Indian Markets To Continue The Winning Streak, Open Positive

Morning Update 07th Feb 2012

Opening Bias

The Indian markets may continue their winning streak and open positive today. The SGX Nifty is trading up by 36 points at 5,399, indicating a strong gap up opening to the markets today.

Benchmark Indices
Index	Closing	% Change
SENSEX	17707.31	0.58
NIFTY	5361.65	0.67
Dow Jones	12854.13	-0.06
S&P 500	1344.33	-0.04
NASDAQ	2901.99	-0.13
Bovespa	65223.70	0.01
FTSE	5892.20	-0.15
DAX	6764.83	-0.03
CAC	3405.27	-0.66
LIVE
Hang Seng	20770.97	0.29
Nikkei	8909.8	-0.22
Shanghai	2305.54	-1.11

Amongst the major developments in the Indian markets, our sources tell us that the government is likely to provide some relief to individual income-tax payers in the forthcoming Union Budget by raising the exemption limit to Rs 2 lakh, as provided in the Direct Taxes Code (DTC), and hiking the slabs for the different tax brackets. DTC, which is currently being scrutinised by the Parliamentary Standing Committee, has suggested that the income tax exemption limit be hiked to Rs 2 lakh from Rs 1.8 lakh at present. It also proposes that the highest personal income-tax rate of 30 per cent should apply to annual income above Rs 10 lakh, as against Rs 8 lakh. If such a thing happens, it will come as great respite to individual tax payers who are currently being faced by high inflation burden. However, the possibility of lowering the tax rates is remote in view of the fiscal constraints being faced by the government.

Key Global Indicators
	Gold (Rs/10gm)	Crude ($/bbl)
Spot	27359	116.17
% change	-	0.06
Future	27939	97.38
% change	0.17	0.48

In other developments, NMDC, JSW Steel and many other companies operating in Karnataka are in for a tough time and will have to tackle woes such as higher costs and limited production if the Supreme Court accepts the recommendations of the panel set up to investigate the illegal mining scam. It seems that NMDC and JSW may have to pay a higher price for iron ore as the Central Empowered Committee (CEC) has recommended the cancellation of 49 licenses and proposed capping the state's annual production at 30 million tonnes. It has said that even captive iron ore will be sold at market rates and has called for all ore from old mines as well as new to be auctioned.

Moving on, global agency Standard & Poor's upheld India's current rating at BBB- with a stable outlook, but warned that the sovereign rating may come under pressure if the government fails to arrest the rising inflation, widening fiscal deficit and restrict the slowdown.

The economy is battling high prices, a weak fiscal position and slower growth on the domestic front while uncertainty in the global financial markets and Europe's sovereign debt problems have added further pressure. India's economy has also slowed under the brunt of 13 interest rate rises since March 2010 as the central bank sought to tame inflation from near double-digits to its current two-year low of 7.47 per cent. Going forward, with the interest rates peaking out, inflation showing some definitive signs of abating and the economy inching its way back into the recovery mode, it is time the government steps up its efforts to speed up the reforms.   

On the global front, the picture seems gloomy and a bit timid. Most of the US and European stocks declined as Greece struggled for an agreement on spending cuts needed to ensure another round of rescue funds. The Asian markets are also seen trading on a mixed note in the early trades.

Currency Rates
	Rs/$	Rs/Euro	Rs/GBP	Rs100/JYP
RBI Rate	48.6790	63.5678	76.7522	63.4600
Future	49.2675	64.3425	77.5650	64.3675

In conclusion, for today we expect the markets to remain largely positive on the back of certain triggers in the global markets. However, we advise our readers to continue to book profits on counters that have yielded significant returns.

Stocks In Action

According to a press release, the Reserve Bank of India (RBI) has advised Kerala-based gold loan company Manappuram Finance not to accept/renew any public deposits. The RBI has stated that acceptance of deposits either by Manappuram Finance or by Manappuram Agro Farms (MAGRO) is punishable with imprisonment and has cautioned the general public who deposit money with Manappuram Finance or MAGRO do so at their own risk. In reply to RBI's action the company management has said that they have not been accepting any deposits since March 2011 and a technical glitch in its accounts had led to the RBI issuing it a notice. We expect the counter to witness further negative action today on account of this development.

According to Business Standard, Petronet LNG, the country's biggest natural gas importer, is in talks with the Kerala government to set up a gas-based power plant at an investment of around Rs 3,000 crore. The plant may be set up adjacent to the company's upcoming re-gasification terminal at Kochi where Petronet is investing Rs 4,500 crore in setting up the 5 million tonne terminal. Kerala is a power-deficit state and the state government is keen to see new capacity additions. Earlier the company also had plans to set up a power plant near its Dahej LNG terminal in Gujarat but it has not yet taken off as the company awaits a firm purchase commitment from the Gujarat state government.

After facing major unrest from a section of the union in the past few months, Dhanlaxmi Bank's managing director and chief executive, Amitabh Chaturvedi, has put in his papers. Chaturvedi took charge of the old generation private sector bank in 2008 after a stint with ICICI Bank and Reliance Capital. He was credited with the success of turning around the ailing private sector bank within a short time. Recently, the Reserve Bank of India allowed an extension of his tenure as the managing director and chief executive. According to unconfirmed sources, it is believed that Chaturvedi had differences of opinion with the board of directors, some of whom were not in agreement with his plans for the future growth strategy of the bank. The sudden development has raised concerns about the bank among the market participants. We expect negative action in the counter. 

