per cent and all this was on the back of a whopping Rs 8,824 crore net inflow of FII investments into the Indian equities. One of the major triggers for such FII inflows was the cheap stock valuation and the benefits of a beaten-down currency.

Going forward, with the stock valuations no longer cheap and the rupee inching its way back, all eyes would now be on the government’s ability to tackle its fiscal deficit woes and take some strong actions towards economic reforms. The build-up to the upcoming Union Budget 2012-13 will be closely watched by traders and investors all over Dalal Street. Another key event on the investors’ radar would be the UP elections.

In conclusion, the month of February would majorly revolve around the government’s efforts towards putting the economy back on the path of higher growth and show some valour on the reforms front. As for today, we expect the markets to remain volatile with negative bias. The European market cues will have a crucial role to play during the afternoon session. We advise our readers to book some profits on those counters that have yielded significant returns.

Stocks In Action

According to a BSE press release, KEC International’s consolidated net profit for Q3FY12 rose by 39 per cent YoY to Rs 81 crore, boosted by a one-time gain from the sale of land in Navi Mumbai. However, margin pressure remained during the quarter and that hurt its EBITDA. The net revenue for October-December was up by 36.3 per cent from a year ago to Rs 1,459 crore. KEC’s order book rose by 15 per cent from a year ago and currently stands at Rs 9,200 crore. The order inflow for the quarter was Rs 2,500 crore - the highest ever quarterly order intake - and KEC expects this will provide good visibility over the coming quarters.

Expect some negative action in the scrip of IOC as the oil refiner is slated to cut back its ATF by up to 3.1 per cent, effective today. However, this move will benefit the beleaguered airline industry. IOC will slash its jet fuel prices to Rs 63,864 from Rs 65,920.87 per kilolitre in Mumbai. The other state refiners tend to follow IOC in determining the jet fuel prices.

According to a BSE press release, India’s largest private sector lender ICICI Bank’s third quarter net profit rose by 20 per cent year-on-year to Rs 1,728 crore on the back of robust loan growth. Its net interest income (NII) increased by more than 17 per cent YoY to Rs 2,712 crore. Both these parameters were better than the street estimates that saw net profit at Rs 1,621 crore (13 per cent up YoY) and net interest income of Rs 2,650 crore (up by 15 per cent YoY). Moving on, the bank’s loan book expanded by 19 per cent YoY to around Rs 2.46 lakh crore in the three months’ period. The bank improved its asset quality with the gross non-performing asset (NPA) ratio that stood at 3.82 per cent compared to 4.14 per cent a quarter back. The net NPA ratio too fell from 0.93 to 0.83 per cent sequentially. Consequently, provisions declined by 27 per cent YoY to Rs 341 crore.

We expect some positive action in the scrips of Aptech and Core Education & Technologies today as according to reports in The Economic Times, the educational services’ firm has emerged as a front-runner to acquire billionaire investor Rakesh Jhunjhunwala’s stake in Aptech. Jhunjhunwala is seeking a valuation of Rs 700 crore for his stake at a 63 per cent premium to Tuesday’s closing price of Aptech on the BSE. Jhunjhunwala purchased 36 per cent in the company six years ago at one-third the current price.

According to a BSE press release, Crompton Greaves’ consolidated net profit fell by 67 per cent to Rs 77.14 crore for the quarter ended December 2011 as against Rs 232.80 crore in the same period a year ago due to the weak performance of its overseas’ subsidiaries. Its net sales were at Rs 3,027.95 crore as compared to Rs 2,396.99 crore in the same period last fiscal. Going forward, the increase in competition and slowdown in demand is set to hurt the company’s profitability.

Corporate Action