Market may open higher on firm Asian stocks

The market may open higher on firm Asian stocks. Trading of CNX Nifty futures on the Singapore stock exchange indicates that the Nifty could gain 26.50 points at the opening bell.

GMR Infrastructure (GMR) after market hours on Monday, 30 December 2013 said it has signed a definitive agreement with Malaysian Airports Holding Berhard (MAHB) to divest its 40% equity stake in Sabiha Gokcen International Airport (ISGIA) and its operating company LGM Tourism (LGM) for an amount of euro 225 million (i.e. approximately Rs 1910 crore), subject to certain adjustments. Definitive agreements have been signed subsequent to the exercise of Right of First Refusal (ROFR) by MAHB under the existing shareholders agreement of ISG, on 23 December 2013, GMR said.

GMR said that the transaction is subject to customary closing conditions including the approval of the relevant government authorities and the project lenders to ISG.

Commenting on the transaction, G M Rao, Chairman, GMR Group said, “This transaction is yet another evidence of GMR Group’s ability to implement appropriate strategy to face the challenges of changing times. We at GMR Group continue to focus on creating liquidity and enhance value by effective portfolio management under our ALAR (Asset Light Asset Right) strategy. The efforts of the Group taken in recent times shall strengthen our balance sheet”.

ISG is one of the world’s fastest-growing airports. It currently hosts more than 58 different carriers covering over 125 destinations. The consortium of Limak Holidng, GMR Group and MAHB was selected as the preferred bidder for upgrading and maintaining the airport in July 2007. The airport’s new terminal was commissioned in October 2009, 12 months ahead of schedule. LGM undertakes the operation of non-zero services at the airport such as hotel, food beverages, and lounge. GMR’s equity investment at ISG is around euro 71.6 million.

Canara Bank said after market hours on Monday, 30 December 2013 that in tune with the market conditions, the bank has aligned its lending rates.

Accordingly, the base rate stands modified from 9.95% to 10.20% with effect from 1 January 2014. The bank has also aligned its Benchmark prime lending rate (PLR) to 14.45% from 14.20% from 1 January 2014.

Shares of Apollo Tyres will be in focus after US based tyre maker Cooper Tire Rubber Company on Monday, 30 December 2013, announced that it has terminated the merger agreement with Apollo Tyres. Commenting on the development, Cooper Chairman, Chief Executive Officer and President, Roy Armes, said: “It is time to move our business forward. While the strategic rationale for a business combination with Apollo is compelling, it is clear that the merger agreement both companies signed on June 12 will not be consummated by Apollo and we have been notified that financing for the transaction is no longer available. The right thing for Cooper now is to focus on continuing to build our business. Our business model is strong, and despite the challenges this year, we are coming off record operating profit through the first half of the year and expect to continue to be profitable for the second half, ending the year with a strong balance sheet. We look forward to continuing to execute on our strategy in 2014, and we have a very strong base from which to do this-brands that are respected for quality, a loyal customer base, a flexible global network of manufacturing facilities, a skilled workforce, and top technical capabilities”.

“While Cooper believes Apollo has breached the merger agreement, and we will continue to pursue the legal steps necessary to protect the interests of our company and our stockholders, our focus will be squarely on our business and moving it forward,” Armes said.

“Addressing the situation at Cooper Chengshan Tire (CCT) in Rongcheng, China is our top priority in the near term. The issues at CCT were driven by the merger agreement, and with the agreement now terminated, Cooper is working independently to restore normal operations at CCT, including obtaining the information needed for Cooper to resume regular financial reporting as soon as possible. Once the situation at CCT is resolved and regular financial reporting has resumed, Cooper will be in a position to address additional options for the deployment of capital targeted at returning value for our stockholders,” he added.

