Indian Markets May Open Negative

The Indian markets may open negative after Moody’s lower ratings on a few EU nations and its view that the growing financial and macro-economic risks emanating from the euro area could prove a serious threat to global serenity. The SGX Nifty is trading down by 9 points at 5,406, indicating a flattish gap down opening to the markets today.

Overnight, the US and European indices ended their respective trading sessions on a firm and positive note owing to the successful approval of the austerity vote in Greece’s parliament. But soon after the close of the markets there, Moody’s Investor Services lowered its ratings on Italy, Portugal, Slovakia, Slovenia and Malta by one notch and slashed Spain’s sovereign rating by two notches. The rating agency also cut the outlook on France, the United Kingdom and Austria to negative but kept their ratings at triple-A for the time being. Consequently, the Asian shares are seen trading on a weak note as a result of this development.

Among the various domestic developments, it seems that the government is all set to move ahead with its plans of disinvestment in blue chips such as ONGC and BHEL through the auction route to raise about Rs 14,500 crore within the current fiscal itself. While the ONGC stake sale through the auction route is expected to yield Rs 12,000 crore, BHEL might fetch the government about Rs 2,500 crore. A final decision on this is expected anytime soon as an Empowered Group of Ministers would meet to decide on the exact pricing and time of the stake sale. The positive outcome of this move will help the government to meet part of its flamboyant disinvestment targets and score some much-needed goodwill points in the run-up to the UP elections and the Union Budget 2012-13.

Moving on, today being Valentine’s Day, we expect some heavy action in the counters of Archies, Titan, PVR, Gitanjali Gems, Jubilant Foodworks and Hanung Toys. It’s historically noted that due to the nature of businesses of these companies, their scrips have witnessed swift upward spirals around this period. Readers could look into buying these scrips with a short-term perspective. According to our technical expert, there is a strong possibility of Gitanjali Gems and PVR riding high today.  

In conclusion, we expect the markets to remain negative through the first half and pick up vital cues from the European markets during the late noon trades.

We expect some negative action in the scrips of Reliance Communication and telecom players engaged in the tower equipment business as according to TRAI’s recommendations for the new telecom policy, the regulator wants to cap FDI investments at 74 per cent on a uniform basis for the entire telecom sector. At present 100 per cent FDI is allowed in the tower equipment business and 74 per cent in the mainstream telecom business. The move to cap all the FDI investments in the telecom space at 74 per cent would affect the valuations of RCom’s proposed stake sale.

According to a BSE press release, Indian Oil Corporation (IOC) has announced its third quarter results. The company’s December 2011 quarter net profit was up by 52 per cent at Rs 2,488 crore versus Rs 1,635 crore YoY. It net sales were up by 29 per cent at Rs 98,272 crore versus Rs 75,891 crore YoY.

According to a BSE press release, Coal India reported a 53 per cent jump in its net profit at Rs 4,037 crore for the quarter ended December 2011. The company reported about 17 per cent growth in sales at Rs 15,349 crore and beat the street estimates on net profit. However, its sales’ growth fell short of expectations. Its consolidated ‘other’ income was up at Rs 1,856 crore versus Rs 1,250 crore YoY.

According to a BSE press release, SAIL has announced its third quarter results. The company’s December 2011 quarter net profit was down by 43 per cent at Rs 632 crore versus Rs 1,108 crore YoY. Its net sales were down by 5 per cent at Rs 10,594 crore versus Rs 11,143 crore YoY. The company reported forex loss of Rs 466 crore versus gain of Rs 33 crore YoY. Its EBITDA margin stood at 13.6 per cent versus 14.6 per cent YoY.

According to a BSE press release, SBI has posted a better-than-expected December 2011 quarterly performance. Its net profit rose by more than 15 per cent (YoY) to Rs 3,263 crore on higher interest income and its net interest income (NII) rose by nearly 27 per cent to Rs 11,466 crore. Its net interest margin (NIM) also increased to 4.05 per cent compared to 3.8 per cent in the July-September quarter. The gross NPA ratio stood at 4.61 per cent as against 4.19 per cent in the previous quarter. The net NPA ratio was 2.22 per cent versus 2.04 per cent in the previous quarter. The total provisions are at around Rs 4000 crore in the December quarter as against Rs 3,936 crore a year back. Provision against loan losses zoomed up by 84 per cent YoY to Rs 3,006 crore.

According to a BSE press release, Sun Pharmaceutical Industries’ consolidated net profit rose by 90.86 per cent to Rs 668.30 crore in the quarter ended December 31, 2011 on the back of robust sales by its Israeli arm, Taro Pharmaceutical Industries. The company had posted a net profit of Rs 350.15 crore for the corresponding period of the previous fiscal. The net sales of the company increased to Rs 2,145.13 crore in the third quarter from Rs 1,561.68 crore in the same period last fiscal. 

According to a BSE press release, Cipla has posted a 16 per cent YoY increase in net profit to Rs 269.91 crore for the quarter ended December 31, 2011. The company’s net profit for the third quarter last fiscal stood at Rs 232.69 crore. Cipla’s net sales increased by 14 per cent to Rs 1,711.47 crore in the third quarter of 2011 from Rs 1,501.36 crore in the three months ended December 31, 2010.