All eyes will be focused on the RBI’s quarterly policy review today
The domestic market is likely to open sideways ahead of the Reserve Bank of India’s quarterly monetary policy review. Investors are worried that a fresh rate hike would hurt expansion plans of corporates and lower earnings going ahead, however, analysts opine that the central bank may hike short-term lending and borrowing rates by another 25 basis points each. A clutch of corporate results from companies including BHEL, Alstom Projects, Cairn India, Glenmark Pharma, JSW Steel, Maruti Suzuki and Shriram Transport Finance, among others, will lead to stock-specific action.
On the international front, Wall Street closed lower overnight over the stalemate over the deal to raise the debt ceiling. Markets in Asia were mostly higher in early trade on Tuesday, as positive earnings forecasts helped the regional indices go higher. The SGX Nifty was up 17 points at 5,705 compared to Monday’s close of 5,687.50.
The Nifty carried on from where it ended on Friday, registering an even better intra-day high and low yesterday, with a 46 points gain to close at 5,680. We expected the Nifty to move to the 5,700 level, which it did at the intra day high. The market reacted strongly to events such as the benefit for telecom majors from the tariff hike by Airtel and in anticipation of better results from Reliance Industries.
After 10 days of sideways consolidation, the market is headed higher. We can expect the Nifty to move up to 5,780.
Weak cues from the Asian region led to a flat opening in the domestic market. The imbroglio over raising the US debt ceiling ahead of the 2nd August deadline was the main factor that impeded the markets early on. The Nifty opened at 5,634, unchanged from its close on Friday, while the Sensex resumed trade 31 points higher at 18,753.
The market was volatile and fluctuated on both sides of the neutral line on added concerns that the RBI may raise rates again on Tuesday. The indices fell to the day’s low in initial trade, the Nifty dropping to 5,617 and the Sensex back to 18,671.
The market remained range-bound in choppy trading till around 1pm, when key European indices opened weak. Buying in heavyweights helped the indices cross their psychological levels-5,700 (on the Nifty) and 18,900 (on the Sensex)-in the post-noon session. The indices went on to touch the day's high as the Nifty rose to 5,701, a gain of 84 points from its intra-day low, and the Sensex went up to 18,932, up 261 points from the day's low.
Markets in the US closed lower on Monday as the stalemate continued over raising the country’s debt ceiling. Although analysts expect a last-minute deal, many are worried that the stalemate will cause rating agencies to cut their stance on US debt.
Among financial stocks, Bank of America and JP: Morgan Chase & Company declined 1.2% each in trade.
The Dow declined 88.36 points (0.70%) at 12,592.80. The S&P 500 slipped 7.59 points (0.56%) at 1,337.43 and the Nasdaq fell 16.03 points (0.56%) at 2,842.80.
Meanwhile, gold gained $10.70 to settle at $1,612 an ounce after touching a record high of $1,622.49 an ounce earlier as investors fled to the precious metal as a safe-haven option.
Markets in Asia were mostly higher in early trade on Tuesday on positive earnings estimates boosted the indices, despite issues related to the US debt stalemate. Japanese camera maker Canon led exporters higher as it advanced 2.8% after boosting its profit forecast on higher sales. Kao surged 4% after the household goods maker raised its full-year outlook and posted a 12% rise in April-June operating profit on higher sales of its chemical products overseas. Automakers and technology stocks helped gains in the Seoul market.
The Hang Seng gained 0.65%, the Jakarta Composite rose 0.02%, the KLSE Composite added 0.03%, the Nikkei 225 advanced 0.04%, the Straits Times was up 0.08%, the Seoul Composite climbed 0.16% and the Taiwan Weighted was up 0.52%. On the other hand, the Shanghai Composite declined 0.08%.
Back home, the RBI on Monday said it expected the farm sector growth to stay “broadly on track”, though it underlined some concerns about the weakening trends in the monsoon pattern.