The Confederation of Indian Industry (CII) on Monday, 30 December 2013, said that the CII Business Confidence Index (CII-BCI) rose sharply to 54.9% in Q3 December 2013, from 45.7% in Q2 September 2013. The pick-up in BCI for the current quarter comes as a major relief for the economy which has been braving the onslaught of the slowdown for the last several quarters and awaiting the return of growth, the CII said in a statement. The survey also strikes a note of caution as the downside risks to growth have still not abated and supply side bottlenecks continue to pose a problem, CII said. “With some positive signals emanating from the global economy, which finds a resonance in our improved export performance and is causing our current account deficit to decline, we believe that the slowdown in the domestic economy may have bottomed out in the second quarter and the trend could reverse henceforth”, observed Mr. Chandrajit Banerjee, Director General, Confederation of Indian Industry.

The 85th Business Outlook Survey is based on the responses from over 174 industry members. Majority of the respondents (63 per cent) belong to large-scale firms, while 12 per cent are from medium-scale firms and 25 per cent were from small-scale. Further, 65 per cent of the respondents were from manufacturing sector while 35 per cent were from services.

The survey reveals that 58 per cent of the respondents expect an increase in their sales in the third quarter of 2013-14, much higher than 45 per cent who witnessed the same during the previous quarter. As regards the input cost in the current quarter, majority of the respondents also expect it to increase. The silver lining, however, is that the percentage of respondents who expect expenses on raw materials, electricity, and wages and salaries to increase has declined significantly from the last quarter, CII said.

Against the backdrop of an expected improvement in sales growth and moderation in inputs cost, majority of the respondents (43 per cent) expect an increase in their pre-tax profit margin in the third quarter, much higher than 31 per cent in the previous quarter.

Another positive signal emerging from the survey is that an improvement in capacity utilization is expected in the current quarter. As compared to 56 per cent respondents experiencing less than 75 per capacity utilization in the second quarter, only 45 per cent respondents expect capacity utilization to fall below 75 per cent in the third quarter, CII said. Underlining the need for continuing policy intervention to step up investment, 53 per cent of firms did not expect their capacity to expand in the current quarter.

What is also encouraging is to note that the export prospects look positive in the current quarter whereas imports are seen to be restrained, CII said. 53 per cent of firms expected their exports to increase in the current quarter, up from 49 per cent in the previous quarter. Similarly, 56 per cent of the respondents didn’t expect their imports to increase during the current quarter.

In the 85th Business Outlook Survey, domestic economic/political instability, slackening consumer demand, high level of corruption, persistent high inflation and risk from exchange rate volatility emerged as the top five current concerns in order of severity to most firms, CII said.

The next major trigger for the market is Q3 December 2013 corporate earnings. The Q3 earnings season will begin around mid-January 2014 and continue till mid-February 2014. Investors and analysts will closely watch the management commentary that would accompany the result to see if there is any revision in their future earnings forecast of the company for the current year and/or the next year.

Key benchmark indices edged lower on the first trading session of the week on Monday, 30 December 2013 after Reserve Bank of India (RBI) Governor Raghuram Rajan said that the commencement of tapering by the US Federal Reserve will mean a repricing of certain assets with consequent volatility in the global financial markets and that a potential additional source of uncertainty for India is the coming general election. The SP BSE Sensex shed 50.57 points or 0.24% to settle at 21,143.01 on that day, its lowest closing level since 26 December 2013.

Foreign institutional investors (FIIs) bought shares worth a net Rs 116.06 crore on Monday, 30 December 2013, as per provisional data from the stock exchanges.

Asian stocks rose on Tuesday as energy shares advanced. Key benchmark indices in China, Hong Kong, Taiwan, and Singapore were up 0.11% to 0.37%. Stock markets in Japan, South Korea, Indonesia, Thailand, the Philippines and Vietnam were closed for holidays.

US stocks were little changed on Monday with the Dow Jones Industrial Average scaling record closing high and the SP 500 index ended its best two-week advance in five months and housing data was weaker-than-forecast.

Pending home sales increased 0.2%, the first gain in six months, after a 1.2% drop in October that was larger than initially reported, the National Association of Realtors said in Washington.

The US Federal Reserve said after a two-day monetary policy review on 18 December 2013 that it will cut its monthly bond purchases to $75 billion from $85 billion starting in January 2014 amid an improved outlook for the job market in the world’s largest economy. The US central bank is poised to continue winding down its stimulus measures gradually over the next year.

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