Index Trends And Stocks In Action For 7th October 2013

Indian Equity market ended on a flat note amid a volatile trading session on Friday. Reason being September services PMI contracted at its steepest pace in past four years weighed high on investors sentiment. The NSE Nifty closed down by 2 points at 5907. Nifty on daily chart has formed a shooting star which is a bearish candlestick pattern, but the candle formed on nifty chart is not a red one so it’s not so bearish candle.  But it gives indication that we might have formed a top for short term. Going ahead on intraday basis 5970 will be big hurdle for nifty to cross and on down side support will come in at 5880-5840.

Yes Bank has witnessed sharp correction on the bourses in the past few months on account of higher dependence on the short term funds. However the pressure may ease going ahead as the bank has not issued CDs since July, after short-term rates rose. Besides, the reduction in marginal standing facility, or MSF, rate by 75 basis points and easing foreign borrowing limits have led to a fall in CD rates by nearly 200 basis points from its peak. In addition to this, the bank last week raised $255 million through dual foreign currency borrowing, for which the rates were 100 basis points lower than the local rates. We expect a positive impact on the stock in near term. 

The government has approved ONGC Videsh and its partner Oil India acquiring a total of 20 percent stake in a giant offshore gas field in Mozambique for over USD 5 billion. OVL, the overseas arm of state-owned Oil and Natural Gas Corp ( ONGC ), and OIL have been permitted by buy Videocon Group's 10 per cent interest in the Rovuma Area-1 for USD 2.475 billion. Meanwhile, OVL on its own will acquire US energy major Anadarko Petroleum's 10 per cent stake in the same block for USD 2.64 billion. We expect a positive impact on ONGC.

One of the leading news daily reported that three global private equity firms are in talks to acquire up to 24 per cent stake jointly in Bombay Dyeing, the flagship company of the diversified Wadia Group, according to merchant banking sources. The deal could be valued at over Rs 500 crore, they said, adding that the exclusivity period of the due diligence is likely to end in next few days. Though the management has declined to comment on the same, we expect a positive impact on the counter. 

Weak economic environment, rising non- performing assets and higher cost of funds will keep margins of banks under stress in the second quarter, say analysts. The stocks like PSU Banks especially SBI are expected to stay under pressure in near term.