Markets May Cut Losses, Open Positive

Opening Bias

The Indian equity markets may open positive as investors resume buying activities in the aftermath of the massive bloodbath seen on Dalal Street yesterday. The SGX Nifty is trading up by 15 points at 5,262, indicating a gap up opening to the markets today.

Yesterday, the Indian equity markets and the rupee tumbled heavily as domestic as well as foreign investors cut their long positions, thus signaling towards a further fall in the stock indices against the backdrop of the government’s whimsical determination to press ahead with its tax norms. The jittery sentiments from the other Asian markets following North Korea’s nuclear threat and slower-than-expected recovery in the US with March non-farm payrolls’ report showing that companies added fewer jobs than expected have also weighed heavy on the markets.

Going forward, despite the modest bounce-back expected today, the markets overall would behave in a very range-bound manner as investors and traders on D-Street await clarity on a number of issues ranging from the March quarter results and the RBI’s monetary stance on the domestic front to the outcome of the sovereign debt crisis and the recent slowdown seen in the Chinese and American economies.

In conclusion, for today we foresee the markets remaining volatile with a positive bias. We reiterate our stance that with the March quarter results’ season approaching soon it is better to stick to individual stocks rather than go bullish on any particular sector.

Stocks In Action

According to Business Standard, leading agro-chemical company, Insecticides India, plans to invest Rs 125 crore in the next two years to expand its production capacity. The company also expects nearly 50 per cent increase in turnover to Rs 850 crore this fiscal on the back of robust demand and ongoing expansions. As per our sources, out of the total investment, Rs 25 crore will be invested to set up a new plant and an R&D center in Rajasthan. At present, the company’s Jammu plant has a capacity to produce 61 lakh kg of granules per annum. Its manufacturing facility at Chopanki in Rajasthan has a production capacity of 38 lakh kg of bulk chemicals per annum. The company plans to launch eight products this year in the Indian market. It has launched Pulsor, a fungicide, in collaboration with a Japanese company, Nissan Chemical Industries, in Maharashtra.

Expect some positive action in the urea fertiliser manufacturing stocks like Chambal Fertilizers, RCF, NFL, FACT and Zuari as sources have revealed to us that the Cabinet Committee on Economic Affairs (CCEA) may take up the new investment policy for urea soon. This policy is likely to ensure at least 12 per cent return on equity. The proposed policy aims to reduce the subsidy on urea.

Expect some positive action in the scrip of Gujarat Alkalies & Chemicals as, according to an article appearing in The Hindu Business Line, the government has decided to impose a definitive anti-dumping duty on phosphoric acid imports from Israel and Taiwan. The anti-dumping duty would be applicable on all grades other than agriculture and fertiliser and would last for five years, according to the revenue department. Phosphoric acid is a chemical used in the beverages and pharmaceutical sectors. It is also used in seed processing, sugar juice clarification, sugar refining and food phosphate manufacturing.

According to sources, the Petroleum and Natural Gas Regulatory Board (PNGRB) has directed Indraprastha Gas (IGL) to refund excess tariff that it charged on gas supplied by it. It is believed that the network tariff of Rs 104.05 per MMBTU (million British thermal Units) and additional compression charges at Rs 6.66 per kg for compressed natural gas (CNG) is considered very high compared to the extant PNGRB notified rates. PNGRB had notified a network tariff of Rs 38.58 per MMBTU and a CNG compression charge of Rs 2.75 per kg from April 1, 2008. Hence, the PNGRB directed Indraprastha Gas to reduce its selling prices and refund the difference in the two tariffs with immediate effect. This move by the gas regulator would significantly dent the profitability of IGL as it would imply that the company would have to lower its selling rates of gases with retrospective effect. It is learnt that the company might adopt a legal route to tackle this. However, as for now, after having tumbled 7 per cent on the bourses yesterday, we expect some further negative action in the scrip.

Corporate Action