According to a BSE press release, Hindustan Unilever's (HUL) Q3 net profit rose by 18 per cent YoY to Rs 753.81 crore, helped by price hikes implemented during the quarter and a decent growth in volumes. India's largest FMCG company reported net sales of Rs 5,853 crore, up by 16.4 per cent YoY in the three-month period. These numbers were quite in line with the market consensus. HUL's operating margin in the third quarter was up by 230 basis points year-on-year. Its shares rose by over 1.5 per cent post the earnings' announcement. But the stock reversed its gains to close down by 3.5 per cent at Rs 386.70 on the BSE.

According to a BSE press release, the net profit of India Cements zoomed up by 161 per cent to Rs 56.3 crore for the quarter ended December 2011 from Rs 21.5 crore in the same period a year ago. Its net sales increased by 20.5 per cent to Rs 941 crore from Rs 781 crore in December 2010. This was on the back of a sharp reduction seen in the inventory pile-up on its expenditure side which indicates a good demand scenario.

According to Reuters, Tata Teleservices will file a review petition in the Supreme Court against an order by the court to cancel three of the company's zonal telecom licenses. The SC last Thursday ordered that all the 122 licenses issued under a scandal-tainted 2008 sale be revoked within four months and asked the industry regulator to propose rules for an auction of licenses and spectrum. Japan's NTT DoCoMo owns 26 per cent of Tata Teleservices, which is India's sixth-biggest mobile phone carrier by subscribers.

According to a BSE press release, National Aluminum Company (NALCO) reported an 80 per cent plunge in net profit for the third quarter ended December at Rs 51.22 crore, although the income remained almost stable. The company had clocked Rs 256 crore of net profit in the October-December quarter of the last fiscal (2010-11). NALCO's total income during the reporting quarter stood at Rs 1,449 crore, as against Rs 1,443 crore in the year-ago period. The total expenditure of the company rose to Rs 1,508 crore compared to Rs 1,157 crore a year ago. The power and fuel costs went up to Rs 568 crore vis-a-vis Rs 443 crore and the raw material consumption during the period was also up at Rs 265 crore against Rs 208 crore during the same period of the previous fiscal. We expect the shares of the company to witness negative action on the bourses.

Corporate Action

Corp Action
Scrip Name	Action	Ratio
AVT Nat Products	Interim Dividend	2.50
HCL Infosystems	2nd Interim Dividend	1.00
IPCA Lab	2nd Interim Dividend	1.00
Rane Madras	Interim Dividend	5.50

Results Today
Scrip Name	Action	Scrip Name	Action	Scrip Name	Action
AIA Engineering	Q3FY12	Digjam	Q3FY12	Navneet Pub	Q3FY12
Arshiya Intl	Q3FY12	GMR Infra	Q3FY12	Omaxe	Q3FY12
Arss Infra Proj	Q3FY12	Hindustan Oil	Q3FY12	Omnitech Info	Q3FY12
Astral Poly	Q3FY12	ICRA	Q3FY12	Opto Circuits	Q3FY12
Atul Auto-$	Q3FY12	IL&FS TRANS	Q3FY12	Phillips Carbon	Q3FY12
Bajaj Corp	Q3FY12	JK Lakshmi Cem	Q3FY12	Precision Cont	Q3FY12
Ballarpur Inds	Q3FY12	JM Financial-$	Q3FY12	Radico Khaitan	Q3FY12
Bharat Gears	Q3FY12	LKP FIN	Q3FY12	Tide Water	Q3FY12
Cadila Health	Q3FY12	M and B Switchgears	Q3FY12	Triveni Engr	Q3FY12
Cantabil Retail	Q3FY12	Mahindra & Mahindra	Q3FY12	United Brew-$	Q3FY12
Career Point	Q3FY12	Man Inds-$	Q3FY12	VIP Inds-$	Q3FY12
Cosmo Films	Q3FY12	Mangalam Cem	Q3FY12	Trent	Q3FY12
Forbes & Co-$	Q3FY12	National Alum	Q3FY12	Zydus Wellness-$	Q3FY12
Glaxosmithkl Cons	Q3FY12	National Steel	Q3FY12

BSE Institutional Turnover
	FII			DII
Trade Date	Buy	Sales	Net	Buy	Sales	Net
6-Feb-12	3,512.46	2,514.52	997.94	1,378.21	1,561.33	-183.12
3-Feb-12	3,193.37	2,119.16	1,074.21	1,016.04	1,931.62	-915.58
2-Feb-12	5,157.50	3,216.27	1,941.23	1,488.05	2,141.19	-653.14
Feb , 12	16,860.61	11,170.74	5,689.87	5,617.23	7,401.36	-1,784.13

FII DERIVATIVES STATISTICS FOR 06-Feb-2012
	Buy	Sell	OI (End of day)		Net Position
	Rs (crore)	Rs (crore)	No. of contracts	Rs (crore)	Rs (crore)
Index Futures	2319.58	2001.01	526024	14028.45	318.57
Index Options	15843.73	15587.72	1379324	36959.19	256.02
Stock Futures	1884.06	1945.08	983795	28056.00	-61.02
Stock Options	750.49	794.76	44008	1274.11	-44.27
Total	20797.86	20328.56	2933151	80317.76	469.30