Markets May Open Positive On Rate Cut Hopes

Indian markets may open positive on the hopes of rate cut.The markets yesterday witnessed some scope based on the CRR and repo rate cut but at the same time the IIP data has revealed slower-than-expected growth in the industrial segment. The inflation numbers, which are the key to the rate cuts, are due this week. Yesterday the markets rebounded form the morning lows to end on a one-month high. The shares of banks were well in demand as an increasing number of investors were seen making their bets on the rate-sensitive sectors. Yesterday’s markets snapped the losses made on Monday. The impact of the S&P downgrade remained very short-lived.

Yesterday the IIP numbers for April 2012 were announced. The numbers disappointed with nearly flat i.e. 0.1 per cent growth. The situation of the capital goods sector has further worsened, having shrunk by 16 per cent in April 2012. The March IIP data was also in the negative. These two sets of numbers have prompted the markets to expect a rate cut in the coming RBI monetary policy review. Even though there is no unanimous opinion among experts on the quantum, the market is expecting a definite rate cut to fuel growth in the country. The WPI inflation numbers due in this week will therefore be keenly watched.

Overnight, the U.S. markets closed in the green on the speculation that the central banks may make moves to stimulate world economy. Dow Jones ended with 1.31 per cent gains while the S&P 500 Index added 1.17 per cent. Nasdaq also surged by 1.19 per cent. The European markets were also seen rising in value with the FTSE making 0.76 per cent gains while CAC and DAX posted marginal gains.

On the Asian front, most of the Asian markets are trading with a mixed trend. All the three key indices have given up the morning gains. Japan’s Nikkei is still trading in green with 0.49 per cent gains. Shanghai and Hang Seng are, however, trading in negatives after the initial gains. 

In conclusion we expect the markets to remain volatile with positive bias today.

Stocks in Action

According to Business Standard, the CEO and executive director of Adani Power Limited (APL), Ravi Sharma, has resigned from his post. The company has appointed Vineet Jain as executive director. It is barely a month since the CEO of Adani Group’s Australian subsidiary resigned. We believe that the stock may see some volatility in the share price movement in today’s trading session on the back of the above news.

According to media reports, DLF Hotel Holdings has sold its entire stake in Adone Hotels and Hospitality Ltd (Adone) for Rs 567 crore. The sold entity is a wholly-owned subsidiary of the realty heavyweight DLF. The move will infuse cash inflow for the company which could be further used for reducing its heavy debt of around Rs 22,725 crore as on March 31, 2012. DLF in the past has raised around Rs 1,774 crore in FY12 through divestment of its non-core assets. On the back of the above news one may see volatility in DLF’s share price in today’s trading session. 

According to media reports, the joint venture between SAIL and RINL is in advanced stages of discussions for acquiring 10 per cent stake in Majan Mining company (MNC) which is an Oman-based limestone mining company. SAIL has also signed an initial pact with Oman Oil Co to jointly set up a 3 MTPA gas-based steel plant in Oman with an investment of around Rs 15,000 crore. RINL too is looking at Saudi Arabia to set up a 3 MTPA steel plant as a JV with local major Rajhi Steel with an investment of Rs 20,000 crore. On the back of this news one may see some positive movements in the SAIL share price in today’s trading session.

According to media reports, VA Tech Wabag is seeking acquisitions targets to expand its footprint in South America. Further, it hopes that the topline of the company will touch Euro 1 billion over the next five years which will help the company to be among the top three players in the global water and waste water management business. VA Tech had a fresh order intake of Rs 1,862 crore in 2011-12 along with an order backlog of Rs 3,731 crore. This year the company is targeting 20 per cent growth in orders and the revenue is expected to grow by 15-18 per cent year-on-year to Rs 1,650-1,700 crore. On the back of this news one may see a positive movement in the share price of the company in today’s trading session.

According to media reports, Anil Agarwal-headed Vedanta Resources has offered to pay around Rs 16,000 crore to purchase the stake of the government in Hindustan Zinc Ltd (HZL) and Bharat Aluminum Company (BALCO) of around 29.54 and 49 per cent respectively. According to the reports, the valuation has been arrived on the basis of the January market price. One could see some volatility in HZL’s share price in today’s trading session. 

Diesel engine supplier Suzuki Powertrain India (SPIL) will merge with India’s biggest car maker Maruti Suzuki India (MSIL). Maruti holds 30 per cent stake in the company while 70 per cent is held by Suzuki Motor Corporation (SMC), Japan. This looks as a positive merger as it implies better margins for Maruti. We expect some positive movement in the stock.