Indian Markets May Give Up Gains, Open Negative

Opening Bias

Indian equity markets give up yesterday’s marginal gains and open negative. The SGX Nifty is trading down by 85 points at 4757 indicating a gap down opening to markets today.

The markets yesterday managed to present the investors with some sigh of relief as the closed in the green zone. Though the markets kept shedding few points every hours, they still managed to finish the day in positives. The negative run of the rupee has not stopped yet though as it stooped down to a new low of Rs 54.58 per dollar.

However, overnight the global markets in US and elsewhere in Europe have continued their weak run with the Dow industrials down for an 11th out of 12 sessions, as a negative gauge of manufacturing in the Philadelphia region added to worries about Europe. Manufacturing in the Philadelphia region was seen contracting in May for the first time in eight months.

Consequently the contagion effect could flow down into our markets and we may a see a negative run in the stocks today. However the order of the day would be majorly dictated by India’s largest PSU bank State Bank of India announcing its March quarter results. Analysts on the street expect SBI to report a net profit of Rs 3,580 crore for the fourth quarter of FY12 as against Rs 21 crore in the same period a year ago period. Even though it looks like a phenomenal growth in its net level one must not forget the high amount of provisions that the bank wrote off last year in a bid to clean its books of account.

Net interest income or the difference between interests earned and paid out, is likely to grow 46% y-o-y to Rs 11,777 crore. Loan book would expand by 16-18% y-o-y while deposits should rise by 14%. Investors on D-Street must keenly watch out for factors like the asset quality, restructuring, slippages and losses in equity investment portfolio.

In conclusion, for today we see markets to remain volatile with negative bias. However, a positive turnaround by SBI could help lift market sentiments. We advise investors to remain cautious while making investment decisions.

Stocks In Action

According to press release on the BSE, Mahindra Satyam , a part of Mahindra group, has reported a better than expected growth of 73.38% quarter-on-quarter in its consolidated net profit of Rs 534 crore for the fourth quarter of FY12 due to one-time gain. Income from operations declined 3% to Rs 1,666 crore in the quarter ended March 2012 as against Rs 1,718 crore in the December ended quarter of 2011. The company reported one-time gain of Rs 109 crore during the quarter. Analysts on average had expected net profit at Rs 220 crore and revenues at Rs 1,655 crore. EBITDA margin stood at 17.5% in the January-March quarter of 2012.

As per the media reports, law minister has concluded that the gas price of US$ 4.2/mmbtu can be increased before FY2014 if both GoI and Reliance Industries agreed on the matter. We believe the news flow is a sentimentally positive for Reliance Industries. However, the key thing to watch out is the Government’s decision on the matter.    

According to press release on the BSE, Two-wheeler major Bajaj Auto today said its net profit declined 44.85% at Rs 772 crore for the fourth quarter ended March 31, 2012. The company had posted net profit of Rs 1,400 crore in Q4, 2010-11. Net sales of the company, however rose to Rs 4,515 crore for the fourth quarter, as compared to Rs 4,030 crore in the same period of previous fiscal. For the year ended March 31, 2012, the company posted a net profit of Rs 3,004 crore, as against Rs 3,340 crore during 2010-11. The company's net sales in 2011-12 rose to Rs 18,880 crore, as against Rs 15,897 in the previous fiscal. The company's board, which met today, recommended a dividend of Rs 45 per share (450%) for 2011-12.