Markets May Open Sideways As Investors Await FII Reaction On Budget
DSIJ Intelligence / 19 Mar 2012
Indian markets may open sideways as investors and traders on Dalal Street turn their attention towards the FII’s reaction on the Budget 2012-13. The SGX Nifty is trading up by 5.5 points at 5338 indicating a flattish gap up opening to markets today.
Opening Bias
The Indian markets may open sideways as investors and traders on Dalal Street turn their attention towards the FIIs’ reaction on the Union Budget 2012-13. The SGX Nifty is trading up by 5.5 points at 5,338, indicating a flattish gap up opening to the markets today.
| Benchmark Indices | ||
|---|---|---|
| Index | Closing | % Change |
| SENSEX | 17466.20 | -1.19 |
| NIFTY | 5317.90 | -1.16 |
| Dow Jones | 13232.62 | -0.15 |
| S&P 500 | 1404.17 | 0.11 |
| NASDAQ | 3055.26 | -0.04 |
| Bovespa | 67684.10 | -0.10 |
| FTSE | 5965.58 | 0.42 |
| DAX | 7157.82 | 0.19 |
| CAC | 3594.83 | 0.41 |
| LIVE | ||
| Hang Seng | 21362.02 | 0.21 |
| Nikkei | 10154.82 | 0.25 |
| Shanghai | 2398.65 | -0.25 |
It was a busy last week for the Indian equity markets. There were a series of economic events that were supposed to affect the stock markets. While the Railway Budget turned out to be a political fiasco, the RBI monetary policy against the backdrop of the February headline inflation showing some signs of pressure emerged as expected. The central bank, after having cut back on the CRRs to infuse some much-needed liquidity into the system, decided to maintain a status quo on key policy rates.
With the GDP having dipped to its second-lowest point in a decade at 6.9 per cent for FY12, the government was required to introduce some fast-paced reforms in order to enable the RBI to consider easing its monetary stance which would in turn help the economy to achieve the projected 7.6 per cent in FY13E. However, weighed down by political pressure, the budget announced by Finance Minister Pranab Mukherjee on Friday proved to be a ‘no brainer’ as it neither addressed the core needs of bringing reforms back on track or reduce the pressure that the Indian economy has been reeling under for quite some time.
| Key Global Indicators | ||
|---|---|---|
|
| Gold (Rs/10gm) | Crude ($/bbl) |
| Spot | 27580 | 126.27 |
| % change | - | -0.10 |
| Future | 27884 | 107.28 |
| % change | 0.12 | 0.21 |
After having started his budget speech on a strong and hard-hitting note, it turned out to be a disappointment as the FM did not bother addressing key issues of reducing subsidy burden and de-regulating key items like diesel and urea which have been the main cause of stress over the past one year.
Though there was some headway in the form of the GST or DTC bill, there still exists no time-frame about when these would see the light of the day. The much-coveted multi-brand retail FDI allowance which would help improve the overall supply chain and reduce pilferage activities also continues to dither under the realms of the government as the FM failed to provide any roadmap here too. From the capital markets’ point of view, given the pressure that equities have been facing on the volume front, the proposal to introduce the Rajiv Gandhi Equity Scheme or the lowering in STT would also not augur too well for investors.
| Currency Rates | ||||
|---|---|---|---|---|
|
| Rs/$ | Rs/Euro | Rs/GBP | Rs100/JYP |
| RBI Rate | 50.3130 | 65.8262 | 79.0468 | 60.2800 |
| Future | 50.3300 | 65.8050 | 79.1675 | 60.1475 |
In conclusion, we expect the markets to remain volatile as traders and investors on the street now await cues from the FIIs’ reaction on the budget. Our advice to readers is to adopt a ‘wait and watch’ strategy as there are talks that the markets would continue to give up gains for a little while more before turning to other fundamentals like macro-economic factors, corporate financial performance and global market cues for guidance.
