Indian Markets May Extend Gains, Open Positive

The Indian equity markets may extend yesterday’s gains and open positive. The SGX Nifty is trading up by 43 points at 4,925, indicating a gap up opening to the markets today.

Overnight, the global stock markets in the US and Europe rebounded sharply with the S&P 500 posting its best session in two months as investors on Wall Street heaved a sigh of relief after China signalled it would support growth while German and French officials said they will work to keep Greece in the euro zone. The Spanish markets though were under pressure as investors continued to fret about the country’s economic situation and banks.

In other global developments, market guru Marc Faber yesterday reckoned that the economy of China posed a larger threat to global risk rather than the ‘insignificant’ Greek economy. According to him, The European Central Bank will be able to support Greece and European tax payers would pay for it. On the other hand, a slowdown in China, the world`s second-largest economy, would have a huge impact on the prices of industrial commodities.

We at DSIJ believe that while the slowdown in China would prove to be detrimental to the world economy, India, on the other hand, could somewhat benefit from this situation as a slowdown in China would mean a drastic fall in the prices of international commodities. However, a weak capital inflow into the country in the aftermath of the government’s inability to spur up any key reforms will work against the tide and spoil the show.

Moving on, the markets yesterday managed to stage a great comeback, but gave up most of the early mornings gains after a sudden fall in the rupee’s value sparked off a late sell-off. The rupee dropped below the psychologically important mark of Rs 55 to the dollar. Consequently, the RBI jumped into an action mode as it excluded the banks’ net overnight open positions from currency futures and options’ segment. The RBI also said that foreign exchange future and options’ positions cannot be offset against OTC trades. 

The RBI capped the position limit in the exchanges for trading currency F&O at USD 100 million or 15 per cent of the OTC market. As the risk of rupee further depreciating remains, the RBI has also allowed banks to use funds from FCNR deposits for granting loans to domestic borrowers to meet working capital needs to attract overseas money. All these above measures have been taken by the RBI to stem this free fall in rupee’s value, but the real deal is that unless the government doesn’t act on its front, the central bank is left with very little headroom to better the macro-economic situation of our country.

In conclusion, for today we see the markets remaining volatile with a positive bias. However, volatility continues to persist as there is a lot of negativity looming on the streets and any bad news on the European front at their opening bell may further mar the mood and send the markets spiraling downwards. We advise investors to remain cautious while taking investment decisions. 

According to media sources, Reliance Industries is seeking a loan of about USD 1 billion to fund its petrochemicals and telecom expansion. RIL has lined up a USD 12 billion expansion of its petrochemical business, the largest since completing its second oil refinery in 2008. The company had earlier this month raised USD 2 billion as loan from German banks. RIL is investing over USD 12 billion over the next 4-5 years in the refining and petrochemical industries. It is setting up an USD 4 billion petroleum coke gasification project that will produce synthetic natural gas to replace expensive LNG as fuel. Also, it is spending USD 8 billion on adding capacities of PFY, PET, polyester and intermediate chemicals such as PTA and paraxylene, besides adding new products such as carbon black and rubber.

According to a press release, integrated textiles company Alok Industries has reported 77.73 per cent growth in net profit after tax to Rs 283.50 crore for the quarter ending March 31. The profit after tax (PAT) during 2010-11 stood at Rs 159.59 crore. The company’s net sales grew by 18.19 per cent to Rs 2,595.38 crore for the period under review over Rs 2,195.87 crore in the same period of the last fiscal. Export sales for the quarter also registered a growth of 40.26 per cent to Rs 814.90 crore as against Rs 580.98 crore in the same period last fiscal. The operating EBIDTA for the quarter stood at Rs 737.44 crore against Rs 575.90 crore, up by 28.05 per cent. Meanwhile, the PAT (after exceptional items) for the 12 months ended March 31, stood at Rs 380.53 crore. The net sales for the fiscal 2011-12 stood at Rs 8,900.86 crore, up by 39.33 per cent from Rs 6,388.44 crore in the last fiscal. Export sales stood at Rs 3,029.56 crore compared to Rs 2,217.25 crore - a growth of 36.64 per cent.

Engineering major L&T Construction has bagged contracts worth Rs 744 crore during the first quarter of the current financial year (2012-13) so far. Its power transmission and distribution segment secured new orders worth Rs 479 crore from key customers like NMDC, Jindal Power Limited and NTPC. An order has been secured from Power Grid Corp for the construction of overhead transmission lines from Barh in Bihar to Gorakhpur in Uttar Pradesh. In its water and solar business, L&T Construction has secured orders worth Rs 265 crore from various customers for the construction of a solar thermal plant at Rajasthan and also an EPC contract for the construction of a pumping station and allied works at Botad Branch Canal from Paliyad to Goma in Bhavnagar district, Gujarat.

According to Business Standard, global firm Crisil has emerged as the lowest financial bidder for the coal ministry’s contract to prepare the methodology for determining the reserve price for coal block auctions. Crisil provides ratings, research, and risk and policy advisory services. Of the six bidders in all, Crisil, SBI Caps and PwC had been shortlisted by the ministry after the technical bids, sources said. Deloitte was also among the early bidders. In February, Coal India Ltd’s subsidiary, Central Mine Planning & Design Institute (CMPDI), on behalf of the coal ministry, had invited an expression of interest for providing consultancy services. CMPDI has been assigned the task of hiring a consultant for the methodology of fixing the reserve price of blocks and finalising the bid document, and assist in the bidding process.

According to Economic Times, UK-based Thomas Cook Group will sell its entire 77.1 per cent stake in its Indian arm, Thomas Cook India, to Toronto-based Fairbridge Capital, owned by India-born billionaire Prem Watsa of the Fairfax Group. The deal is estimated to be worth Rs 1,000 crore, inclusive of the open offer, and at a slight discount to the market.