Markets May Open Sideways With Positive Tone

Overnight, the US stocks rose after reports cast a favoruable light on the economy, lifting the major indexes into positive turf for the week. Thursday’s economic data had the Federal Housing Finance Agency reporting that the US home prices climbed 0.7 per cent in the final month of 2011. And the government offered further evidence of an improving labour market as applications for jobless claims last week held at a near four-year low.The labour department said that the initial claims were flat at a seasonally adjusted 3,51,000. The four-week average of claims, meanwhile, fell by 7,000 to 3,59,000, marking the lowest level since March 2008.

The Asian shares are also trading in the positive zone in early trades, tracking positive cues from the US markets and also from Europe where German business confidence exceeded forecasts. 

Amongst major developments, crude futures prices (NYMEX) have soared up to reach USD 108 a barrel on the back of improving data in the US and European economy and as the Iranian crisis escalated further. Both these combined have posed some serious questions on the possible supply constraints. It has also been noted that Brent crude (spot prices) have spurted to USD 125 per barrel levels, which will put pressure on the Indian government to allow OMCs to hike retail prices of petrol, if not other variants, and help cut losses. However, with the UP elections and the Union Budget expected over the next fortnight it may still be a while before we see any such move. But one thing is for sure - a hike in petrol prices is inevitable for now.

Moving on, it seems that derivative traders on D-Street have rolled over their bullish bets into the March series but on a slower clip, indicating that a section of the traders are not sure where the market is headed towards in March. This is much in line with our expectations, as the UP elections results and Union Budget expected by mid-March would turn markets volatile. As per provisional numbers, Nifty futures saw a 67 per cent rollover, as compared to 74 per cent witnessed last month. Across the markets the rollovers were around 78 per cent, similar to their average. While sectors like textiles, infrastructure and media saw the strongest rollovers, fertilizers, cement and FMCG witnessed lower than expected rollovers.

For today, we expect the markets to remain volatile with a positive tone. However, we advise readers to tread with caution as on a broader level we still expect the markets to remain highly volatile leading into the budget.

Stocks In Action

According to sources, Citigroup Inc plans to raise up to USD 2.1 billion by selling its entire stake in Housing Development Finance Corp (HDFC). Sources added that Citigroup planned to sell about 145 million shares, or a 9.9 per cent stake for between Rs 630 and Rs 703.55 per share.

According to a BSE press release, State Bank of India (SBI) will issue fresh shares to the government on a preferential basis to raise about Rs 7,900 crore. The board has approved preferential allotment of equity shares of face value of Rs 10 each to the government at Rs 2,181.69, including a premium.  Based on the floor price of Rs 2,191.69 per share in accordance with the SEBI regulations, the executive committee of central board of the bank today fixed the issue price at Rs 2,191.69. Following the capital infusion of Rs 7,900 crore, the government’s stake in the bank is likely to increase by up to 2.5 per cent.The capital infusion by the government will raise the Tier I capital of the bank to about 8 per cent.

According to a BSE press release, Ranbaxy Laboratories reported a consolidated net loss of Rs 2,983 crore in the fourth quarter, compared with Rs 97.5 crore loss a year ago, as it made provisions for settling up a probe by the US Justice Department and also incurred foreign exchange losses due to the rupee depreciation. The company's net sales, meanwhile, surged 79 per cent year-on-year from October-December to Rs 3,738 crore, helped by the launch of generic versions of cholesterol-lowering drug Lipitor and Caduet, which is also used for treating high blood pressure. Analysts on an average were expecting Ranbaxy to report a profit of Rs 575 crore on revenue of Rs 3,156 crore in the fourth quarter.

According to a BSE press release, Aventis Pharma said its net profit declined by 65.58 per cent to Rs 36.10 crore for the fourth quarter ended December 31 due to the acquisition of nutraceutical formulations business of Universal Medicare. The company had posted net profit of Rs 104.90 crore in the October-December period last year. The net sales of the company rose to Rs 337.90 crore during the fourth quarter, as against Rs 286.50 crore in the same period previous year. Last August, Aventis had entered into a definitive pact with Mumbai-based Universal to acquire its business of marketing and distribution of branded nutraceutical formulations in India.

According to Business Standard, Kingfisher Airlines (KFA) bankers have insisted that they would not pump in any money in the air carrier unless the promoters infuse fresh equity. Several banks said that it makes no sense for a bank to get its fingers burnt again by lending to a borrower that is losing huge sums of money every month.

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