Indian Markets May Open Positive

Opening Bias
The Indian markets may open positive in the wake of Greece’s prime minister winning parliamentary approval for austerity measures to secure funds. The SGX Nifty is trading up by 7 points at 5,395, indicating a flattish gap up opening to the markets today.

Overnight, the Greek parliament approved a stringent set of austerity measures necessary for the country to receive more outside financial assistance and head off a messy default. As a result, the euro and the US equity index futures have advanced, indicating that the markets there would cheer the development. 

On the domestic front, the December IIP has dipped to 1.8 per cent as against 5.9 per cent in the month of November 2011. The lower industrial output growth in the month was on expected lines as the eight core industries had registered a muted growth of 3.1 per cent in December, mainly due to the slackening output of crude oil, steel and natural gas. The fall in growth was primarily because of the contraction in mining and the capital goods sectors and a lower manufacturing sector growth. During April-December 2011, the IIP growth stood at 3.6 per cent as against 8.3 per cent in the corresponding period a year ago.

With this decline in the IIP percentage, coupled with the advance GDP growth falling to 6.9 per cent, we believe it makes a good enough case for the RBI to consider a rate cut in its next monetary policy review in March.

Moving on, the pace of the markets today would be determined by the Q3 earnings’ announcements of the SBI. According to street estimates, the SBI is likely to report PAT of Rs 3,061.6 crore in the October-December quarter of FY12 - a growth of 8 per cent as compared to Rs 2,828.1 crore in the year-ago quarter. The net interest income (NII) is seen going up by 18 per cent to Rs 10,711.7 crore from Rs 9,049.8 crore year-on-year.  

In conclusion, for today we expect the markets to remain positive with bouts of volatility in the mid-afternoon session.

Stocks In Action

According to a BSE press release, Tata Power Company has posted a 40.6 per cent decline in its consolidated net profit for the quarter ended December 31, 2011 at Rs 262.67 crore as compared to Rs 442.37 crore in the corresponding quarter a year ago. The firm’s total income rose by 57.45 per cent to Rs 7,115.60 crore for the quarter under review, compared with Rs 4,519.18 crore achieved a year ago. These numbers were far below the market expectations. 

According to a BSE press release, DLF saw its consolidated net profit for the third quarter fall by 44.6 per cent to Rs 258 crore from Rs 466 crore a year ago and cautioned that it would take another few quarters for it to regain full momentum. The net sales for the company dropped to Rs 2,396 crore from Rs 2,594 crore. The high cost of borrowing coupled with the increasing cost of materials and labour has been pinching the real estate companies for the last few quarters. Rising home loan rates have also forced home buyers to postpone their plans, aggravating the problems for real estate firms. 

According to The Times of India, the Income Tax Department has slapped additional tax notices of Rs 1,137.23 crore on DLF and its subsidiaries for the 2009-10 assessment year. The company said that it has challenged these orders before the appellate authorities.  

According to a BSE press release, JSW Steel has reported consolidated net loss of Rs 47.89 crore for the third quarter ended in December due to forex losses, higher raw material costs and the hit taken by its group firm, JSW Ispat Steel. The company had reported a consolidated net profit of Rs 291.72 crore during the October-December quarter in 2010-11. The net sales, however, rose by 41 per cent to Rs 8,404.66 crore during Q3 2011-12 due to higher revenues from the steel business.

According to a BSE press release, Anil Ambani Group firm, Reliance Capital, reported a 43 per cent decline in its consolidated net profit at Rs 60 crore for the third quarter ending December 2011 as compared to Rs 106 crore in the October-December quarter of the previous fiscal. The company attributed the decline in profit mainly due to the 47 per cent increase in interest costs and a loss of Rs 34 crore from its general insurance business. The total income rose by 16 per cent to Rs 1,587 crore during the December quarter. 

According to a BSE press release, Oil India (OIL) posted 11.7 per cent growth in its quarterly net profit and announced that it would give free shares and a special dividend to it shareholders. The net profit for the October-December quarter rose to Rs 1,013.98 crore compared to Rs 907.98 crore in the same period a year ago. OIL said that its higher crude oil and natural gas production offset a three-fold jump in the company’s fuel subsidy outgo. The company paid Rs 1,853 crore as subsidy in Q3, 231.73 per cent higher than the outgo of Rs 558.59 crore a year ago. India’s second-largest state-run explorer said that it would give a second interim dividend of Rs 10 per share and give three shares for every two shares held. It had earlier announced a dividend of Rs 25 per share in December. The bonus share and the special dividend come ahead of the government’s sale of shares in the company.