Oil, IT look weak, banks choppy

STOCK MARKET WATCH

The benchmark contract in the New York Mercantile Exchange touched a record intra-day high of $147.20 a barrel after having slipped to around $136 a barrel earlier this week.

The new ascent in oil prices is fuelled mainly by supply concerns following renewed threats by Nigerian rebels to attack oil installations and tensions between Iran and the West after Iran's missile tests.

Analysts said unless oil prices soften substantially, oil marketing stocks will continue to be under pressure.

The shares of private oil companies such as Reliance Industries and Cairn India are likely to underperform next week on concerns that the government might impose windfall profits tax.

IT: Weak on grim earnings expectations
Information technology shares are likely to trudge downwards next week led by a sharp fall in HCL Technologies shares, after the company reported a loss on its foreign exchange hedge ahead of its April-June earnings.

The company today said it expected a loss of $65 million-$75 million in April-June as the rupee has depreciated against the dollar, and the company booked its hedge at a higher rate.

The sector will also be weighed by grim expectations of earnings, after Infosys Technologies' earnings today failed to cheer investors.

Infosys today reported April-June net profit of Rs 13.02 billion, sailing past street expectations, but did not increase dollar-wise guidance for the full year.

This was interpreted by investors as a reflection of pessimism towards the latter half of the year, during which the company had earlier suggested growth would pick up.

Banks: Mixed signs
Bank shares are seen moving sideways. Leading brokerage house Morgan Stanley continues to be negative on Indian banks as valuations are stretched despite recent corrections.

With inflation and oil price showing no signs of decline, there are fears that Reserve Bank of India may resort to further monetary tightening before the first quarter review of its annual policy on July 29.

India's headline inflation scaled a new 13-year-high at 11.89 per cent for the week ended June 28 from 11.63 per cent in the previous week, according to government data released today.

To make matters worse, industrial growth in May was sharply lower at 3.8 per cent as against 10.6 per cent a year ago. With the decline in both stock and government securities markets this quarter, banks are likely to post high mark-to-market losses.

There is some positive for the private sector banks, as loans growth has not slowed down considerably and non-interest income continues to grow robustly.