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Indian stock market daily morning report (August 31, 2010, Tuesday)

Contributed by Keynote Capitals

By Keynote Capitals

Views on markets today

- Indian markets ended a volatile session on marginally positive note yesterday on back of mixed global cues and news of Direct Tax Code introduction in the Parliament. Flat European markets also weighed on investor sentiment. EIH gained ~11.5% Reliance Industries bought 14.12% stake in EIH through its wholly-owned subsidiary Reliance Industries Investment and Holding Private Limited at Rs 182 per share. Tata Steel rallied as much as 3.5% after its unit Corus reached an agreement with Thailand's SSI over the potential $500 million sale of its mothballed Teesside plant in northern England. The up-move was mainly led by gains in metal, consumer durable and auto stocks while FMCG, IT and capital goods stocks witnessed profit booking.

- Market breadth was weak at ~0.84x as investors sold small and mid cap stocks. Both FIIs and domestic institutions bought equities worth Rs1.84bn and Rs68.7Cr respectively.

- The Asian markets are trading lower this morning. The Nikkei is trading lower after erasing two days of gains on the Bank of Japan's emergency move failed to curb strength in the yen and worries about the US economy spurred profit-taking. The Hang Seng is also trading lower.

- Indian markets are expected to open negative as US and Asian markets slid on concerns about the flagging US economy, but the focus will be on India’s June quarter GDP data to be announce today.

Key events today

- Announcement of GDP data for first quarter ended June 2010.

Economic and Corporate Developments

- The government plans to roll out the new Direct Tax Code (DTC) from April 1, 2012.

- The Direct Taxes Code Bill has proposed to retain the current tax system of exemptions for SEZ notified till 2012 but imposed a 20% minimum alternate tax.

- The proposed increase in exemption limits in the Direct Taxes Code (DTC) Bill will benefit an overwhelming 96% of taxpayers, who earn less than Rs0.5mn p.a.

Buzzing Stocks

- Reliance Industries has acquired 14.12% stake in EIH for Rs10.2bn.

- NTPC has signed a MoU with Bangladesh Power Development Board for setting up two 1,320 MW each power projects at Chittagong and Khulna in Bangladesh. NTPC may offer upto 49% equity stake to Qatar Petroleum in its gas-based project at Kerala.

- Jubilant Organosys has signed a long-term contract worth US$33mn with a US life sciences company for its custom research and manufacturing services (CRAMS) business.

- Reliance Communications has set up an integrated third generation innovation laboratory to develop applications for mobile services consumers.

- Videocon is in talks with foreign entities for a 26% stake-sale in its telecom subsidiary, Videocon Telecommunications.

- Union Bank of India and PNB have increased their term deposit rates by up to 1% across various maturities.

- M&M plans to separate the agri business of its subsidiary Mahindra Shubhlabh Services and merge it into itself.

- ONGC said that Cairn Energy Plc required its consent besides government approvals to "consummate" the proposed sale of Cairn Energy’s stake in Cairn India to Vedanta Resources.

- Gitanjali Gems plans to acquire a leading Italian jewellery house by the end of next month.

US markets

The US markets closed on negative note as worries about the pace of economic recovery overshadowed data showing a rise in consumer spending and income. The uncertainty weighed more on sectors associated with growth, including banks and consumer discretionary stocks.

US consumer spending rose at the strongest pace in four months in July while a smaller rise in incomes was less than forecast. The expectation that data this week will confirm the economy shed jobs in August also kept investors at bay.

US President Barack Obama's attempt to address worries the recovery is faltering appeared to fall short. Mr. Obama had discussed additional steps to help the recovery with his advisers, but the speech did not promise any concrete measures, and stocks extended losses afterward.