Young Investor

Markets in a minute

K. VENKATASUBRAMANIAN | Updated on April 09, 2011

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Cricket and markets seem to have an uncanny ability to mirror each other. While the new world champions in cricket consolidated their position in the hearts of fans, the markets too were in consolidation mode. The week saw the markets move sideways reacting to local and global cues.

Prarthana: A great victory indeed! The Indian team has done all of us proud with an amazing performance.

Vedant: What is so great about it? They started as favourites and faced far less competent sides than Kapil's team did in 1983. It's quite funny to see politicians falling over each other to dole out freebies to this team.

Prarthana: Huh! Anyway…looks the Cairn -Vedanta deal would have to wait in the pipeline for some more time, with the government referring the issue of royalty payment to a panel for review.

Vedant: ONGC, which has a 30-percent holding in the Cairn's Rajasthan fields pays 100 per cent of the royalties. The oil ministry reportedly wants the burden shared between ONGC and Cairn India. Cairn Energy and Vedanta have extended the deadline for the deal to May 20. Looks like no smooth sailing deal this!

Prarthana: Interestingly, Sesa Goa has indicated that it would go ahead with its open offer. Shares of Cairn India and Sesa Goa were both down a couple of per cent.

Vedant: Well, Kingfisher Airlines finally seems to be flying out of a ‘debt pocket' with its loans being restructured after a consortium of banks led by SBI and ICICI bank picked a 24 per cent stake in lieu of the debt. What's more, the deal was done at a 35 per cent premium to the current market price.

Prarthana: Yeah, but even then it accounts for only 22 per cent of its Rs 7,651 crore of debt. Post this, the paid-up equity capital of Kingfisher would increase to Rs 497 crore from Rs 265 crore. That would cause some dilution!

Vedant: Meanwhile, inflation fears persist, with food inflation over 9.1 per cent and the fuel price index staying at over 13.1 per cent.

Prarthana: China though has yet again announced a rate hike of 25 basis points, a move which surprised most market analysts. Some market players suggested that this was more to contain speculative capital flowing into China. Need to see if our RBI too will up the ante, even though it has kept raising rates over the past one year.

Vedant: Staying with global cues, Portugal might seek a bailout as its borrowing costs reach record levels. Some estimates peg the package at $107 billion. So there still could be a lot of disturbing news from that region.

Prarthana: Let us hope our earnings season, which starts next week, turns out to be a good one.

Vedant: High hopes…. anyway, it will be interesting to see how companies have tackled input price inflation. Besides, don't forget that elections are to be held in several states from next week and it may have broader political ramifications, affecting possibly the ruling dispensation. The markets cannot afford to ignore this scenario.

Published on April 09, 2011

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