Markets To Open Budget Week On Positive Note
DSIJ Intelligence / 12 Mar 2012
Opening Bias
The Indian markets may snap back on last week’s losses and open positive today. The SGX Nifty is trading up by 30 points at 5,402, indicating a gap up opening to the markets today.
| Benchmark Indices | ||
|---|---|---|
| Index | Closing | % Change |
| SENSEX | 17503.25 | 2.09 |
| NIFTY | 5333.55 | 2.17 |
| Dow Jones | 12922.02 | 0.11 |
| S&P 500 | 1370.81 | 0.36 |
| NASDAQ | 2988.34 | 0.60 |
| Bovespa | 66704.00 | -0.31 |
| FTSE | 5887.49 | 0.47 |
| DAX | 6880.21 | 0.67 |
| CAC | 3487.48 | 0.26 |
| LIVE | ||
| Hang Seng | 21076.41 | -0.05 |
| Nikkei | 9972.29 | 0.43 |
| Shanghai | 2436.06 | -0.14 |
Last Friday, the markets managed to cut losses as investors and traders on D-Street discounted the RBI’s move to cut back the CRR and infuse fresh liquidity into the system. While the markets expected an optimistic 50 bps cut in the CRR, the positive surprise of a 75 bps cut to 4.75 per cent managed to spur investors’ sentiments.
| Key Global Indicators | ||
|---|---|---|
|
| Gold (Rs/10gm) | Crude ($/bbl) |
| Spot | 27521 | 125.36 |
| % change | - | -0.37 |
| Future | 27974 | 106.87 |
| % change | -0.08 | -0.49 |
Moving on, this strong momentum is expected to be carried on today as the markets cheer the RBI’s move. However, the coming days are expected to be very crucial and one may see the markets turning very volatile. An array of macro-economic reports is slated to be announced this week. Ranging from the IIP numbers expected to be released by today noon to the WPI inflation for the month of February expected on the 14th to the RBI’s monetary policy review on the 15th and finally the Union Budget 2012-13 on the 16th, all these events would have a binding effect on the markets and their future ahead.
While the expectations from the finance minister for this budget are to adopt a reformist approach by de-regulating the diesel prices, reduce the government subsidy and fast-track the key policies to spur economic growth, the recent defeat it has faced in some of the state assembly elections may prompt the FM to adopt populist measures in a bid to satisfy the vote bank ahead of the general elections in 2014.
As for today, the January IIP numbers are expected to remain subdued. A recent Reuter’s survey of 25 economists has suggested that India’s industrial output would grow at 2.1 per cent in January compared with 1.8 per cent in the previous month. However, judging by the dismal core sector growth of 0.5 per cent for the month of January, which has a 38 per cent weightage in IIP, we at DSIJ believe that the IIP for January would slip well below the expected 2.1 per cent.
| Currency Rates | ||||
|---|---|---|---|---|
|
| Rs/$ | Rs/Euro | Rs/GBP | Rs100/JYP |
| RBI Rate | 50.0150 | 66.1776 | 79.0087 | 61.3100 |
| Future | 50.1075 | 66.4750 | 78.9600 | 61.1750 |
On the global front, the US stocks rose last Friday with the S&P 500 and NASDAQ tallying a fourth week of gains, after another strong monthly jobs’ report illustrated that the recovery continues. According to the US Labor Department, the non-farm payrolls climbed by 2,27,000 last month. The numbers were more than expected. The agency also revised higher jobs’ growth for December and January. In the coming week investors in the US may shift their focus to its very own economic conditions as a sting of reports on inflation, current account balance and manufacturing index data along with the Federal Reserve’s economic review come up.
In conclusion, we expect the markets to open positive but turn volatile towards the mid-afternoon session and they also may give up the early gains. Our advice to readers is to adopt a ‘wait and watch’ strategy ahead of some key events expected this week. These events would turn the markets highly volatile and it’s best not to take any bold positions at such times. For those who wish to play the situation, we recommend the use of F&O strategies.
