Oil, steel could run up, while auto looks weak

STOCK MARKET WATCH

The shares of state-run oil companies are likely to remain in the positive territory next week on easing international crude oil prices, analysts said today.

Petroleum and Natural Gas Minister Murli Deora has ruled out a cut in domestic fuel prices despite softening crude oil prices. The retail prices in India are based on crude oil price of $68 a barrel, which is much lower than the current global rates.

State-run oil retailers such as Indian Oil, Hindustan Petroleum and Bharat Petroleum are losing around Rs 6 billion daily on the sale of various automobile and cooking fuels at government-regulated prices.

The analyst at a bank-sponsored brokerage said shares of Reliance Industries and Cairn India may remain depressed as the government clarification on windfall tax is still awaited.

Steel: Up due to a rise in June IIP
Steel shares may recover next week, taking cues from the growth in industrial production in June. The 5.4 per cent acceleration in industrial output was lower than the year-ago month’s growth of 8.9 per cent, but higher than the previous month’s 4.1 per cent.

The fall in crude oil prices has brightened the investor sentiment worldwide, and experts believe steel shares would be among the major gainers.

Auto: Weak on high inflation, interest rates
Rising inflation is expected to influence investors who will look to exit from interest rate sensitive stocks such as auto next week.

The headline inflation in the week ended August 2 rose to 12.44 per cent from 12.01 per cent in the previous week.

Automobile stocks are considered to be the most rate sensitive as more than 60 per cent of two-wheelers and almost 80 per cent cars in India are purchased on credit.

The rates for automobile loans have gone up almost 300 basis points during the current calendar year to 15-16 per cent for four-wheelers and 12-13 per cent for two-wheelers, impacting sales. For commercial vehicles, the volume of credit purchases is as high as 95 per cent.

Bank: Range-bound on lack of triggers
Bank stocks are seen range-bound next week in the absence of triggers. The move by banks to raise the prime lending rate is seen as positive as it will help ease the pressure on margins. Also, the increase in benchmark PLR has been more than the hike in deposit rates. According to Merrill Lynch, banks may see a margin expansion in July-September, taking the margins back to 2007-08 (April-March) levels.