Markets May Open on Flat positive Note

Indian markets may open Flat positive ahead in line with global cues. The SGX Nifty is marginally up by 10 points at 4995.5 indicating a flattish gap up opening to the markets today

The Indian markets had a strong trading session yesterday as the broader indices closed higher by almost 1.33 per cent. Nifty shot upwards towards the 4,985 mark, inching towards the 5,000 level while the Sensex also sailed higher by closing at sub 16,416 levels. This was on the back of recovery seen in the rupee which strengthened against the dollar and the positive global cues, especially from the European region after the opening polls. The rally was led by the financial stocks. 

Overnight, the US stock markets fell marginally and the European markets too lost their early gains and closed lower in the red zone. As per Bloomberg reports, this was due to investor wariness about the deepening euro zone crisis and was also fueled by reports that Spain’s government could bail out an ailing bank with sovereign debt. The Spanish 10-year bond yields rose to 6.53 per cent, their highest since November 2011 before the European Central Bank injected cheap three-year loans into the banking system.

In the coming week, a fresh measure of the US’ job growth will grab the spotlight in the financial markets, but that will compete for investor attention with Greece’s potential exit from the euro zone. However, with Greece looking positive now, Spain has raised concerns since it is a bigger economy.

The rupee has recovered strongly against the dollar giving some relief to the economy and is currently trading at 55.25 against a dollar, after creating a fresh low in CY2012. Meanwhile, Brent crude oil price rose on Monday above USD 107 per barrel on account of the Middle East oil supply worries which resurfaced as talks over Iran’s nuclear program faltered. The crude oil prices are still above the comfort zone of the economy. Along with this, the result season has made the market more volatile. 

One should watch out for stocks like SAIL, HPCL, ONGC, Aurobindo Pharma, Power Grid Corp, Welspun Corp, United Spirits, and Hotel Leela etc. that are going to post their March quarter results today. These stocks may see a price movement.

For the Week ahead the market will remain volatile as the May derivatives contracts expire on Thursday, May 31. However on Friday Government will announce the GDP numbers for March Quarter which will help the investors to decide on the market direction. As this also give cues to RBI on its next course of action on the monetary policy front in the aftermath of rising inflation. 

In conclusion for today we expect the markets to remain volatile with negative bias as investors are jittery in this uncertain environment over Euro Zone concern. Also this week we have May month expiry and traders roll over positions from the near-month May 2012 series to the June 2012. 

Ranbaxy Laboratories has received US approval for acne treatment drug Absorica and expects a US launch in the fourth quarter of this year. The product was jointly developed by Canadian group Cipher Pharmaceuticals and Galephar Pharmaceutical Research while Ranbaxy holds the US marketing rights. Post approval, Cipher will receive a USD 9 million milestone payment from Ranbaxy of which USD 4.5 million would be shared with Galephar, which is a Canadian company. Cipher will also get royalty on net sales from Ranbaxy – majority-owned by Japanese company Daiichi Sankyo. This is positive news and we may see some positive movement in the counter today.

State-owned Coal India Ltd, the largest coal producing company in India, yesterday announced its results for the March 2012 quarter, which remained quite muted. The company witnessed a 5 per cent drop in consolidated net profit at Rs 4,013 crore as compared to the same period last year. However, the consolidated total income jumped by 32 per cent to Rs 21,747 crore from Rs 16,485 crore in March 2011. During the quarter the employee cost jumped by 89 per cent to Rs 9,069 crore, which was Rs 4,806 crore a year ago. The counter will see some pressure on the back of posting muted result for the quarter ended March 2012.

NMDC, the largest iron ore mining company in the country, reported subdued results for the March 2012 quarter. The net sales of the company declined by 31 per cent on a YoY basis to Rs 2,594 crore and the net profit declined by 21 per cent on a YoY basis to Rs 1,642 crore. The stock will remain under pressure today on the back of the subdued result.

Hotel Leela Venture Ltd yesterday made a statement to the media that a promoter group firm, Leela Lace Holdings Pvt Ltd, has pledged shares aggregating to a stake of 18.56 per cent to State Bank of India (SBI) and Bank of Baroda (BOB). LLH holds over 18.86 crore shares, representing 48.64 per cent of Hotel Leela Venture and it has pledged over 16.35 crore shares representing 42.18 per cent paid-up capital as on May 22, 2012, the note said. The company is undergoing a corporate debt restructuring process and the money that will be received through the pledging of shares will help it to meet its short-term capital requirements. It is reported to have piled up nearly Rs 4,000 crore in long-term and short-term debts.

As per a news report, Moody’s, the biggest rating agency in the world, stated that the depreciating rupee will not have much impact on India’s sovereign rating as only 7 per cent of the total government debt is placed overseas, comprising 5 per cent of the gross domestic product. It said that the problems will be bigger for private companies who have huge foreign currency borrowings as the falling rupee will raise the cost of paying back the borrowings. Still, the agency said that the total private sector external debt is at a “relatively low” 16 per cent of GDP, meaning the impact on the sovereign ratings from this private sector exposure would also be limited. The rupee has been hitting record lows against the dollar because of concerns about the country’s widening current account gap as well as the fiscal deficit.