Stocks In Action
According to Reuters, India has decided to end its export ban on cotton, amidst growing political pressure from the ruling party and opposition, Trade Minister Anand Sharma said in a press statement on Sunday. Last Monday, India unexpectedly banned cotton exports to ensure supplies for domestic mills, boosting global prices as the absence of shipments from the world’s second-largest producer might tighten a market facing weak demand. Union Minister of Agriculture Sharad Pawar had called for the ban to be lifted, saying he had been kept in the dark about the decision.
According to Business Standard, after freezing the bank accounts of beleaguered Kingfisher Airlines, the Service Tax Department has now served a notice on Jet Airways to pay about Rs 69 crore as dues soon or face similar consequences in response to which the airline said it would do so by Monday. Jet Airways has not paid a total of about Rs 69 crore worth of dues for January and February which they collected during this period. The company posted a loss of Rs 101.22 crore in the third quarter ending December 31 last year as higher fuel prices, lower fares and rupee depreciation continued to hurt the company. We expect negative action in the stock today not only on account of the above mentioned development but also due to the implementation of the new DGCA rules for pilots’ duty time and rest, which would mean that the airline operator would have to cut down on its flights schedule.
According to The Hindu Business Line, Apollo Tyres plans to invest around Euro 400 million (over Rs 2,500 crore) to set up two new facilities in East Europe and Brazil in the next 3-4 years as it aims to expand its global footprint. The company, which currently has a European subsidiary called Apollo Vredestein, is also keeping its options open to acquire a tyre firm in the Latin American market to start its operations there. The company is planning to start the plant with passenger car radial tyres with an initial capacity of 7-10 million units per year. We expect positive action in the counter today on account of this development.
According to Economic Times, state-run hydropower company Uttarakhand JalVidyut Nigam (UJVN) will invest Rs 2,500 crore to set up two gas-based power plants in a joint venture with GAIL. UJVN’s managing director, G P Patel, told ET that the company has got 50 acres of land in Kashipur and has identified another 55 acres of land in Haridwar for the two gas plants. The majority of the power produced from these plants would be sold to Uttarakhand through a long-term power purchase agreement (PPA). The project is expected to be completed by 2015-16 and initially these two projects will be of 350 MW but later the capacity of these projects would be increased to 450 MW.
Corporate Action
| Stocks Paying Dividend (Ex-Date) | ||
|---|---|---|
| Scrip Name | Action | Rs |
| ACC | Final Dividend | 17.00 |
| Firstobject Tech | Interim Dividend | 0.15 |
| BSE Institutional Turnover | ||||||
|---|---|---|---|---|---|---|
|
| FII | DII | ||||
| Trade Date | Buy | Sales | Net | Buy | Sales | Net |
| 9-Mar-12 | 4,039.93 | 2,755.28 | 1,284.65 | 1,106.66 | 1,119.56 | -12.90 |
| 7-Mar-12 | 2,240.41 | 2,745.00 | -504.59 | 984.58 | 1,114.49 | -129.91 |
| 6-Mar-12 | 2,629.95 | 2,871.17 | -241.22 | 1,238.12 | 1,058.21 | 179.91 |
| Mar , 12 | 15,319.41 | 14,212.44 | 1,106.97 | 6,155.06 | 6,461.61 | -306.55 |
| FII DERIVATIVES STATISTICS FOR 09-Mar-2012 | |||||
|---|---|---|---|---|---|
|
| Buy | Sell | OI (End of day) | Net Position | |
|
| Rs (crore) | Rs (crore) | No. of contracts | Rs (crore) | Rs (crore) |
| Index Futures | 2257.82 | 1766.61 | 522086 | 13953.70 | 491.20 |
| Index Options | 13373.55 | 13217.81 | 1735776 | 46287.09 | 155.74 |
| Stock Futures | 1527.34 | 1488.11 | 995572 | 29009.94 | 39.23 |
| Stock Options | 572.94 | 455.23 | 58153 | 1669.54 | 117.72 |
| Total | 17731.65 | 16927.75 | 3311587 | 90920.27 | 803.89 |
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