News & Analysis » India

Indian stock market morning report by Keynote Capitals (October 24, 2008, Friday, 7.00 a.m. GMT)

Economic and Corporate Developments

- The rupee opened trade this morning at a record low of 50.15 per USD, following sharp decline in Asian stock markets.

- Crude oil prices are close to the $67 per barrel mark.

- The petroleum minister has said that India is watching the price of crude oil and will make an announcement in a week on revising fuel prices. He said last week that the fuel prices may be cut if the average price of crude oil processed by Indian refineries falls to $61 a barrel. The price of the Indian basket of crude oil fell to $61.47 a barrel on Wednesday.

- The inflation figure for the week ended October 11, 2008 was 11.07%, vis-a-vis 11.44% for the previous week.

- According to the Finance Minister, there is adequate liquidity in the banking system. He has advised banks to lend aggressively.

- The Reserve Bank of India is considering options to make cheaper finance available to NBFCs, including a separate line of credit for bank finance backed by government securities or AAA-rated commercial paper.

- Retail loans growth in India further slow downed at the end of August 2008 as home loans, the major contributor, saw a substantial decline. The growth slowed to 17.4% in August 2008 from 21.4% a year earlier.

- Reliance Industries has denied that Chevron has offered it the latter’s 5% stake in Reliance Petroleum. Chevron acquired the stake in 2006 for $300mn and has an option to increase it to 29%

- Apollo Tyres is considering a price increase of 3-4% in the December quarter, to protect its margins.

- Dell, the world's No.2 computer maker, expects softness in demand for PCs due to the global economic downturn, but hopes to increase market share in emerging markets such as India.

Results to be announced today

ABB, Aditya Birla Nuvo, Alstom Projects, Ambuja Cements, Asian Paints, Bharat Electronics, BHEL, Binani Industries, BPL, Colgate, CRISIL, Dish TV, Dishman Pharma, Electrotherm, Emkay, Great Offshore, Glaxo, Godrej Consumer Products, Lupin, Hexaware, HCC, HUL, ITC, Moser Baer, NTPC, Tata Steel, TV 18.

US markets overnight

The US markets managed to end up 2% in late trade. Former Federal Reserve Chairman Greenspan has called for tighter regulation of financial sector to prevent a repeat of credit crisis. Credit Suisse posted 3Q net loss of 1.26bn Swiss francs ($1.08bn) compared to profit of 1.3bn francs a year ago, after writing down value of leveraged loans and mortgage-backed securities. However, Credit Suisse declined to join UBS in seeking government assistance last week, and instead raised 10bn francs from investors in Qatar, Israel and Saudi Arabia to show the bank can weather the financial crisis alone. Sony cut its full-year net income forecast by 38% because of yen's strength against euro. Slower growth expectations also have led many companies to cut jobs. Last week's jobless claims were higher than expected. Goldman Sachs plans to cut 3,200 jobs (10% of its workforce) adding to 125,000 job cuts across the securities industry this year. Xerox and General Motors will also be cutting their workforces. Goldman Sachs, Coller Capital and Lexington Partners are weighing bids for Lehman Brothers investments in US and European private-equity funds. Crude is down at $67.64/barrel, which is over 50% down from its July high as slower economic growth threatens to undercut demand for the commodity. With oil prices down so dramatically, OPEC is expected to announce production cuts at its emergency meeting tomorrow.

Views on markets today

With the Asian markets sliding further down this morning, today is all set to be another day for the bears. The Nikkei is down 600 points, dropping below the 8,000 level for the first time since May 2003. The Kospi fell below the 1000 level a level witnessed for the first time since June 2005.

Back home, there is no stopping the bad news. While the Finance Minister confirmed the slowdown in the economy, he also expressed concerns about the increasing deficits. As per the Minister, India may not achieve its revenue and fiscal deficit targets. Corporate earnings growth is seen subdued. While Reliance Industries reported flattish earnings growth, some major corporates saw a huge dip in earnings. Reliance Industries’ profits went up by 7.4%. Though the earnings growth is above estimates, it took a major hit on margins. Grasim, Bajaj Auto, and Dr. Reddy's Laboratories saw a major fall in quarterly earnings. Apart from global factors, a few major companies will announce their results which include ABB, Tata Steel, Maruti Udyog, ITC, Ambuja Cements and Lupin. We may see volatility with weakness in the Indian markets today.