Market may open lower; September industrial production data eyed

11 Nov

The market may open lower reacting to the sharp slide in Asian stocks on Thursday, 10 November 2011, when domestic stock markets were closed on account of Gurunanak Jayanti. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicates a fall of 53 points at the opening bell. Asian stocks were trading higher today, 11 November 2011.

On the macro front, data on industrial production for September 2011 is due today, 11 November 2011. Industrial output in the month of August 2011 rose 4.1% from a year earlier. Inflation data for October 2011 is due on Monday, 14 November 2011. Inflation, as measured by the wholesale price index (WPI), rose 9.72% in September 2011.

Jet Airways (India), GE Shipping, Reliance Capital, Housing Development & Infrastructure and Tata Chemicals unveil Q2 results today, 11 November 2011.

Tata Steel announced on Thursday, 10 November 2011 that consolidated net profit fell 89.26% to Rs. 212.43 crore on 11.73% rise in total income to Rs. 32918.33 crore in Q2 September 2011 over Q2 September 2010. The company said its performance was adversely impacted by higher global raw materials costs and lower average selling prices at Tata Steel Europe. Tata Steel’s net debt at the end of September 2011 stood atRs. 45056 crore, compared to Rs. 46627 crore at the end of March 2011.

Tata Steel Managing Director Mr HM Nerurkar said, Tata Steel’s Indian operations performed strongly despite the overall soft market situation. The continued interest rate hikes impacted steel demand growth, but the company sequentially increased sales volumes due to enhanced market reach and customer focus. Higher raw material prices and adverse currency movements impacted profits in Q2 September 2011, but the focus on company-wide cost saving initiatives yielded desired results. We remain committed to commission the 2.9 million tonnes per annum expansion in Jamshedpur in the last quarter of this fiscal year and we are making good progress on the greenfield project in Odisha. Efforts to reinvigorate the South East Asian operations are continuing through new product launches, branding initiatives, increased market access and improvements in operating parameters.

Tata Steel Europe MD & CEO Dr Karl-Ulrich Köhler said, Higher raw material costs and lower average selling prices made the normally quiet summer quarter particularly testing. Despite these headwinds, Tata Steel in Europe succeeded in matching the delivery volumes achieved in Q1. The actions taken after 2008 to weather the financial crisis has strengthened the European operations’ ability to cope with market disturbances. The restructuring and performance improvement initiatives that we launched in the first half will build on that progress and yield further competitive edge. Our focus on product and service innovation is also achieving breakthroughs in pursuit of our mission to be the long-term preferred partner of customers in our chosen markets.

Realty major DLF announced on Thursday that consolidated net profit fell 10.98% to Rs.372.41 crore on 2.27% rise in total income to Rs. 2577.16 crore in Q2 September 2011 over Q2 September 2010.

Housing Development Finance Corporation (HDFC) has announced strategic plans to enter the education Sector. HDFC’s strategy is to enter India’s vast education sector by way of participating in the segment of schools. The long-term objective is to create a visible impact on school systems across the country by providing school management and other allied services, apart from setting up initial flagship schools. HDFC also plans to enter the segment of vocational education and training by undertaking career enhancement programs, initially offered to graduates across the country. The objective is to address the twin challenges of employability and deployability being increasingly experienced across several industry sectors including the financial sector. HDFC had earlier entered the education finance sector through its subsidiary, Credila Financial Services. Credila is India’s first and only fully dedicated education loan company.

Reliance Infrastructure after market hours on Wednesday said it had bought back 2 lakh equity shares from the open market on that day. The company has announced a program for buyback of equity shares for the aggregate amount of upto Rs. 1000 crore. Since the launch of the programme, the company has bought back 42.25 lakh shares from the market for an aggregate amount of Rs. 226.05 crore, it said.

Hindalco Industries announced on Thursday that net profit rose 16% to 503 crore on 7% rise in revenues to Rs. 6272 crore in Q2 September 2011 over Q2 September 2010.

