Indian Markets May Give Up Gains, Open Negative

Indian equity markets may give up its gains and open negative in line with weak global cues. The SGX Nifty is trading down by 66 points at 4867 indicating a gap down opening to markets today.

Overnight, U.S. stocks declined with the Dow industrials ending near a four-month low, as economic reports failed to deflect the latest breakdown in Greece’s attempts to form a coalition. European stocks too ended deep in the red as worries about Greece’s political uncertainty and position in the euro-zone arena overshadowed data showing that Germany’s economy grew in the first quarter. Most Asian stock markets have opened lower tracking weak global cues.

Back home, the markets yesterday ended on a firm note as the rupee rebounded slightly and metal shares rallied on better-than-expected quarterly earnings by JSW Steel. Shares of engineering and construction major Larsen & Toubro also gained on encouraging earnings guidance. However, the sustainability of this rally is a big concern as the rupee continues to be weak. 

The Indian rupee is trading dangerously close to 54-to-a-dollar mark and proving to be a challenge for companies dependent on imports for sourcing inputs.  Markets experts believe that the current global developments are driving investors shun equities and flock dollar thereby also weakening demand for exports. The country’s shady domestic scenario is also to be blamed. A large and rising current account deficit, a bloated fiscal deficit and a prolonged pause in case of reforms, adversely affect the investment environment. 

In order to arrest this decline in the value of rupee, the govt. must take some stringent measures like reviewing the current fuel subsidy situation and decontrolling prices of diesel by aligning them with international benchmarks. The govt. could also discourage excess gold imports by creating opportunities for more productive investments in the economy. Las but not the least, it must speed up its reforms process by expediting the implementation of fiscal measures such as the goods and services tax (GST). Experts believe that GST would be the biggest sop for exports as it would lower costs, improve export performance and have a salutary impact on our trade and current accounts.

In conclusion, for today we see markets to remain volatile with negative bias. We advise investors to remain cautious while making investment decisions. 

Diversified Aditya Birla Nuvo (ABNL) has planned a capital expenditure of Rs 650 crore in the current financial year, more than twice it spent last year. Bulk of the capex will be used to import new technology in its rayon business and to set up a new caustic soda plant. The new caustic soda plant will come up at Patalganga near Mumbai, where ABNL already has carbon black facilities. Meanwhile, company’s fourth quarter consolidated net profit declined to Rs 170 crore, down 42% from a year ago. The rise in depreciation and interest costs primarily relating to 3G investments in the telecom business (Idea Cellular) constrained net profit. In Jan-March it also had Rs 104 crore in provision towards entry tax liability largely related to previous years with respect to its carbon black plant in Renukoot. ABNL's EBITDA was up 11% to Rs 862 crore and revenue rose 15% to Rs 5,994 crore in the quarter.

Shree Cement reported a 73% increase in net profit  at Rs 114 crore for the quarter ended March 2012. It was Rs 66 crore in the same period a year ago. The total income also rose 43% to Rs 1,555 crore from Rs 1,090 crore in March 2011. For the financial year ended March 2012, the net profit was up 27% at Rs 267 crore as against Rs 210 crore in FY11. The total income was up 31% at Rs 4,756 crore as compared to Rs 3,637 crore in FY11. The company declared a dividend of Rs 6 per share.

Hinduja's flagship company Ashok Leyland is planning to invest about Rs 4,150 crore in Tamil Nadu. The proposed investments include a Light Commercial Vehicle (LCV) project in association with its Japanese partner, Nissan. The company also plans to launch two more products by end of this year. Last year, Ashok Leyland-Nissan launched their first product Dost, which came from Ashok Leyland. According to Dasari, the company sold 7,760 units of the vehicle and has managed to grab 17% market share in the LCV market now. Company's performance in 2011-12, according to management has been sluggish due to poor demand in the Southern market, which is the key market for the company, coupled with high interest rates and depreciation charges due to capital expenditure. Also, the company's investment in overseas arms has resulted in a fall in its net profit by around 10% to Rs 565 crore.

Diversified business house Videocon Industries plans to raise $51.02 million (over Rs 270 crore) through issue of securities on a private placement basis from overseas market. In a filing to the BSE, the company said it will issue 157,50,000 Global Depository Receipts amounting to $51.02 million. The securities will be issued to LLIC Sarl at a price of $3.2395 apiece, equivalent to Rs 174 per equity share. Videocon, however, did share details why it is raising this money.

JK Tyre & Industries reported nearly seven-fold increase in its standalone net profit for the quarter ended March 31, 2012 at Rs 86.34 crore. The company had posted a net profit of Rs 12.46 crore in the corresponding period last year. The standalone total income went up by 13.1% to Rs 1,523.55 crore in the fourth quarter of last fiscal from Rs 1,346.35 crore in the year-ago period. For the entire 2011-12 financial year, JK Tyre & Industries posted a consolidated net loss of Rs 31.99 crore as against a net profit of Rs 65.91 crore in the previous fiscal. The consolidated total income during FY12, however, rose by 16.2% to Rs 6,947.10 crore from Rs 5,978.77 crore in FY11.