Markets To Open-side Ways, Pranab's Last Day As FM

The Indian markets yesterday gave up most of the gains in the last hour of trading which was after the RBI made an attempt to save the rupee from falling further. The measures offered by the RBI were much below D-Street’s expectations. The rupee yesterday had reflected some strength in the early trades but finally closed almost flat near to its Friday’s closing level.

Further, today is the last day of Pranab Mukherjee as the finance minster who will now file his nomination for the president’s post. It would be an impactful exit if he announces some of the much-awaited reforms today, which will boost the market sentiments and also help the economy to step back on the fast track of growth. Meanwhile, there is a lot of buzz about who will now occupy the finance minister’s chair and the new appointment will no doubt have an effect on the markets.

Yesterday, global rating agency Moody’s reported that India’s rating outlook remains stable as it is of the view that negative trends are not new in the economy and that India would grow going ahead. The views expressed by Moody’s were opposite to that of the other rating agencies like S&P and Fitch which have revised the outlook to negative from stable.

All sights are now set on the European leaders’ summit this week which will provide an indication of where the Euro region would be headed next. There is speculation that this summit would either make or break the euro’s futures. This has obviously made the world markets jittery. Overnight, the U.S. markets plunged with major Indices closing lower in the range of 1 to 2 per cent. The pain was more considering that the European indices closed yesterday in the range of 1 to 2.5 per cent.

Taking cues from the overnight closing of the developed markets like the U.S. and Europe, the Asian markets have opened to a negative start. These would remain edgy as investors will take cues from the developed markets. Further, Citigroup Inc. has cut China’s growth forecast on concerns of the European debt crisis and the demand for the country’s exports will see a fall. Citibank expects the Chinese market to grow at 7.8 per cent this year compared with the previous estimate of 8.1 per cent. The slowdown in the world’s second-largest economy will definitely impact global growth.

The depreciating rupee continues to be a major headwind above our economy. It is currently trading at 56.534 against the USD. Brent crude has come down from USD 125 in the past couple of months to USD 91 per barrel, which is good for our economy. However, the depreciating rupee has offset some of the benefits.

In conclusion we expect the markets to remain sideways with a negative bias unless the FM announces certain positive reforms. Our advice to investors is to play with caution.

Stocks In Action

C&C Construction yesterday, post market closure, made an announcement that the company has received an order from Ircon International Ltd for the construction of road-over-bridges (ROBs) and their approaches at Alwar Yard, Neem Ka Thana, Kishangarh, Alwar and Ajmer in Rajasthan for a total cost of around Rs 151 crore.

Supreme Infra India yesterday made an announcement that the company’s subsidiary, Supreme Infra Projects Private Limited (SIPPL), has completed the construction of the Patiala Nabha Malerkotla (PNM) Road on a DBFOT basis. The company has commenced tolling operations from June 24, 2012. The project was awarded by the Punjab Industrial Development Board (PIDB) and in August 2011 was taken over by SIPPL from the original concessionaire. The size of this project was worth Rs 94 crore. The concession period is of 13.5 years. The total length of the road is approximately 56 kms. The EPC work was executed by Supreme Infrastructure India Ltd. On the back of this news one may see volatility in the company’s share price in today’s trading session.

According to Business Standard, India’s three big state-run oil retailers together hold oil bonds worth about USD 5 billion (Rs 28,000 crore), which is likely to be the maximum amount of dollars these companies will be able to buy directly from the Reserve Bank of India (RBI). Indian Oil Ltd, Hindustan Petroleum Ltd , Bharat Petroleum Ltd hold oil bonds worth Rs 15,000 crore, Rs 6,900 crore and Rs 6,000 crore respectively. The RBI last sold dollars to oil companies against oil bonds between 2008 and 2009. On the back of this news one may see volatility in the scrips of oil marketing companies (OMCs) in today’s trading session.

According to Business Standard, Sun TV Network has proposed to spend around Rs 200 crore as capital expenditure (capex) for the current financial year, which will include upgrading equipment and programming operations. Besides, the company has lined up Rs 250-260 crore to acquire films for distribution through its distribution arm, Sun Pictures, the report suggests. The stock yesterday surged by almost 4.21 per cent on the back of this news. However, we also expect the stock to trade volatile with a positive bias in today’s trading session.

According to Economic Times, amidst global economic slowdown, the IT companies are looking to expand their operations in Indore and the city is emerging as an attractive investment destination. According to industry experts, the availability of workforce, incentives by the Madhya Pradesh government and facilities are the factors attracting the IT companies. Officials said that Infosys has been given 52.64 hectares (130 acres) of land while TCS has been given 40.47 hectares (100 acres) in the ‘super corridor’ by the state government. On the back of this news one may see a positive bias in IT stocks like Infosys and TCS in today’s trading session.

According to Economic Times, the lenders of Hindustan Construction Company (HCC) agreed to provide an additional Rs 1,500 crore under a corporate debt restructuring (CDR) scheme if the promoters infuse Rs 302 crore equity. The loan tenure is likely to be extended to 10 years. The report says that officials from the banking circle said that lenders will provide an additional working capital of Rs 500 crore and sanction a non-fund based limit of Rs 1,000 crore.