Markets May Open Negative

The Indian markets may open negative in the absence of strong cues. The global indices are seen trading in the negative as Italy will auction more debt later today. Besides, Spain is under the threat of more downgrades while Greece will be going through an election process over the weekend. The worrying factor is that Spain’s 10-year borrowing rates are up from 6.67 per cent to 6.71 per cent. All the Asian indices are seen trading in the negative. SGX Nifty has also been trading lower by 20 points, beaming negative signals to the markets.

Ahead today markets will wait the May inflation numbers which are expected by the markets in the range of 7.4% for May 2012. Lower inflation will force RBI to cut the rates and markets may show a rally on the hopes of rate cut.  The inflation rate was at 7.23 % for April of 2012. If the core inflation comes at 5 percent or below then there are hopes that RBI will go for rate cut. If the inflation rises then the hopes of CRR cut will be rise. Most of the gains that markets have shown in June are mainly on hopes of the rate cut and hence inflation data will be keenly watched by the markets. Higher inflation data will prompt the traders and investors to book profits and markets may show a disappointing end to the day.

The economic times has reported that the growth of the Chinese economy could drop below 7% in the second quarter of this fiscal. It has also said that the sharp slowdown in the economy forced the policy makers in China to cut the interest rates.

Back home, yesterday the markets opened in the negative over a fresh blow in form of the the IIP data. Though the markets regained later, the uncertainty about the growth of the country is looming large on the indices. The rupee is back to the 56 mark again there is also the issue about who will be the next president of India.

Overnight, the US markets closed in the red over European worries. Dow Jones ended lower by 0.62 per cent while the S&P 500 Index declined by 0.70 per cent. Nasdaq declined by 0.86 per cent at the time of closing. The European markets were a mixed bag but mainly in the negative with the FTSE showing a flat closing and CAC and DAX making marginal losses.

As an overall impact of the European worries and decline in the U.S. markets, the Asian markets are trading on a low note. All the three key indices are down. Japan’s Nikkei is trading lower with 0.6 per cent losses. Shanghai and Hang Seng are also trading in the red. As such, investors seem to be confused and extremely worried over the very crucial Greek elections. Adding fuel to fire, Moody’s have downgraded Spain’s sovereign debt rating and has also downgraded a few of the Spanish banks. Cyprus has also been downgraded by Moody’s.

In conclusion, we expect the markets to show a mainly negative opening and to remain volatile through the day

Stocks in Action

According to media reports, ONGC is set to invest Rs 440 crore in the drilling of 40 oil and gas wells in the Krishna-Godavari basin next fiscal and this year the oil & gas major has already taken up around 14 wells for drilling. The onshore wells are located at East Godavari, West Godavari and the Krishna districts of Andhra Pradesh. According to ONGC, there are two blocks with estimated reserves of 1,000 million metric tonnes of oil or oil equivalent gas in these three districts. One may see a volatile share price movement in today’s trading session on the back of this news.

According to media reports, the coal ministry yesterday said that the coal output for FY13 is estimated at 584 million tonnes against a demand of 776 million tonnes. On account of this shortfall, companies like NTPC have scaled back their expansions plans and cut capacities. According to the NTPC management, the company plans to cut capacities to 14,000 megawatt by 2017 due to the shortage of coal. On the back of this one may see volatility with a negative bias in power stocks in today’s trading session.

Yesterday, post the market’s closing, Subex made an announcement about the launch of its new foreign currency convertible bond (FCCB). The company will launch up to USD 131.1 million secured convertible bonds having a coupon of 5.7 per cent due in 2017 and convertible into ordinary shares of Subex Ltd. This is a cashless exchange offer for its outstanding FCCBs of USD 180 million at a coupon rate of 2 per cent due on July 9, 2012 and FCCBs worth USD 98.7 million with coupon rate of 5 per cent also due on the same day. On the back of this news, one may see volatility in the share price of Subex in today’s trading session.

The Thomas Cook Centre of Learning has launched its first franchisee in Delhi. This is an initiative by Thomas Cook (India) Ltd to develop talent for the organisation as well as for the industry. In the context of high growth and increasing customer expectations, talent management will be one of the important challenges facing the travel industry. Apart from the undergraduation and postgraduation programmes, the centre has also ventured into corporate training, International Tourism Board training and college tie-ups. It promises its students on-the-job training by providing them a three-month internship with Thomas Cook (India) Ltd. On the back of this news, one may see volatility in the share price in today’s trading session.

According to DNA, Coal India has cut coal supplies to one of Lanco Infra’s thermal power plants. This is negative news and we expect the stock to shed a few points today.