Stocks In Action
The total plan outlay for the petroleum sector has increased to Rs 79,727.88 crore in 2012-13 as opposed to Rs 69,882.71 crore in the previous year. Of that, ONGC plans to invest over Rs 33,065 crore in exploration and production of oil and gas - a 5 per cent increase over capital expenditure in 2011-12. IOC has scaled down its capex for the next fiscal to Rs 10,000 crore as against a spending of Rs 11,000 crore in the current year. The spending would be incurred on core refining and marketing business and in oil and gas exploration. GAIL India has planned a capex of Rs 9,446.77 crore in the next fiscal as against Rs 6,878.96 crore in the current year. This would include spending on its core gas transmission and marketing business and on its petrochemical expansion. BPCL and HPCL have planned a capex of Rs 4,479 crore and Rs 3,467.43 crore respectively.
Expect some negative action in the stocks of ONGC and Oil India today as the two oil & gas majors are expected to take a huge hit in their financial performance owing to the recently announced hike in crude oil cess levied during the budget 2012-13 last Friday. According to a research report by Centrum Broking, the increase in cess (keeping all the other variables constant) is likely to impact the upstream companies significantly with downward revision in earnings of 10 per cent for their FY13E and FY14E earnings’ expectations. The report further adds that although cess is cost-recoverable while calculating the profit on petroleum for the upstream companies, the absolute impact in earnings would still be substantial.
According to Business Standard, the country’s biggest gas importer, Petronet LNG, plans to reduce the time for capacity expansion of the Dahej terminal by more than a year to cash in on the huge domestic gas shortage. The company is working on a strategy to expand the terminal’s capacity by 50 per cent to 15 million tonnes by first introducing the re-gasification and marine facilities. This would enhance the capacity in two years, even without the storage tank.
According to DNA, MOIL, India’s largest manganese ore producer, is planning a foray into the power sector as it searches diversification and growth opportunities and battles flat revenues from its core operations. The state-owned firm has floated an expression of interest (EoI) seeking a tie-up with private mine developers for jointly securing, exploring, mining and commercially exploiting coal blocks allotted under the government dispensation route. Depending on the response, MOIL is expected to sign one or more memoranda of understanding with a provision for ultimately converting them into special purpose vehicles (SPVs) and joint ventures.
According to Economic Times, The Future Group is negotiating as many as 18 divestment and fund-raising transactions simultaneously, including inducting a strategic partner in its flagship Big Bazaar stores, as it seeks to pare its near Rs 7,800 crore debt and put its finances back on track. New ventures and rapid expansion of the existing businesses made the group borrow heavily but consumer slowdown and low returns from the financial services’ ventures have hit it hard. The interest costs have risen substantially, dragging down profits in the first half of the current fiscal.
Corporate Action
| Stocks Paying Dividend (Ex-Date) | ||
|---|---|---|
| Scrip Name | Action | Rs |
| ONGC | 2nd Interim Dividend | 1.50 |
| BSE Institutional Turnover | ||||||
|---|---|---|---|---|---|---|
|
| FII | DII | ||||
| Trade Date | Buy | Sales | Net | Buy | Sales | Net |
| 16-Mar-12 | 3,490.69 | 2,607.11 | 883.58 | 1,201.53 | 1,971.92 | -770.39 |
| 15-Mar-12 | 2,375.95 | 2,219.93 | 156.02 | 809.83 | 1,199.00 | -389.17 |
| 14-Mar-12 | 3,813.19 | 2,153.91 | 1,659.28 | 1,285.06 | 2,142.17 | -857.11 |
| Mar , 12 | 32,133.88 | 26,156.71 | 5,977.17 | 11,516.35 | 14,069.99 | -2,553.64 |
| FII DERIVATIVES STATISTICS FOR 16-Mar-2012 | |||||
|---|---|---|---|---|---|
|
| Buy | Sell | OI (End of day) | Net Position | |
|
| Rs (crore) | Rs (crore) | No. of contracts | Rs (crore) | Rs (crore) |
| Index Futures | 3634.11 | 3292.60 | 583070 | 15530.74 | 341.50 |
| Index Options | 38428.71 | 40932.31 | 1847735 | 49126.35 | -2503.60 |
| Stock Futures | 2738.73 | 2967.87 | 1047432 | 30382.46 | -229.15 |
| Stock Options | 1428.20 | 1368.99 | 59344 | 1719.66 | 59.21 |
| Total | 46229.74 | 48561.78 | 3537581 | 96759.21 | -2332.04 |
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