Monday, 27 October 2008

Stocks to watch: SBI, Reliance, Zydus Cadilla

Equities are likely to open lower on Monday following meltdown in overseas markets on fears of slow-down in global economy and recession in the US.

Crude oil prices fell to a 17-month low Monday, extending the previous session's $4 loss, as an emergency production cut by OPEC was shrugged off by traders anxious about the onset of a deep global recession. US light crude for December delivery fell 22 cents to $ 63.93 a barrel, after touching a 17-month low of $63.67. Prices tumbled by $3.69 on Friday, taking the full-week loss to 10 percent.

Rupee continued its downward march and plunged to 50.05 against the dollar in early trade on heavy dollar demand from importers amid melting stock markets.

A committee led by the finance secretary Arun Ramanathan has made out a case for using a part of the country’s foreign exchange reserves to provide liquidity support to Indian banks for their overseas operations. The committee, appointed by the finance minister to assess the liquidity situation, has said that a portion of India’s forex reserves, aggregating $273 billion, could be used to invest in securities such as bonds issued by foreign offices of Indian banks. This may benefit banks like State Bank of India and ICICI Bank.

The government may appeal to the Bombay High Court to allow distribution of Reliance Industries’ (RIL) Krishna-Godavari (KG) basin gas through public sector Gail India’s pipeline so that the national resource can be used by gas-starved industrial units. Concerned over the on-going court battle between the Ambanis over the KG gas, and the consequent delay in its production, the empowered group of ministers (EGoM) on Thursday billed it as one of the interim solutions.

Zydus Cadila, has taken Teva Pharmaceuticals, the world’s largest generic drug maker, to court in the US seeking damages for Teva’s antitrust violations and unfair trade practices relating to a drug called risperidone. The $2.5-billion (approximately Rs 25,000 crore) drug is widely used for treating schizophrenia.

It is turning out to be a double whammy of sorts for companies that have taken a hit on account of mark-to-market (MTM) losses due to their exposure to forex derivatives. These companies may find it difficult to convince the income tax (I-T) department to allow MTM losses as deduction.

Source: EconomicTimes

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