Markets Will Continue To Open In Negative Amid Slower Economic Growth And Weak Global Markets

The Indian markets may continue to open on a negative note ahead in line with the global cues and weak economic data. The SGX Nifty is down by 38 points at 4,885, indicating a negative gap down opening to the markets today. This will be the third consecutive negative opening of the markets, indicating a bearish mood among the investors.

The Indian markets had a negative trading session yesterday as the broader indices closed lower by 0.57 per cent. Nifty closed at 4,924 while the Sensex closed near the sub 16,218 level, inching back towards the 16,000 mark. This was due to weak GDP numbers for the March quarter and the struggling global markets. The Indian economy grew by 5.3 per cent and this marked the eighth successive quarterly decline and the slowest pace in nine years. For the full year FY12, the economy grew at 6.5 per cent. However, the government announced the new national telecom policy (NTP) 2012 which helped the markets to trim some of the losses in the last one hour of the trading session. The NTP proposes to abolish roaming charges on mobile phones and to allow users to retain the same number across the country.

Overnight, the US stock markets tumbled yesterday on account of the increase in the jobless claim data in the week ended May to 3,83,000 from 3,73,000. Also, persistent fears over the euro zone and the weak US data drove money out of equities and into cash and bonds. The European markets added more concerns across the globe as the rising bond yields are at their all-time high, thus increasing the cost of borrowings. Further, fears have grown about problems in Spain as well as in Greece, with the possibility of the latter leaving the euro zone, given the fact that the voters’ opposition to the terms of an international bailout deal for the country will spread to other European nations.

Investors should watch out for stocks like McNally Bharat Engineering and MphasiS which are due to post their March 2012 quarter results today. These stocks may witness volatility in their prices. In conclusion, for today we expect the markets to remain negative on the back of the slowdown in the economy and weak global cues, especially from the European and Asian regions.  The Asian markets will see further downfall as China’s PMI data for the month of May has declined to 50.4 as against 53.3 in April. Further, Europe remains one of the major importers from China and with slowing down in the economy the exports from China will take a hit, raising concerns over the slowdown of the Chinese economy. 

Stocks In Action

According to media reports, Spicejet will be the first carrier to import ATF directly as they hope to take the delivery of the first shipment in early July. Early in February, the government had allowed airlines to import fuel directly which would help those aviation players posting heavy losses. On April 18, the director general of foreign trade, an apex government authority on exports and imports, allowed Spicejet to import aviation fuel directly. With the crude prices moving closer towards the 100 dollar mark, the direct import of fuel will help the company to save fuel costs. On the back of this news one may see a positive movement in the share price of Spicejet in today’s trading session.

Mahindra and Mahindra (M&M) plans to launch six new models this year and has a capex plan of Rs 5,000 crore for the next three years. Further, the growth on the tractor front was lowered to 5-6 per cent against the previous expectation of 10-12 per cent for FY12. Also, the XUV500 car will be rolled out in Australia, Chile and Western Europe as early as next month. The car has already received good response form South Africa and Brazil. On the back of this news, one could see some volatility in the share price of M&M in today’s trading session.

Gabriel India, a small-cap company, yesterday informed the exchange that its board has approved a bonus issue. The board has declared bonus in the ratio 1:1, i.e. one bonus share for every one held. On the back of this news, there could be some volatility in the share price in today’s trading session.

According to media reports, Reliance Power and Kakinada Seaports, along with Royal Dutch Shell, will jointly set up a liquefied natural gas (LNG) terminal on India’s east coast to meet local gas demand. The terminal will help Reliance Power to secure fuel supplies for its 2,400 megawatt (MW) gas-fired project at Samalkot in Andhra Pradesh. The company’s other plants and projects are facing local gas shortage issue which prevents them from full operation. On the back of this news, there could be some volatility in the share price in today’s trading session.

According to media reports, India’s leading mattress-maker, Kurlon, is planning to raise Rs 200 crore to finance its expansion plans for FY13. The company’s plans also involve selling a 10 to 15 per cent stake to private equity (PE) firms with whom talks are in the final stages. The expansion drive includes adding capacity and increasing the dealership network to 10,000 from the current 7,000. A major chunk of the funds will go towards setting up a new Rs 100 crore factory in Gujarat which will increase its monthly manufacturing capacity from 1,60,000 mattresses to 2,20,000 mattresses. The stock may see some volatility in today’s trading session.