Hindalco Industries said that the second half of FY 2012 (year ending March 2012) will be difficult due to global uncertainties, falling LME prices, and persisting cost pressures. The intensity of resource challenge, which accentuated in the first half of FY 2012 due to monsoon related issues is expected to moderate, the company said. Overall, the second half of FY 2012 is expected to be challenging in terms of cost pressure, domestic demand and realizations, Hindalco said in a statement. Various initiatives of asset sweating and cost optimization are expected to cushion the results, the company said. With some of the projects slated to go on stream in second half of FY 2012, the start-up, quick ramp-up and speedy stabilization of production are going to be key focus areas for the company, Hindalco said.

Mahindra Satyam announced on Thursday that consolidated net profit as per Indian GAAP rose 5.7% to Rs. 238 crore on 10% rise in revenues to Rs. 1578 crore in Q2 September 2011 over Q1 June 2011.

Vineet Nayyar, Chairman, Mahindra Satyam, said, Our growth momentum continues, for the 5th consecutive quarter. As we come towards the end of our 3-year transformation journey, it is indeed satisfying to see that all our key business performance indicators such as growth, profitability and talent retention, are on course. We have shown significant improvement quarter on quarter, in spite of an uncertain macro-economic environment.

C P Gurnani, CEO, Mahindra Satyam, said, This was an eventful quarter for us. Our emphasis on differentiation and scaling up our market share through verticalized solutions is bearing fruit. Investments into emerging areas such as Enterprise Mobility and Smart Grid are gaining momentum.

GMR Infrastructure reported consolidated net loss of Rs. 62.53 crore in Q2 September 2011 as compared with net profit of Rs. 71.12 crore in Q2 September 2010. The company’s total income rose 50.68% to Rs. 1882.20 crore in Q2 September 2011 over Q2 September 2010.

Banking stocks will be in focus as a leading ratings company Standard & Poor’s (S&P) upgraded the Indian banking sector saying its domestic regulations are in line with international standards differing with the downgrade accorded by Moody’s. In our view, banking regulations in India are in line with international standards and the regulator (RBI) has a moderately successful track record, S&P said while upgrading the risk profile (BICRA) a notch higher to ‘Group 5′. The latest BICRA (Banking Industry Country Risk Assessments) of S&P comes a day after US-based Moody’s changed the outlook for the sector to negative from stable, a move which evoked sharp criticism from Indian government and bankers.

Weakness in European markets pushed Indian stocks lower, with the key benchmark indices settling at their lowest level in two weeks on Wednesday, 9 November 2011. The BSE Sensex fell 207.43 points or 1.18% to settle at 17,362.10, its lowest level since 26 October 2011.

Foreign institutional investors (FIIs) bought shares worth Rs. 559.04 crore on Wednesday, 9 November 2011 as per provisional figures on the stock exchanges. FIIs had bought shares worth Rs. 456.2 crore and Rs. 128.62 crore on Tuesday, 8 November 2011 and Friday, 4 November 2011, respectively.

The earnings season is drawing towards a close. Coal India and National Aluminium Company report Q2 results on Saturday, 12 November 2011. Sun Pharma unveils Q2 results on Sunday, 13 November 2011. Tata Motors, Mahindra & Mahindra, Tata Power, Bhel, Jaiprakash Associates, Bhushan Steel, JSW Steel and India Cements unveil Q2 results on 14 November 2011. Tech Mahindra unveils Q2 results on 15 November 2011.

India’s October exports rose an annual 10.8% to $19.9 billion, while imports for the month rose 21.7 percent to $39.5 billion, the trade secretary said on Tuesday, citing provisional data. India’s trade deficit in October is seen at $19.6 billion, the highest in four years, Rahul Khullar said. At this rate, the trade deficit for the year could breach the $150 billion mark, he added.