The central bank, however, underlined that a ‘near- normal’ monsoon performance will be important for higher growth. Though growth will be good in absolute terms, in percentage terms it may be lower this fiscal on account of the high base effect from the past year’s record production.
The RBI in its Macroeconomic and Monetary Developments Report said it will have to continue the thrust on tight monetary stance till there is "clear evidence of inflation trending close to a level within RBI's comfort zone"
Mumbai: The Reserve Bank of India (RBI) on Monday gave strong hints of another hike in its key interest rates at the policy review on Tuesday, saying that high inflation requires further monetary tightening, slowdown in growth notwithstanding, reports PTI.
"The unfinished task of taming inflation warrants continuation of anti-inflationary monetary stance, (though) the downside risks to growth have increased," RBI said in its Macroeconomic and Monetary Developments Report released on the eve of the first quarter review of the credit policy on Tuesday.
The RBI said it will have to continue the thrust on tight monetary stance till there is "clear evidence of inflation trending close to a level within RBI's comfort zone".
The headline inflation stood at 9.44% for June. The central bank has set an inflation target of 6% for the fiscal-end.
During the past 15 months, the central bank has raised 10 times its key policy rates-repo or the short-term lending rate, and reverse repo at which it borrows from banks-by 425 basis points. The repo is at 7.5% now while the reverse repo stands at 6.5%.
Stating that the monsoon, global commodity prices and the Eurozone crisis have the potential to alter growth path and inflation level, the RBI said, "A significant departure of monsoon from 'normal', a collapse of global commodity price bubble and Eurozone debt crisis assuming full-blown proportion" can alter both growth as well as inflation forecasts.
The rising inflationary trend in advanced economies poses a threat to increasing price rise in domestic front as well, the central bank said.
Pointing out that the industrial activity moderated in the first quarter of the fiscal, RBI said a similar trend is likely to continue in the July-September quarter, too.
The central bank, however, retained its economic growth forecast for the current fiscal at around 8%. A report by RBI-sponsored professional forecasters, however, scaled down GDP growth to 7.9% from earlier projection of 8.2%.
The report expressed the hope that a slight moderation in monsoon may not radically alter the agriculture output.
Noting that manufacturing activity has become more broad-based on the back of the acceleration in factory output across last fiscal, the RBI said subdued growth in certain core industries like electricity, cement and natural gas is a drag on overall industrial growth.
RIL earned $10.3 for turning every barrel of crude oil into petroleum products or fuel as opposed to $7.3 per barrel gross refining margin in Q1 of 2010-11 fiscal
New Delhi: Reliance Industries (RIL) today reported a 16.7% rise in net profit Rs5,661 crore April-June quarter this fiscal compared to Rs4,851 crore in the same period the previous year, RIL said in a statement. The company attributed the increase to higher refining margins, reports PTI.
RIL, which operates the world's largest refining complex at Jamnagar in Gujarat, said it earned $10.3 for turning every barrel of crude oil into petroleum products or fuel as opposed to $7.3 per barrel gross refining margin in Q1 of 2010-11 fiscal.
Turnover was up 37.2% to Rs83,689 crore while exports jumped 57.5% to Rs51,737 crore.
RIL chairman and managing director Mukesh D Ambani said: "The growth in earnings was driven by strong refining margins and sustained performance in the petrochemicals business. Our cash flows give us the unparalleled opportunity to allocate capital to higher-margin resource plays in leading markets around the world."
"We remain committed towards investing in India and have commenced the investment program in the petrochemical business," he added.
Basic earnings per share (EPS) for the quarter ended 30 June 2011 was Rs17.30 ($ 0.4) against Rs14.80 for the corresponding period of the previous year.
For the quarter ended 30 June 2011, production from the KG-D6 block was 1.41 million barrels of crude oil and 156.2 BCF of natural gas, reduction of 41% and 18% respectively as compared to Q1 FY10-11. Production of gas condensate was 0.21 million barrels, a growth of 81.6 % over the previous year.