Positive Domestic And Global Cues Would Drive Market

The Indian markets yesterday had a good relief rally when both the broader indices closed almost 3 per cent higher, with Nifty very much closer to the 5K mark. Further, on the back of speculation that the RBI may cut the rate in its monetary policy during its meeting scheduled for June 18, 2012, positive sentiments helped the markets to move northwards. Today one may see the Nifty inching higher and reaching 5,050 in the trades. Also, the prime minister’s meet yesterday focused on infrastructure development and this will help the markets to inch higher. According to media reports, the PM has announced a slew of new projects in a big push to critical sectors such as railways, aviation, shipping, coal and power.   

Overnight, the US markets closed on a good positive note and witnessed one of the best gains of CY12. All the three major indices i.e. Dow Jones, Nasdaq and S&P closed higher by more than 2.25 per cent. This was after the investors speculated that the US fed may go for the third round of quantitative easing (QE) which will spur growth in the world’s largest economy. The European market closed the day on a higher note too with the FTSE, CAC and DAX closing their trading above 2 per cent. The European Central Bank (ECB), in its meet yesterday, kept the rate unchanged and said that it cannot compensate for policy inaction from the respective euro regions. It has recommended taking quick measures so that the euro regions can come out from their sovereign debt crisis.

On the other hand, the Asian markets like Hang Seng and Nikkei are trading higher by more than 1 per cent while Shanghai is trading marginally in the red zone, down by 0.1 per cent. The Asian markets are trading higher as they join the overnight’s US and Europe party.

The depreciating rupee continues to be a major headwind for our economy, currently trading at 55.4958 against a dollar. Brent crude has come down from the level of USD 125 in the past couple of months to USD 100 per barrel, which is good for our economy. However, the depreciating rupee has offset some of this benefit.

In conclusion, we expect the markets to open positive with the combination of domestic and global cues. However, we would advise investors to play with caution.

Stocks In Action

The country's largest car maker, Maruti Suzuki India, has cut the production of some petrol models, including the best selling Alto, as sales of such cars have declined due to high fuel costs.  Maruti Suzuki India’s (MSI) managing executive officer for marketing and sales, Mayank Pareek, in a statement given to the media stated that the sales of petrol cars have dipped quite low as the market sentiment is down. As such, the production has been adjusted accordingly. The company had recently stopped the production of petrol models to the extent of 8,000-8,500 units over three days, including the Alto, M800, A-Star, Estilo and Omni, to prevent inventories piling up further. This development will have a negative impact on the scrip today.

As per a media report, agro-chemicals maker, Crystal Crop Protection, has acquired the pesticide Luphos-36 from Mumbai-based Cheminova India. The company has stated that the present acquisition shall help the company move up the value chain in the agro-chemical space and offer the farming community the best solutions. Luphos-36 is an insecticide that is effective on the sucking pest of cotton, paddy, castor, cardamom, tea, coffee, coconut, mango, sugarcane and some caterpillars that feed on pulses. The company is eying to promote the brand in major states, including Punjab, Haryana, Andhra Pradesh, Maharashtra, Gujarat, Rajasthan, Tamil Nadu, Karnataka, MP, Assam and West Bengal. This is Crystal’s second acquisition after it acquired Hyderabad-based Rohini Seeds in December last year to strengthen its footprint in the agriculture inputs market. The company is in an acquisition mode and will witness decent growth in the coming years. The acquisition will have a positive momentum on the company’s scrip today.

JP Morgan Securities has cut its IT spending growth outlook for 2012 as global production trends and spending by China has slowed down, not to forget the rising macro-economic uncertainties in Europe and the United States. It has cut the revenue growth estimates for most IT hardware segments, with the exception of tablets. The growth for software companies is expected to be lower at 2.5 per cent, compared with their previous estimate of 5.5 per cent. As per a company statement, about 35-40 per cent of software growth is at risk because of the economic turmoil across Europe and the US. It now expects the IT service industry to grow at about 1.3 per cent in 2012, down from its prior estimate of 3.1 per cent. This could lead to some pressure on the IT stocks today.

Infrastructure Company KEC International (KEC) yesterday stated that the company has secured new orders worth Rs 391 crore for its transmission and telecom businesses. The company further said, “In transmission, the company has received an order for 400 kV double circuit transmission line on a turnkey basis in Tamil Nadu from the Tamil Nadu Transmission Corporation. The order value is Rs 361 crore. The project is likely to be completed in 18 months and the total line length is 114 kms. Besides, the company has received an order for the supply and establishment of optical power ground wire (OPGW) communication systems on a turnkey basis from Power Grid Corporation of India (PGCIL) in the north-east region of India. The total value of this order is Rs 30 crore and the project duration is of 15 months. The total line length of the network is over 1,100 kms. On the back of the new orders, the scrip will see some positive momentum today.

Tata Motors’ Dharwad plant for small commercial vehicles is now operational and has begun to produce the Tata Ace Zip and the Tata Magic Iris. As per the company’s press release, this move is integral to Tata Motors’ dominant presence in the commercial vehicles market. The company launched Tata Magic Iris in May 2011. This is a four-wheel, three or four-seater, small passenger carrier, positioned as an alternative for commuters who depend on three-wheelers. The company also launched Tata Ace Zip in May 2011, which is a micro truck with a payload of 600 kg for deep-penetration, door-to-door goods movement. The scrip took a beating after the company posted weak numbers for its Tata JLR segment. However, the other segments are doing well and we may see some positive momentum in the scrip today.