Indian stocks likely to open in the green: Thursday Market Preview

Earnings reports and weekly food inflation data will be keenly watched by investors

The Indian stock market is likely to open higher on the back of positive global cues. Wall Street closed in the positive overnight on assertions from Federal Reserve chairman Ben Bernanke to enhance growth with low interest rates. The developments also spurred the Asian indices to open with gains on Thursday. The SGX Nifty gained 14.50 points to 5,850.50 compared to its previous close of 5,836.

Companies declaring their results today include Bank of Baroda, Biocon, Birla Corp, Crompton Greaves, HCL Infosystems, ICICI Bank, JSW Energy, LIC Housing Finance and Polaris. Besides earnings, the government will release the weekly food inflation figures, which will give further direction to the market in the day.

Tracking good global cues, the local market opened higher on Wednesday with the Sensex gaining 66 points at 19,611 and the Nifty up 16 points to 5,884. Amid choppy trade the indices touched the day’s high, with the Sensex scaling 19,634 and the Nifty at 5,892.  However, the weak outlook from IT major Wipro disappointed the market, sending the indices into negative territory.

The see-saw movement continued till noon, when a huge bout of selling hurtled the indices further southwards. A mixed opening by key European bourses lifted investor sentiment a little in post-noon trade. But selling pressure pushed the market down once again to the day’s lows in post-noon trade. At the intra-day low the Sensex was at 19,413, down 132 points, and the Nifty shed 48 points to 5,820.

Fluctuation continued till the end of trade with losses expanding today. The Sensex closed the session at 19,449, down 97 points from its previous close, and the Nifty lost 35 points to settle at 5,834.

The market closed with modest losses, an indication that it is still in a range. Tepid quarterly earnings reports kept a lid on the market today. The Nifty is yet to break past the 5,900 levels, which is necessary for an uptrend. On the downside, support remains at 5,750 and then at 5,550.

Remarks by Fed chief Ben Bernanke at the end of the two-day policy meeting on Wednesday lifted the US markets to multi-year highs. Mr Bernanke stated that higher commodity prices have pushed inflation up, but these effects would be “transitory,” he added. He said that the central bank is likely to continue reinvesting maturing debt after June, when the Fed’s $600 billion bond buying comes to an end. Mr Bernanke reiterated his move to keep interest low for some more time.

The Dow Jones industrial average surged 95.59 points (0.76%) to 12,690.96, its highest close since 20 May 2008. The S&P added 8.42 points (0.62%) to 1,355.66, its best closing since 16 June 2008. The Nasdaq Composite Index gained 22.34 points (0.78%) to 2,869.88, its best since 12 December 2000.

Gains in the US markets rubbed on the Asian indices, which were higher in early trade on Thursday. Comments from the Fed chief are expected to boost export-oriented economies in the region. Japanese looked past the dismal industrial output data for March and focused on the global economy instead. Industrial output fell 15.3% in March, higher than analysts’ forecast for an 11% fall and exceeding the previous record decline during the Lehman crisis in 2009. Reflecting worsening sentiment after the quake, household spending fell to a record 8.5% in March from a year earlier.

The US optimism was reflected in bourses across Asia, with the Shanghai Composite gaining 0.65% in early trade. The Hang Seng advanced 0.60%, the Jakarta Composite was up 0.30%, the KLSE Composite climbed 0.18%, the Nikkei 225 surged 1.28%, the Straits Times increased by 0.48%, the Seoul Composite rose 0.61% and the Taiwan Weighted gained 0.23%.

Back home, the Delhi High Court on Wednesday directed the striking Air India pilots to return to work forthwith, as the management quickly terminated the services of six of their leaders and derecognised their union while government said the airline cannot be held at “gunpoint.”

Notwithstanding the court order, leaders of the Indian Commercial Pilots Association (ICPA) made up of 800 pilots of the erstwhile Indian Airlines and spearheading the stir said “we are continuing with our agitation as of now”.


