Markets Fragile, April Inflation Eyed

As we expected in the morning update, the markets have opened sideways today. Though they have gained a bit since the opening, we still believe that the current state of the equity markets is quite fragile. The gains do not look sustainable today, and there may be an inverse reaction if the inflation numbers come in higher than the street expectations, which are at 6.7%. In the last week, the IIP numbers came in negative, showing that the economy is not in a healthy shape. Whatever has already been done is not enough, and more efforts are required.

Globally, the equity markets were trading with a weak sentiment in the last week after the political crisis in Greece. There are renewed fears on the debt crisis, and the impact of the same was seen on the global indices. On the back of the same, the Asian indices are trading with marginal gains, though the European fears are weighing higher on these indices.

The rupee has marginally appreciated against the US Dollar and the Euro this morning, but may come under pressure further in the day.

Among the sectoral indices, except for Oil & Gas, all the other indices are trading in the green at the moment. Metals and Bankex have gained 1% each at this hour.

From the Sensex stocks, Bajaj Auto has gained 2.43%. The company is expected to post its earnings results in this week, and investors are buying the stock on favourable expectations. The two-wheelers category is expected to keep posting good sales mainly due to robust rural demand, and hence the stock has surged.

The shares of ICICI Bank have surged by 1.73%. Recently, the bank has increased its foreign currency deposit rates. Metals stocks such as Jindal Steel, Sterlite Industries and Hindalco are also top on the buyers' list. The shares of SBI have gained over 1% as the bank will post its quarterly performance update on May 18, 2012. Coal India is also on the buyers' radar, and its shares are up by 0.89%. The company is yet to come up with any concrete solution to the fuel supply pact. ONGC, on the other hand, is down by 1.47% over the security concerns at its offshore oil fields. According to an Economic Times article, ONGC Videsh (OVL) is also expected to give up a Vietnamese oil block after it failed to drill wells.

In individual stocks, Manappuram Finance has rallied 7%, with the company expected to post its quarterly earnings in this week. Divi’s Laboratories has rallied by 4% after the company posted handsome a 24% growth in its earnings. It also recommended a dividend of Rs 13 per share with an effective dividend yield of 1.58% on Friday’s closing price. The shares of Jain Irrigation and Chambal Fertilisers are also trading up after their quarterly results posted in the last week. Lupin, which tanked nearly 3% after the company paid higher taxes in Q4, is back on the buyers’ radar, and the stock has jumped 2.53%.

Companies like Nakoda Ltd, Elecon Engineering, Relaxo Footwear, Atul Auto, Ramkrishna Forgings, Tamboli Capital and Jammu & Kashmir Bank have recommended divideds this morning.

Colgate Palmolive and Berger Paints have reported new highs today. Kernex Micro and MTNL are trading at new lows.

The market breadth, which indicates the overall health of the market, is positive as more stocks have advanced.

Ahead today, we expect the markets to remain volatile with a negative bias.