Indian Markets May Open Positive For 2nd Consecutive Day

Opening Bias

The Indian markets may open positive for a second consecutive day. The SGX Nifty is trading up by 30 points at 5,410, indicating a gap up opening to the markets today.

Benchmark Indices
Index	Closing	% Change
SENSEX	17587.67	0.48
NIFTY	5359.55	0.49
Dow Jones	12959.71	0.29
S&P 500	1371.09	0.02
NASDAQ	2983.66	-0.16
Bovespa	66384.76	-0.48
FTSE	5892.75	0.09
DAX	6901.35	0.31
CAC	3490.06	0.07
LIVE
Hang Seng	21361.16	1.07
Nikkei	9981.88	0.93
Shanghai	2437.93	0.13

Overnight, the US stocks extended gains into a fourth session ahead of a monetary policy decision from the Federal Reserve and a rush of economic releases this week. Consequently, the Asian shares are also seen trading on a firm note in the early morning trades. 

Currency Rates
	Rs/$	Rs/Euro	Rs/GBP	Rs100/JYP
RBI Rate	49.9448	65.3999	78.2535	60.7200
Future	50.1925	65.7700	78.4500	61.0800

On the domestic turf, the markets rallied yesterday over the positive turnaround in the IIP data released for the month of January 2012. The data released by the Central Statistical Office (CSO) showed that output at factories, utilities and mines jumped to 6.8 per cent as against a weak 2.5 per cent (revised) in the month of December 2011. Last year, in January 2011, the IIP stood at 7.5 per cent.

While the recent IIP data would come as respite to some, we at DSIJ are cautious about the credibility of these numbers and their use while making policy decisions. After dipping from 3.6 per cent in July 2011 to -5.1 per cent in October 11, the IIP for November suddenly shot up to 5.9 per cent. Thereafter, for December it dipped back to 2.5 per cent and now is back up to 6.8 per cent. This seriously shows the erratic and volatile nature of the industrial production data.

Key Global Indicators
	Gold (Rs/10gm)	Crude ($/bbl)
Spot	27521	125.82
% change	-	0.21
Future	27980	106.99
% change	-0.01	0.61

Also, some of the items that have contributed to this rebound in January have been shocking. Items like zarda/tobacco products, food & beverages items, printing & publishing items and newspapers have been some of the key contributors, according to a press statement issued by the CSO. Our advice to readers is to not consider seriously the current set of IIP figures as a true reflection of the economic activity. In our view it is just another flash in the pan on the eve of the RBI’s monetary policy review expected tomorrow.   

In conclusion, we expect the markets to open positive but turn volatile towards the mid-afternoon session. They may also give up their early gains. Our suggestion 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 a BSE press release, Axis Bank said that it would raise USD 35 million (about 150 crore) from the overseas markets under its medium-term-note program (MTN). The board of directors has approved the allotment of senior notes aggregating to USD 22 million through its DIFC Dubai branch and USD 13 million through its Hong Kong branch under the MTN Program. 

According to Economic Times, Punjab National Bank (PNB) plans to undertake capital infusion to the tune of Rs 2,360 crore to maintain the financial strength of the bank. While the bank would pitch for capital infusion of Rs 1,075 crore from LIC of India, an amount of Rs 1,285 crore has been sought from the government, said chairman and managing Director of PNB, K R Kamath. Stating that the bank continues to hold its leadership position in business, network and technology adoption, Kamath said that the capital infusion would impart flexibility in its operations by adding to the bank’s financial strength. The PNB CMD ruled out any adverse impact of the telecom scam on the bank. 

According to a BSE press release, pump manufacturer WPIL said that it would acquire the pump business of South African PSV Holdings Ltd for ZAR (South African Rand) 54 million (about Rs 35 crore) in an all-cash deal. The company said that the acquisition will be made through its Singapore subsidiary, WPIL International Pte. PSV Holdings Ltd, a listed company based in South Africa, is a specialised industrial engineering group focusing on pumps, spares, valves, engineering linings, industrial supplies, fuel pumps, dispensers and cryogenics. On the other hand, WPIL is a Kolkata-based company, having presence in various segments of the pump business, these being used for water supply, barge pump stations, irrigation, thermal power plants and fire-fighting, among others. 

According to Business Standard, GAIL India has said that it plans to commission the long-delayed LNG terminal at Dabhol in Maharashtra by the month-end or early April. GAIL, which owns 31.52 per cent stake in Ratnagiri Gas and Power Co, the firm that owns the 1,967 MW power plant and the adjacent 5 million tonnes a year LNG import terminal, has contracted a shipload of gas (LNG) to commission the facility. Work at the LNG terminal was 70-80 per cent complete when RGPPL took over the plant from the bankrupt US energy major Enron Corp in 2005. GAIL mechanically completed the plant in late 2010 and the dredging work of the sea channel leading to the Dabhol port was completed last year. However, since the construction of the breakwater facility is not yet complete, the terminal will be commissioned through smaller ships, thereby leading to only 30-40 per cent capacity utilisation. The construction of a breakwater that will guard ships against high tides is not likely before 2013-14 and the LNG terminal will become fully operational only after the completion of such a facility.

According to The Deccan Herald, competition watchdog CCI has ordered a probe into allegations that the coal giant CIL is imposing unfair conditions for the supply of coal to Maharashtra State Power Generation Company (MahaGenco). The probe has been ordered after a complaint was filed by MahaGenco against Coal India and its subsidiary Mahanadi Coalfields. The complaint, the official added, has been admitted under Section 4 of the Competition Act, 2002. Section 4 pertains to the abuse of dominant position by market players.

According to Reuters, a trust controlled by Wipro’s billionaire founder Azim Premji plans to sell up to 35 million shares or around 1.4 percent stake in the software company on the stock market via offer for sale route (auction method) to fund education projects. Premji and his family own about 79 percent of India’s third-largest software exporter through various units that include the Azim Premji Trust, which will sell the shares. The stake of about 35 million shares is valued at about Rs 15.32 billion based on its Monday market closing price of Rs 437.75. As part of the auction process, Wipro said a floor price for the bidding would be given to the stock exchange in a sealed envelope before the opening of the sale on Wednesday.

According to CNBC-TV18, Vijay Mallya-owned troubled Kingfisher Airlines owes Bank of Scotland USD 21.6 million in overdue lease payments for 10 ATR 72-500 aircraft, a UK High Court has ruled, paving the way for potential action by the bank to recover the outstanding sum. As per news reports, Bank of Scotland had brought the action on behalf of a consortium of lenders against Kingfisher’s parent company, United Breweries Holdings, which had guaranteed the airline’s obligations.

Corporate Action