India’s service sector contracted for a second straight month in October, as new business grew at its weakest pace since May 2009, dragged by sagging global demand and tight monetary policy, a survey showed on Thursday, 3 November 2011. The seasonally adjusted HSBC Markit Business Activity Index, based on a survey of around 400 firms, slumped to 49.1 in October, its lowest reading in two-and-a-half years and below the 50-mark which separates growth from contraction. It was at 49.8 in September.

India’s manufacturing activity in October expanded–though modestly–indicating an improvement in business conditions from a month ago as growth in new orders accelerated, a survey showed Tuesday, 1 November 2011. The seasonally adjusted HSBC Purchasing Managers’ Index, prepared by Markit, rose to 52 in October from 50.4 in September. A figure above 50 indicates expansion.

India needs to guard against imported inflationary pressure as the euro-zone continues to reel under the debt crisis, Prime Minister Manmohan Singh said on Wednesday, 2 November 2011. In an increasingly interdependent world, we have to be wary of contagion effects, Mr. Singh said in a statement before his departure to attend a conference of the Group of 20 industrial and developing economies in Cannes, France.

Bad loans are not threatening the entire banking system and the policy guidance given so far would hold until further notice, a deputy governor of the Reserve Bank of India, Subir Gokarn, said at a televised event on Tuesday, 8 November 2011.

RBI announced a 25 basis points hike in its key policy rate viz. the repo rate to 8.5% after half-yearly review of the monetary policy on 25 October 2011. The central bank cut its GDP growth forecast for the current fiscal year through March 2012 to 7.6% from 8% earlier. But it retained its March-end inflation projection of 7%. RBI said the projected inflation trajectory indicates that the inflation rate will begin falling in December 2011 (January 2012 release) and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favourably.

Mr. Sudipto Mundle, a member of the Reserve Bank of India’s technical advisory committee on monetary policy, on Thursday, 3 November 2011, said he expects inflation to ease in the January-March quarter as global commodity prices will begin to cool by then, helped by a favorable base. However, it will still overshoot the RBI’s March-end projection of 7%, possibly ending the fiscal year at as high as 8%, he added. Mr. Mundle expects the economy to grow 7%-7.5% this fiscal year, below the RBI’s 7.6% forecast.

India and Pakistan hailed progress in diplomatic ties on Thursday, promising to open a new chapter in their fraught relationship at a next round of formal peace talks due to take place by the end of this month. Indian Prime Minister Manmohan Singh and his Pakistani counterpart Yusuf Raza Gilani held nearly an hour-long discussion at a resort island in the Maldives.

Asian shares rebounded modestly Friday after brighter corporate news lifted US stocks and debt-ladened Italy was able to fund itself at a bond auction. Key benchmark indices in Hong Kong, China, South Korea, Taiwan and Singapore rose by between 0.15% to 1.46%. Key benchmark indices in Indonesia and Japan fell by between 0.16% to 0.22%.

China’s exports in October rose at their weakest pace in eight months, underlining official concern about the sector that has dragged on economic growth this year while imports jumped much more than expected. Customs figures showed Chinese exports rose 15.9% in October over the year earlier month. Imports though jumped 28.7% reflective of a buoyant domestic economy. The October trade surplus came in at $17 billion.

A key gauge of Japan’s corporate capital spending fell more than expected in September and manufacturers expect a further drop this quarter as business confidence sags in the face of the strong yen and slowing global growth.

Italy, the latest euro zone nation to find itself in the bond market’s crosshairs, moved closer to a national unity government Thursday, while its treasury managed to sell 1-year bills at yields of less than 7 percent — the threshold that investors believe renders its debt burden unsustainable.

In Greece, former European Central Bank vice president Lucas Papademos was appointed to head the country’s new crisis coalition.

US stocks bounced back on Thursday from the previous session’s steep losses as investors latched onto positive corporate and economic news. Merck raised its dividend and Cisco reported strong earnings, reinforcing the view that corporate America is showing strength even as problems in Europe weigh on investors’ minds.

Thursday’s economic data showed new US weekly jobless claims declined to the lowest level since April, while the trade deficit unexpectedly shrank in September to its narrowest level since December.

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