Market set for an uncertain start; TCS eyed

The key benchmark indices may remain volatile as investors may refrain from taking large positions ahead of extended holiday. Market will remain closed on Monday, 19 October 2009 on account of Diwali. Asian markets were trading mixed.

Investors will keenly watch Q2 result from India's largest software services exporter TCS today, 16 October 2009. A total of ten brokerages expect a between 6.8% fall to a 4.9% growth in TCS' consolidated net profit as per US accounting standards at between Rs 1416.30 crore to Rs 1595.40 crore in Q2 September 2009 over Q1 June 2009. Their expectations peg a between 0.4% to 3.8% growth in revenue at between Rs 7237.70 crore to Rs 7478.40 crore in Q2 September 2009 over Q1 June 2009.

Ultratech, Emkay Global, TV18, Ibn18 Broadcast, Network 18 Fincap, BASF India, Deep industries, GTL Infra, Monsanto, Onward Tech, Piramal Glass, Prime Focus, Raj TV, VST Industries among other companies will announce their Q2 September 2009 result today.

Reliance Communications (RCom) will be in action after Anil Ambani chairman of RCom on Thursday alleged there was a “vicious and mala fide” campaign against his telecom company Reliance Communications by a “known rival group” and dubbed the special audit report, which claimed that RCom was mis-stating its revenues as “biased and prejudiced”. But the auditor, Parekh & Co defended its work and also denied a claim by Mr Ambani that it had not sought feedback from RCom.

Meanwhile, Inflation based on the wholesale price index (WPI) rose 0.92% in 12 months to 3 October 2009, slightly above previous week's annual rise of 0.7%, data released by the government on Thursday showed. Within the WPI, the food articles index rose 13.34%. The government revised upwards inflation for the year through 8 August 2009 to a much smaller decline of 0.37% from an estimated fall of 1.53%.

C. Rangarajan, chairman of the prime minister's Economic Advisory Council said on Wednesday the Reserve Bank of India is likely to hold interest rates at a near decade-low in its policy review this month and the monetary stance can continue until inflationary pressures rise. Robust industrial growth could offset the impact of a 2 to 2.5% contraction in farm output due to weak monsoon, and help the economy grow between 6 and 6.5% in 2009/10, Rangarajan said.

Faster industrial output growth and rising inflationary pressures have strengthened case for an end to the RBI's accommodative monetary stance next year. Industrial output grew at its fastest pace in 22 months in August at 10.4 %.

Meanwhile, the IPO of Indiabulls Power was subscribed 21.84 times. Indiabulls Power, a unit of Mumbai-based developer Indiabulls Real Estate, is developing five thermal power plants in western and central India, with total capacity of 6,600 megawatts, and will use the issue proceeds to fund two projects. The issue closed on Thursday, 15 October 2009.

The company has allotted 6.11 crore shares to anchor investors at Rs 45 per shares, at the top end of the Rs 40 to Rs 45 price band for the IPO.

Stock and sector-specific activity may dominate trade in the coming days based on expectations on Q2 September 2009 results. Auto firms are seen reporting strong Q2 results on strong volume growth and on lower input costs. Lower interest rates and pay hike for government employees has boosted auto sales this year after last year's slowdown in demand. Government employees have started receiving the balance 60% of their wage arrears as per the recommendations of the VIth Pay Commission.

Cement firms, too, are seen reporting good Q2 numbers on the back of volume growth, higher realisation and decline in costs like imported coal. Metal firms are seen reporting fall in net profit due to a sharp fall in metal prices on year-on-year basis.

Fall in volumes in the commercial property segment and lower realisations in both commercial and residential property segments, will pull earnings of realty firms lower.

Banks are seen reporting a sedate growth in core lending amid sluggish credit offtake. On the flip side, PSU banks will benefit from treasury gains amid volatility in prices of government securities during the quarter.

Strong growth in new subscriber additions will aid topline growth of telecom firms. But falling average revenue per user (ARPU) and revenue per minute due to intense competition will cap bottom line growth.

Asian stocks were trading mixed today as a decline among financial shares was offset by a weakening yen that boosted the outlook for Japan's exporters. The key benchmark indices in China, South Korea and Singapore fell by between 0.29% to 0.56%. The key benchmark indices in Hong Kong, Japan and Taiwan rose by between 0.01% to 0.19%.

US markets closed with marginal gains after a topsy- turvy session on Thursday on positive economic news and better than estimated earnings from Goldman Sachs and Citigroup. The Dow gained 47.08 points, or 0.5%, to 10,062.94, its highest close since last October.. The S&P 500 index added 4.54 points, or 0.4%, to 1,096.56. The Nasdaq Composite Index rose 1.06 points, or 0.1%, to 2,173.29.

Lots of earnings coming from the US. Goldman Sachs posted better-than-expected results, beating estimates on both earnings and revenue front. Citigroup beat on earnings but didn't better estimates on revenue.

IBM numbers came out after market close. The company raised its full-year outlook and reported higher-than-expected quarterly profit.. Internet search giant Google handily beat analysts' expectations for both profit and revenue.

In the day's economic news, weekly jobless claims dropped to their lowest level since January 2009 at 5.15 lakh jobs.

Back home, Stock-specific buying continued even as the key benchmark indices edged lower in what was a choppy trading session on Thursday. The BSE 30-share Sensex fell 35.91 points or 0.21% to 17,195.20.

As per provisional data, foreign funds on Thursday, 15 October 2009, bought equities worth a net Rs 752.48 crore. Domestic funds dumped stocks worth a net Rs 443.08 crore

A section of the market is concerned that a glut in share sales may suck liquidity from the secondary market. As per reports, 30 companies have filed their draft red herring prospectuses in September 2009 with market regulator Securities & Exchange Board of India (Sebi) for raising funds through initial public offering.

The corporate sector has raised large sums of money through equity and equity related instruments in the past six months or so to either to retire high cost debt or to fund expansion. The supply of paper by Indian firms appear limitless, raising concerns that additional share sales will suck liquidity from the secondary market.

As per one report, companies plan to raise over Rs 50,000 crore through initial public offers (IPOs), follow-up public offers, divestment of stake sale in the second half of the current financial year. Reliance Infratel also announced on 22 September 2009, its intention to raise Rs 5,000 crore from the primary market. A number of companies are also in the fray to raise funds by way of qualified institutional placement (QIP), reports suggest.

Divestment of state-run firms by the government may also increase the supply of paper in the market. As per recent reports, the government is planning to announce a blueprint for selling its stake in state-owned firms in the first week of October 2009. The policy is expected to suggest how the government will eventually bring down its stake in public sector companies to 75% over a period of time.