Markets May Continue The Positive Momentum

The Indian markets may continue with the positive sentiment created after the PM comments on GAAR and outcome of EU Summit. The markets in the last week posted a healthy 2.5% gains indicating improved sentiment of the investors.

The PMO in the last week said that the proposed GAAR policy will only be implemented from FY13 and that too after the consultation with the Prime Minister. The FII’s which were seen selling the stake in the equity markets, bought the stakes of over Rs 3000 crore in the Indian markets on Friday. The Prime Minister also took additional charge of the Finance Ministry which also helped the markets to improve the sentiment. Last week also saw the price of the petrol reduced by nearly Rs 2.5 per liter.

The Indian national currency also saw appreciation in the last week on the hopes of the reforms. The rupee saw its second biggest intraday gains in the last 3 years. The experts now see rupee touching the 54 levels if the positive sentiment continues.

The European Summit has been successful after the leaders of the participating countries agreed to stabilize the debt markets and capitalize the banks. The European Central Bank was allowed to directly inject the capital in to the Euro zone’s private banks. It was also decided that to keep USD 149 billion in existing emergency reserves to fund key business programs to increase the employment opportunities. Another cheer was given mainly to help the debt ridden countries like Spain and Italy by easing the borrowing conditions to increase the flexibility of EU lending terms.

On this strong news, the European and US indices surged and posted heavy gains. The US markets were up between 2-3% on Friday. CAC and DAX surged by 4% each and FTSE was up 1.4%. In the anticipation of the same the Asian indices were also up. On the Asian front, South Korea has posted biggest trade surplus in 21 months which will also be seen positively by the markets.

On the back of the same we expect the market to keep the positive momentum alive today as well.

Stocks In Action

According to Business Standard, SAIL will invest around Rs 3,000 crore to quadruple capacity of its Gua iron ore mine in Jharkhand to 10 mtpa and put up a four mtpa pelletisation plant. The techno-commercial discussions are also in progress for increasing the mine capacity and the contracts for developing the mine will be finalised by October this year. The stock may show some gains on this positive news.

Business Standard has also reported that State owned iron miner NMDC will invest Rs 30,071 crore during the next Five Year Plan i.e. 2012-2017. The company hopes to achieve a production capacity of 50 MT by 2016-17 and establish steel and other value added plants by that time. Most of the money will be invested in developing Bailadila iron ore mines and constructing a 3 MT steel plant at Nagarnar. Both the projects are scheduled to be commissioned in 2014-15. The stock may show some gains today on this news.

The positive news flows has continued in the power sector. In the last week most of the power stocks shown gains and we expect the momentum to continue in this week as well. In a letter to Coal Ministry, the Power Ministry has advised it to direct Coal India to sign the Fuel Supply Agreements (FSA) with power generation companies which have long-term power purchase pacts – PPAs, with the distribution companies. The stocks of the power generation companies may show some price appreciation today.

Auto Major, Tata Motors has posted 3% decline in the June sales. It’s sales of commercial and passenger vehicle in domestic market declined by five per cent in June 2012. Medium and heavy vehicle sales were down 21% while Passenger vehicles sales for June were lower by 22 per cent. On this news the stock may show some negativity today.

On the other hand Auto Company Mahindra & Mahindra has reported a jump in June sales. M&M has recorded a 16.12% rise in its June sales to 41,322 units. Its domestic sales were at 38,951 units up 15 per cent. The stock may be in investor’s radar.

Reliance Infrastructure has commissioned its Rs 800 crore road project in Haryana. The project was executed through the SPV. The project has a concession period of 17 years, during which time the road will be operated and maintained by its SPV. The stock will be in gains today.