Markets To Remain Volatile

The Indian markets may remain volatile, continuing last week’s uncertain environment. Markets would remain nervous considering the domestic and world’s bleak economic outlook.

Last week markets closed marginally higher in the green zone. The much awaited event of RBI monetary meet failed to kick start with a positive sentiment. This was after the governor decided to hold the CRR and the repo rate at the present level, as the Inflationary pressure continued to hover above the economy. Streets had expected at-least a CRR and repo rate cut of 25 basis points each. However we at DSIJ had told readers through our previous articles that RBI should remain Status quo which would be god for our economy. CPI data for the month May 2012 stood at 10.36 per cent which is up by 13 basis points from the previous month.

Also on the other hand, major global event of FOMC meeting in US on Wednesday further disappointed the Global Investors as they expected some measures on the easing front. However Fed chairman remained silent on the third round of Quantitative easing front and extended its Operation twist till the year end for an amount of USD 267 billion. Further the Fed has revised the growth outlook downwards and the unemployment rate upwards indicating that the U.S. economy is struggling to grow in the current environment. While European markets closed higher on the back of the positive news on Greece election. Nikkei, FTSE, DAX and CAC have shown the gains between 1.8-3% last week. Further according to media reports, this week events from the Europe like details of Spanish bailout plan will keep the investors on their edge.

Asian markets last week closed in the mixed bag with Hang seng closed lower 1.24 per cent while Nikkei closed the week higher 2.68 per cent. While Shanghai closed the week down with a sharp cut of almost 6.5 per cent after the disappointing data. Last week HSBC Holdings Plc and Markit Economics showed the initial version of the manufacturing Purchase Managers’ Index drop to 48.1 from 48.4 observed in May, where a level of below 50 signifies weakening business conditions.

The rupee has further depreciated against the dollar and breached the 57 mark, thus posting an all-time low. Rupee on Friday slid down further at Rs 57.30 against the US dollar. Brent crude has come down drastically in two digits. From the levels of USD 125 in the past couple of months it is now trading at USD 91 per barrel, on the back of weak demand from the developed markets like US and Europe. The crude last week plunged almost 8 per cent after the Fed remained silent on the QE front which further created speculation among investors that the demand for the crude will probably fall goign ahead. The crude prices have come down drastically which is good for our economy, but this to some extent has been offset by the Rupee depreciation.

Stocks In Action

According to business standard, State-run CIL has hiked the prices by an average of 10-15% for non-coking coal mined from selected blocks in Western Coalfields. The development comes after Coal India (CIL) rolled back the hike in prices of coal under its new pricing mechanism in the wake of protests by consumers. The increase in the prices came into effect from midnight of June 21. On the back of this news one may see volatility with a positive bias in the Coal India’s share price in today’s trading session.

According to business standard, Jet Airways has sought government clearance to scale down its flights to the northeastern region by about half to stem the losses. The airline, which currently operates around 38 daily services in several northeastern destinations, has written to the Civil Aviation Ministry to allow it bring these operations down by nearly 50%. On the back of this news one may see volatility in the share price in today’s trading session.

According to business standard, The Indian generic drug industry is generally receptive to the proposed US law on medicine even though it seeks to enhance US-FDA inspection of the manufacturing facilities globally for a fee. Industry players and analysts feel that while the level of inspection by the US Food and Drug Administration will increase, the clearances will be faster to enable expeditious exports of the generics to the world's biggest and most lucrative market. On the back of this news one may see volatility in the Pharma stocks in today’s trading sessions.

According to media reports, In a move to bring uniformity in the sector, the government has decided to charge 8% of gross revenue as license fee from all telecom service providers across all categories and services from 2013-14. At present, DoT is charging license fee in the range of 6-10 per cent depending upon type of service and circle. According to reports, for the period from July 1, 2012 to March 31, 2013, the operators have to pay an annual license fee at a rate of 9 per cent for Metro and Category A, 8% for Category B and 7% for Category C circles. On the back of this news one may see volatility in the share price of the major Telecom stocks in today’s trading session.

According to media reports, Suzlon will sell stake in its China manufacturing unit to China Power New Energy Development Co Ltd for Rs 340 crore. Suzlon, the world's fifth-largest wind turbine maker by cumulative installed capacity, will sell the unit with the majority of its assets and liabilities. Suzlon Group established its marketing operations in China in 2005, followed by a wholly-owned manufacturing facility in 2006. The company has till date installed over 900 megawatts of wind capacity in China. On the back of this news one may see volatility in the Suzlon’s share price in today’s trading session.
 
According to media reports, on the back of healthy demand, rise in input costs and hike in excise duty, steel prices are likely to go up by 5.7% this fiscal. Centre for Monitoring Indian Economy (CMIE) monthly report stated that "We expect steel companies to undertake further round of price hikes in the coming months of 2012-13 on the back on healthy demand, rise in input costs and hike in excise duty." On the back of this news one may see volatility in the steel companies share price in today’s trading session.