Markets May Open Positive As Spain Receives 100 billion Euros Bailout

Indian markets may open negative owing to the positive global cues as well as partial recovery of the rupee in the last week. After the faltering domestic growth, markets are also expecting a rate cut in the upcoming RBI policy meet and we believe that the markets will start discounting the same in this week.

On Saturday Euro zone finance ministers have agreed to lend Spain up to 100 billion Euros. In a conference call on Saturday, 17 finance ministers discussed the situation. The exact bailout amount is not yet finalized as of now however the concerned authorities have said that it will be sufficiently large. Previously Greece, Ireland and Portugal, all have taken bailouts and Spain would be the fourth European country to do so. We believe that markets across the world will cherish this decision.

Earlier on Friday Indian equity markets closed with marginal gains. The markets traded in green for the entire day and extended the gains in the final hour. The broader indices i.e. Sensex and Nifty, closed higher by 0.4%

Overnight U.S. markets closed in green with Dow closing its session higher by 0.75% while NASDAQ gaining nearly 1%. S&P index also gained 0.81%. In the S&P index, nine out of 10 industries gained while only energy stocks traded in red. Shares of Social media giant Facebook surged by 3% after announcement of ‘app center’ which will be a new add-on software for the users.

The European markets on Friday closed their day trading in red. Major Indices like CAC, DAX and FTSE lost in the range of 0.2 to 0.6 per cent. Now with the bailout package announced to the Spanish banks we expect the markets in Europe to post some gains in this week.

On the Asian front the China cut interest rates in the last week however there are fears that the economy is sliding fast in the slowdown.  Overall the Asian stocks gained in the last week giving investors a reason to celebrate.  China is expected to report its May numbers which will guide the Asian indices ahead in the week. The Bank of Japan is expected to keep its monetary policy unchanged in its Friday policy meeting. Besides machinery orders data is also expected in the week which will guide the Nikkei.

In conclusion we expect the markets to open positive, however they will remain fragile as any negative news may impacts the markets earnings. We would advise investors to play safe.

Stocks in Action

As per the media reports Domestic auto company Mahindra & Mahindra (M&M) have plans to increase the monthly production of its sports utility vehicle XUV500 to 5,000 units by September-October. It has already increased the production of this model to 4000 in May due to the increasing demand. M&M’s nine monthly capacity has been sold out. It has also increased its reach to nineteen cities in the country. This sounds like good news to the company.

As per the news by Mint, Jindal Steel & Power (JSPL) said on that it was making plans to scrap a USD 2.1 billion Bolivian steel project. It has said that the Bolivian government had not met contract terms of supplying the natural gas for the project. We expect the stock price may slide a bit due to this.

With the rate cut in the quantum of 0.25% eyed by the markets, we see bank stocks to show gains on Monday.

Power ministry is likely to move its proposal to Coal India to import the coal in order to meet the domestic coal demand. Central electricity authority is also working on a mechanism to import the coal. The news may lift up the power stocks in short time.

According to business Standard, Apollo Hospitals has plans to invest about Rs 1,940 crore to add 2,955 more beds in the country in the next 3 years. Currently it has 37 hospitals in the country and it plans to add another 14 which will take the total number of hospitals to 51 by 2014-15.

Business Standard has also reported that the RBI has approved the 27% stake sale in Reliance Capital Asset Management Company by Reliance Capital to Nippon Life. We view this as positive news on the stock.

According to HSBC, Infosys is on the track to meet its June quarter guidance. The HSBC met the company management as per the news in the Business standard, and the bank now expects 0-1% Q-o-Q growth in its revenues.

Shares of Lanco Infratech may be on the investor’s radar as it stands to benefit from the hike in power tariff in Tamil Nadu.