Goldman Sachs downgrades RIL, Cairn to ‘neutral’

The global investment firm, in a report, stated that downside risks with regard to RIL include “weak refining margin and low petrochemical margins”, while those for Cairn include fall in crude prices, delay in production ramp-up and adverse regulatory developments

New Delhi: Investment banker and securities firm Goldman Sachs today downgraded Reliance Industries (RIL) and Cairn India to ‘neutral’ from ‘buy’, on shrinking refining margins and regulatory issues, reports PTI.

The global firm, however, upgraded the state-owned HPCL, ONGC and IOC to ‘buy’ list and retained the ‘Neutral’ outlook on other oil companies including GAIL, GSPL, BPCL and Oil India.

“We remove RIL from our Asia Pacific Conviction list and downgrade it to ‘neutral’ from ‘buy’ as we are concerned about lack of clarity on its sustainable growth drivers, implying limited scope of medium-term earnings surprise following Q4 results,” Goldman Sachs said in a report.

The downside risks with regard to RIL, the report said, include “weak refining margin and low petrochemical margins”.

The report also expressed concern over the performance of RIL’s “E&P (exploration and production) division owing to a lack of clarity on D-6 production levels and slow progress in exploration acreage”.

RIL’s shares slipped 1.56% to Rs985.15 on the Bombay Stock Exchange (BSE) today.

With regard to Cairn India, Goldman Sachs said, that although it had upgraded the oil company to ‘buy’ category in July 2010, the stock underperformed mainly on account of the “Cairn-Vedanta deal overhang”.

The downside risks for Cairn include fall in crude prices, delay in production ramp-up and adverse regulatory developments.

Shares of Cairn India closed down 0.13% at Rs348.20 on the BSE.


ED to attach properties of errant telcos in 2G scam

Senior advocate KK Venugopal, appearing for the ED did not mention the names of the companies but assured that attachment proceedings will be initiated soon and will be completed within two months

New Delhi: The Enforcement Directorate (ED) today told the Supreme Court that property worth Rs2,000 crore each will be attached against two companies which are involved in the second generation (2G) spectrum scam during the tenure of former telecom minister A Raja, reports PTI.
"Property worth Rs2,000 crore has to be attached relating to these companies," senior advocate KK Venugopal, appearing for the ED, submitted before a bench comprising justices GS Singhvi and AK Ganguly.

Mr Venugopal, who was reading the excerpts of the fresh status report of the ED submitted in a sealed cover, did not mention the names of the companies but assured that attachment proceedings will be initiated soon and will be completed within two months.

He hinted that attachment orders will be issued shortly under the Prevention of Money Laundering Act (PMLA) and Foreign Exchange Management Act (FEMA), against the two companies against whom the ED has so far registered the complaints.

"It will be done in two months time against the companies whose names have been mentioned in the complaints. We have to collect details of their properties as many of the companies keep benami properties," the senior advocate said when the bench asked how much time will the ED take to complete the investigation.

The ED in its status report said investigation was in progress regarding the involvement of five foreign companies in the 2G scam which are registered in Virgin Island.

On hearing this, the bench asked "What is the response of the CBI on it?"

Mr Venugopal said till now the ED has not written about it to the Reserve Bank of India (RBI) and future course of investigation will follow.

However, he said action has been taken and complaint has been registered for FEMA violation of Rs4,000 crore which will be added on as the investigation will progress and attachment will start.

The ED gave details of various financial transaction connected with the scam and said that the company connected with Shahid Usman Balwa's DB Realty was involved in the movement of Rs1,400 crore.

"The companies are connected with DB Realty. Funds started moving from a real estate company. Rs1,400 crore went from the top to the bottom and goes back to the original source," Mr Venugopal said referring to the transaction of money among various companies after the grant of 2G licence.

Meanwhile, CBI also filed fresh status report about its probe and sought more time to complete the investigation relating to the allocation of spectrum during the period of 2001-07.

The bench appreciated the probe done by the CBI and ED and said they have done a "commendable job".


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