Markets To Open Flat With Negative Bias

The Indian markets may open on a Flat negative note ahead in line with the global cues. The SGX Nifty is up by 4.50 points at 5,065, indicating a flat negative gap  down opening to the markets today.

The Indian markets witnessed a negative trading session yesterday as the broader indices closed lower by 1.5 per cent. Nifty closed at just above the 5,000 level mark while the Sensex closed near to the 16,705 level. Yesterday the Indian markets reversed their intraday gains post the announcement of the RBI Policy Meet. The central bank shocked the market with its status quo on rate cuts, saying that core retail inflation is still a big concern for the economy. Moreover, it also stated that factors other than interest rates are contributing more significantly to the growth slowdown. However, inflation is a major concern as the latest CPI numbers have come in at the same level as of May 2012 and inflation has shot up to 10.36 per cent from 10.26 per cent in April.

Adding to the woes The Global credit ratings agency Fitch has revised the outlook of India to ‘Negative’ from ‘Stable. The agency has said that the revised outlook reflects increased risk profile of the country. It has also said that the long to medium term growth potential may further deteriorate if reforms are not expedited in the country. This is another shock the government as it is trying to start process of reforms again in the country.

The Asian markets yesterday closed on a positive note on the back of positive global sentiments, especially from the European region. The Greece election event turned positive in favour of the pro-bailout party which had a majority of the votes. However, it will need coalition to form the government.

Overnight, the U.S. stock markets closed on a mixed note on account of rising concerns from the European region where the stocks ended on a mixed note yesterday on account of the renewed fear of the increasing borrowing costs of Spain and Italy. This lost the initial buying gains on the back of Greece’s election results, which reduced the probability of the country’s imminent exit from the euro zone. The Greek elections have just been a sideshow in terms of the euro zone debt crisis and the investing fraternity’s focus is now back on the structural problems faced by both Italy and Spain. The yield on Spanish ten-year bonds hit a fresh high of above 7 per cent on Monday, a key threshold above which the borrowing costs become too expensive for a country to afford over the long term.

Markets will now  look for the Federal Reserve's monetary policy meeting scheduled on  Wednesday where the Fed is expected to announce some additional stimulus measures.  Meanwhile, as per the report  from NAHB  showed  that housing market index in US crept up  to 29  (five-year high) in June from 28 in May in U.S which is positive.

On the Indian turf the rupee this week recovered against the dollar but it is still at its lowest levels, thus raising worries over the increasing fiscal deficit as this will increase the import cost of the oil companies. However, the London Brent crude oil price has increased marginally by 0.1 per cent on Monday to USD 95.95 per barrel. The lower crude oil prices are providing some relief to the Indian oil companies but the high dollar is negating much of the benefits.

For the rest of the week the market will remain volatile and negative on the back of weak global cues and the RBI’s stance to keep the rate unchanged will keep the market’s sentiments very weak. The scenario on the global front, especially in the European region, is also not too good.  The rising bond yield in Spain and Italy has renewed fears of a bailout plan.

In conclusion, for today we expect the markets to operate on a negative bias on the back of weak global cues as also the slowing GDP growth rate in the country. Also rating cut to negative level by Fitch has raised more worries for the Indian  markets. We believe markets will remain under pressure until we see some major reforms or rate cuts and some policy measures. Also, the Asian markets have seen a downfall as there is concern over the rising yield in Spain and Italy which will increase its borrowing cost sending weak sentiments across the globe.  

As per a Business Standard report, Coal India Ltd has entered into fuel supply pacts with 27 power units, including Adani’s Mundra power plant in Gujarat. The agreements have been signed even as the Prime Minister’s Office (PMO) is slated to convene a meeting on Friday to iron out the various issues in the pact, mainly the penalty clause, which have kept power firms like NTPC from inking the fuel supply agreement (FSA) with CIL. The other power units with whom the coal PSU has signed FSAs include Lanco Anpara Power, Reliance Power’s Rosa Power Project and CESC. The power companies’ stocks will see some positive momentum today.

As per a media report, Ashok Leyland, a flagship company of the Hinduja Group, has announced acquiring another order from the Bangladesh Road Transport Corporation (BRTC) for 88 air-conditioned buses for a value of USD 6.5 million (around Rs 36.41 crore) under the Indian Line of Credit (LoC) scheme offered for the improvement of urban transportation in that country. Earlier this month the company had announced getting an order worth USD 6 million (around Rs 33 crore) to supply 50 vestibule buses to BRTC. The new order comes as an addition to the more than 11,000 vehicles of different models exported to Bangladesh. The company’s international operations in volumes have shown a robust growth with 12,852 vehicles last year with a growth of 25 per cent, said the company statement. The scrip will see some positive trade in today’s market session. 

As per a news report, Tata Steel has shown interest in renewing the pact that it had signed with NMDC in 2010 for exploring the possibilities of entering into a number of joint ventures for the acquisition of mines and setting up of steel plants. “The memorandum of understanding between Tata Steel and NMDC lapsed after two years on January 21 this year. NMDC had communicated to Tata Steel four times before the lapse of MoU. Now, Tata Steel is responding with an interest to renew it,” the report said. This JV will provide an opportunity to Tata Steel to explore more acquisitions, explorations and development of mines, extraction and processing of minerals and the setting up integrated steel plants. The benefits will arise in the long run to both the companies. Tata Steel yesterday was also in the news for its open offer of its associates i.e. Tata Sponge and Tin Plate Company. Tata steel is available at attractive valuation and one should look to invest in the scrip from a long-term view. 

Reliance Industries has been in the news for the falling gas output in KG D6 Block. However, to overcome this, the company has proposed to drill its first exploration well in almost five years on the flagging D1&D3 gas fields. Dhirubhai 1 and 3 (D1 & D3) gas fields, the largest among the 18 gas finds on the KG-DWN-98/3 or KG-D6 block, have proved to be more difficult to produce than previously predicted and RIL now wants to drill a probe to study reservoir characteristics, sources privy to the development said. The reservoir has seen a sharper-than-expected drop in pressure and water and sand ingress in production wells, leading to a drop in the output. It has written to the Directorate General of Hydrocarbons, proposing to drill an exploration well in the D1-D3 development area to probe the Mesozoic synrift clastic reservoir lying below the D1-D3 (Pliocene) mining lease area. The scrip will see some positive movement in today’s trading session.