Markets May Open Negative Over S&P Report, IIP Data Eyed

The Indian markets may open negative due to the recent remarks by the credit rating agency S&P. Yesterday the markets witnessed a turnaround from gains of about 100 points on the Sensex to a loss of 50 points. The credit rating agency yesterday published a report which says that India may lose the investment grade rating and it will be the first country to get so in the BRIC group.

The SGX Nifty is currently trading lower by 22 points at 5,021. Besides, among the Indian ADRs, Sterlite is trading up by 3.85 per cent. HDFC, Dr. Reddys, Infosys and Wipro were trading down while ICICI Bank and Tata Motors were trading at a higher level.

The S&P report yesterday impacted the Indian equities and increased the selling pressure. If India loses its credit rating (BBB-) then the next available rating is of the nature of speculative gains. S&P has already downgraded the India outlook from ‘stable’ to ‘negative’. The finance minister has, however, totally rejected the S&P report saying that India will achieve a turnaround in the situation. He has also said that there have been certain actions such as a push for the infrastructure sector and the recent fuel price hike taken by the government that have not been considered in this report. 

It seems that the positive sentiment displayed by the markets during yesterday’s trading hours have begun to evaporate. Overnight, the U.S. markets closed in the red, thus starting the week on a negative note. Dow closed down by 1.14 per cent while the S&P 500 index also closed down by 1.26 per cent. Nasdaq lost 1.7 per cent under heavy selling pressure. 

The European markets which had shown gains of over 1 per cent during the opening hours came down significantly. While DAX closed in the positive, FTSE and CAC were down marginally.  The next trigger that the markets will watch out for is the election that will take place in Greece. The Spain bailout impact has been very short-lived as the economy is afraid to be in deep recession. 

On the Asian front, most of the markets are trading in the negative today, giving way to the bears. Japan’s Nikkei has declined by 1.57 per cent. The Chinese Shanghai Index is down by 0.65 per cent while Hang Seng is also trading lower by 1.02 per cent at this hour. 

Going ahead, the markets will keenly watch the IIP data which will be announced by 11 am today.  If the IIP data is weak the markets will further slip into the red zone. The IIP data will also be a key to the RBI’s monetary policy meet due on June 18, 2012.

In conclusion, we expect the markets to remain volatile after a negative opening. 

As per media reports, Suzlon Energy has received 45 days of extension from its bond-holders to repay its debt liability of over USD 300 million. The company is also looking to raise funds to repay this FCCB obligation. The shares of Suzlon rose yesterday by 1 per cent.

As per news reports, power companies operating with imported coal will be allowed to raise the power tariffs. The shares of Tata Power, Adani Power, Reliance Power and GVK Power may show some gains today.

Liquor maker Globus Spirits has plans to launch premium brands in the country. The company is looking to expand its India Made Foreign Liquor (IMFL) portfolio. The company entered in the IMFL segment in 2007 and has launched four brands so far.

Nomura has downgraded Pidilite Industries with a target price of Rs 174. It has raised concerns over its raw material prices. The shares of Pidilite tanked by 3 per cent and closed at Rs 169 yesterday.

The shares of BPCL and Videocon may see some upside over reports of new gas discovery in Mozambique.

The shares of Coal India may rise as the company is looking to raise the price of coal in a selected few coal blocks. This may trigger a little upside in its profits.

The telecom firms may see some respite as the government has changed its objective in the 2G spectrum auctions. The main objective of 2G auction has changed from ‘revenue maximisation’ to maximising of revenue within the government’s set parameters.