Markets To Be Volatile On Expiry

The Indian markets may open positive in line with the global cues. The SGX Nifty is trading up by 9.5 points at 5,149, indicating a gap up opening to the markets today.

The Indian markets yesterday remained positive for the entire trading day with the broader indices closing higher by almost 0.4 per cent. This was after investors saw some buying opportunity in some of the beaten-down stocks. Also, as per media reports, the new finance minister, Dr Manmohan Singh, yesterday arranged a meeting to discuss and address issues regarding the current account deficit and some of the pending reforms. The meeting was not pre-planned and hence Dr Singh’s action was positive for the markets. It seems that the FM will take bold moves as he did in 1991 which will further help the economy to expand.

The world markets are keenly watching the European summit which will provide direction for the market going ahead. The outcome of the same would be known tonight and the Indian and other Asian markets would react to the same tomorrow in their early trades.

Overnight, the U.S. markets closed higher with major indices like Dow Jones, Nasdaq and S&P 500 closing higher in the range of 0.7 to 0.9 per cent. The U.S. yesterday released housing sales data which saw a northwards movement and was among the best in two years. The European markets also reacted positively to the U.S. data and closed higher with FTSE, CAC and DAX closing higher in the range of 1.4 to 1.7 per cent. Investors also speculate that there would be a positive outcome of the European summit and that the euro leaders would try to solve the debt crisis.

Reacting to the U.S. and the European markets cues overnight, the Asian markets have opened higher with Hang Seng, Nikkei and Shanghai trading higher in the range of 0.2 to 1.06 per cent. According to Bloomberg reports, Japan’s retail sales rose more than the forecast in May, a sign that consumer spending will help sustain a rebound in the world’s third-largest economy. Further, there are media reports that China may opt for some kind of stimulus to boost the economy.

The depreciating rupee continues to be a major headwind above our economy. It is currently trading at Rs 57.216 against the USD. The RBI’s measures were not effective enough to help the rupee to regain strength against the dollar and hence some bold moves are required to stop the rupee from depreciating further. Brent crude has come down from the level of USD 125 in the past couple of months to USD 93 per barrel, which is good for our economy. Further, Nymex Crude is has gone below USD 80 per barrel but the depreciating rupee has offset some of these benefits.

In conclusion, we expect the markets to remain volatile as investors and traders would watch the European summit and also the June expiry could see some kind of movement in the markets. Investors should play with caution.

Stocks In Action

According to Economic Times, Global banking major HSBC is on course to offload its entire 4.8 per cent stake in the Indian private banking major Axis Bank, selling off a little more than 1.9 crore shares of the bank at a price range between Rs 951 and Rs 971 per share. HSBC is also planning to sell its 4.8 per cent stake in Yes Bank - nearly 1.7 crore shares - at a price between Rs 318 and Rs 325 per share, market sources said. The two deals together, to be done through block deals by HSBC Securities, could be worth about Rs 2,450 crore at the upper end of the price band. On the back of this news one may see volatility with a negative bias in the share prices of Axis Bank and Yes Bank in today’s trading session.

According to Business Standard, Tata Motors, India’s largest commercial vehicle manufacturer, will shut down one of its factories for three days this week - another sign of slowing growth in Asia’s third-largest economy. Tata will suspend production at its Jamshedpur factory where it makes trucks and truck parts from June 28-30. Tata has already closed its Pune plant for three days this month while top car maker Maruti Suzuki and Toyota Motor’s Indian unit have chosen to temporarily reduce production in recent weeks due to the falling demand. On the back of this news one may see volatility with a negative bias in the auto stocks in today’s trading session.

Pharma company, Strides Arcolab, has repaid FCCBs worth USD 80 million. The company had raised FCCBs of USD 100 million in 2007. Later it had bought FCCBs worth USD 20 million. With this the company has successfully bought its debt to equity ratio to 0.7. It now intends to further bring down the D/E ratio to 0.5x. Yesterday the stock showed some volatility and cut the morning gains. We expect the stock to show positive gains today as well.

According to Economic Times, the PMO has asked the coal ministry to expedite the process of coal blocks de-allocation from private firms and give them to Coal India. The PMO has also said that Coal India should appoint mine developers and operators to begin coal production from these coal blocks without delay. The shares of Coal India may surge in price today.

Sadbhav Engineering yesterday emerged as a successful bidder for a Maharashtra State Road Development Corporation project worth Rs 319 crore. The project would be executed through a joint venture with Hindustan Construction Company. It will design, build and contract terminal facilities for passenger water transport along the west coast of Mumbai at Marve and Borivali. The share of the company may be on the investors’ radar today as well.

IT giant Infosys yesterday said that it has successfully lowered its electricity cost by 32 per cent across the campuses and by 50 per cent in the new campuses. It has also reduced water consumption and green house gas emissions. The shares were up by 1 per cent yesterday and we expect some positive movement today as well.

According to Hindu Business Line, Amara Raja Batteries is in an advanced stage of negotiations with some two-wheeler manufacturers for supply of batteries. When this happens it will be a first for the company.  The company has also expanded the capacity. However, this has come at the wrong time when the automobile sector is facing a slowdown. The shares of the company may see some negative movement.

Air cooler company, Symphony, is aiming to double its export to 2,00,000-plus units in the next two years due to the rise in demand. The shares may be in demand on the back of this news.

Power stocks may show some positive momentum built on the recent news of coal block allocations to Coal India as well as a tariff hike in Delhi.