Indian Markets May Cut Back Losses, Open positive

Indian equity markets may cut back on yesterday’s losses and open positive. The SGX Nifty is trading up by 15 points at 5232 indicating a gap up opening to markets today.

Overnight, U.S. stocks extended gains into a third day as better-than-expected data on housing and an upbeat forecast from Citrix Systems Inc. helped lift the S&P 500 Index above 1,400 for the first time in three weeks. Elsewhere European stocks managed to hold themselves and end on a choppy note after well-received earnings from Royal Dutch Shell and Volkswagen helped counter a steeper-than-expected drop in euro-zone economic sentiment.

Back home, the April month expiry for the Nifty F&O series has ended on a flattish note. For the month of May it is believed that traders have carried forward some bearish bets giving rise to the prospects that markets in near term would remain gloomy. The premium of Nifty Futures over the spot Nifty has decreased to 25.7 points from 32.55 points. Though the market wide rollover to May in the Nifty is said to be higher at 71.86 per cent vs 58.46 per cent last month, the picture is quite different in absolute terms if one looks at the Open Interest (OI). The futures OI at the start of May series stood at Rs 36912 crore as against Rs 37600 in the month of April. There is a broad consensus lurking on the streets is that Nifty may consolidate between the 5100-5200 levels. 

In conclusion, for today we see markets to recover from yesterday’s fall but advice investors to remain cautious going ahead. We reiterate our stance that with the March quarter results season ongoing it is better to stick to individual stocks rather than go bullish on any particulars sector.

According to press release on the BSE, Drug firm Strides Arcolab today reported a consolidated net profit of Rs 642.18 crore for the quarter ended March 31, 2012, primarily on the back of its entire stake sale in Australian arm 'Ascent Pharma health'. The Bangalore-headquartered firm had sold its entire stake in Australian subsidiary Ascent Pharma health to Watson Pharmaceuticals for AUD 375 million in January this year. The company had posted a net profit of Rs 45.08 crore in the same period last year. Net sales of the company stood at Rs 527.47 crore for the first quarter ended March 31, 2012, as against Rs 487.47 crore in the same period previous year.

According to sources, the Power Ministry may not accept Coal India's minimum penalty clause in the fuel supply agreement and may seek Prime Minister Office's intervention on the issue. State-owned Coal India Ltd (CIL) in its board meeting last week approved signing of the agreements with the power producers for minimum assured supply of the fuel, following a directive from the government. Failure to supply at least 80% of the committed quantity to the power firms would attract a penalty of 0.01%. The penalty clause would be operational after three years.

According to press release on the BSE, the nation’s foremost tyre manufacturer, MRF, has reported a 67 per cent rise in net profits to Rs 150.13 crore in the March quarter of 2012 as against Rs 89.85 crore in the corresponding quarter of the previous year. The reason for the stupendous rise in bottomline can be attributed to the softening rubber prices, which has helped the company to report an expansion in its operating and net profits margins. The healthy increase in automobile sales during the January-March quarter after the lull of CY11 has also helped MRF to post good earnings’ growth.

According to Business Standard, The Competition Commission of India (CCI) has levied a penalty of Rs 252.44 crore on United Phosphorus for discrepancies in bidding in a tender of Food Corporation of India (FCI) and collective boycott of another tender of FCI. United Phosphorus has said in a filing to the BSE that it was made aware of these allegations from an order on CCI's website dated April 23, 2012. CCI has alleged that UPL has violated certain sections of the Competition Act, 2002. A penalty has been levied on the company and two other manufacturers of aluminium phosphide tablets in respect of alleged cartelisation and collusive bidding in a tender of FCI for 600 million tonne of these tablets in 2009 and collective boycott of another tender of FCI in 2011. UPL has said that it believes there is no violation on its part as alleged by the CCI and it will in due course, take steps to file an appeal against the order before the Competition Appellate Tribunal.