Aviation ministry official named new chairman

State-run Air India said the government has appointed Rohit Nandan, a joint secretary in the ministry of civil aviation, as the ailing carrier's new chairman and managing director.

Nandan, who assumed charge on Friday, will replace incumbent Arvind Jadhav and will oversee the airline's turnaround and debt restructuring plan.

Loss making Air India is in talks with banks to restructure USD 4 billion of working capital debt and is in the midst of implementing a turnaround plan with a hub-and-spoke route model focus, cut costs by redeploying staff and unload non-core real estate.

A financial restructuring plan for Air India will take about three months to complete, the civil aviation minister said on Friday. The airline is estimated to report a loss before tax of Rs 6,994 crore (USD 1.5 billion) for the year ended March.

Inflation, interest rate concerns to keep mkt volatile

Apart from concerns over a slowdown of the US economy and the euro zone debt crisis, high domestic inflation and fears of an interest rate hike will keep the stock market volatile this week, say experts.

The 30-share Bombay Stock Exchange Sensex index lost 2.69% to close at 16,839.63 last week amid persistent selling pressure on worries over the global economic crisis after ratings firm S&P downgraded the US creditworthiness.

An unprecedented downgrade of the US credit rating by Standard & Poor's on August 5 led to a sharp fall in the market, with investors resorting to panic selling.

On Tuesday, when the markets will open for trade this week, the overall inflation numbers for July will be released.

Headline inflation stood at 9.44% in June, while weekly food inflation shot up to 9.9% at the end of July, sparking fears of a further round of interest rate hikes to tame prices.

The market was surprised by the higher-than-expected rate hike of 50 basis points by the Reserve Bank last month. Now, the sharp spurt in food inflation has raised concerns that the central bank will stick to its monetary tightening policy.

"People are expecting interest rates to go up. Worries over the US and euro zone crisis are still high and fresh in the minds of investors. There is a possibility of a pullback from current levels, but we should be bracing for some more volatility in the short term," said Geojit BNP Paribas Research Head Alex Mathews.

Analysts said that given the tricky situation in overseas markets and local macro-economic headwinds, it would be wise to remain cautious and stay stock-specific.

The global environment will play a pivotal role in directing the investor sentiment, they added.

Domestically, it will be inflation and macro-economic concerns that will guide the investor mood.

"Fund flows in the Indian markets have not been that bad, considering the intensity of the sell-off. The government, too, is trying its best to address the governance deficit. But inflation continues to be a big headache, with food inflation flaring in end-July," IIFL Head of Research Amar Ambani said.

On the macroeconomic front, exports continue to be robust, but might moderate in the coming months owing to the slowdown in the US and Europe, he added.

BHEL Jun qtr PAT seen up 17.6% at Rs 785cr

Angel Broking has come out with its earning estimates on capital goods for the quarter ended June 2011. According to the research firm, BHEL June quarter sales are expected to go up by 25% at Rs 8251crore, year-on-year, (YoY) basis.

The company's net profit is expected to go up 17.6% at Rs 785crore on YoY basis.

Gold price may hit Rs 25,000 by Diwali

Gold prices are likely to hit Rs 25,000 per 10 grams by this Diwali due to rise in demand for the yellow metal as a better investment alternative, analysts said.

The European Union's economic crisis and sluggish market recovery in US is leading to increased investments in silver also, which could see the prices of the metal touching Rs 65,000 per kg by Diwali season in October, they said.

Gold prices are currently ruling around Rs 22,450 per 10 gram, while silver is selling at around Rs 54,700 per kg.

"The recovery in US markets is not on expected grounds as the country's unemployment rate was higher in June compared to May this year adding to the uncertainty over the pace of the economic recovery," Emkay Global Financial Services, a commodity brokerage firm said.

According to Emkay Commodities Head Atul Shah, the European Union debt crisis involving Portugal, Ireland and Spain has also shaken investors confidence who are increasingly using gold and silver to hedge against losses.

The Libyan crisis that is far from over is also putting pressure on crude prices leading to volatility in the oil markets, Shah pointed out.

"With uncertainty in world economy and no clear solution in the coming months, the gold prices could climb to Rs 25,000 per 10 grams and silver can touch Rs 65,000 per kg by Diwali," Shah said.

According to WellIndia, another commodity brokerage firm, it is expected that gold and silver may trade upside in the next few weeks because of uncertainty in global economy and safe heaven demand by investors.

According to World Gold Council data, investment demand in Gold from US continues growing. China and India accounted for 51% of the world gold consumer demand and this year it can increase up to 58%, WellIndia said.

"Demand for silver is increasing day by day in China and India. Industrial and jewellery demand is not only increasing but also investors are using gold and silver hedge against inflation," it added.

Higher crude realisation to scale up oil cos Q1 earnings

Despite teething problems like slower gas production at Reliance Industries (RIL) and royalty and cess disputes between ONGC and Cairn India , the oil and gas is not on slippery ground.

Numbers for the April-June quarter for the sector are likely to be good q-o-q, essentially led by higher crude realisation and higher refining and petchem margins.

Crude oil continued its upward journey during the quarter by averaging at around USD 117/bbl Continued unrest in Libya coupled with expectations of tightening of the global oil markets has led to highest crude oil prices since 2008. Petroleum product crack spreads further improved during the quarter, aiding refining margins. Gasoline-crude spreads witnessed an expansion during the quarter from USD 12.7/bbl to USD 15/bbl., q-o-q.

Following are what investors can expect from the first quarter results of RIL, ONGC and Oil India

On the back of strong macro environment, RIL is likely to report a better set of numbers during the quarter. Its net sales will grow 35.5% y-o-y at Rs 78,899.2 crore. Its EBITDA margin will decline by 315 basis points to 13%. Its net profit will grow 17% to Rs 5,895 crore. Analysts have an 'accumulate' rating on RIL stock with a target of Rs 1,036 despite its KG-D6  block’s output slipping due to technical problems to about 52 mcmd from 60 mcmd in y-o-y.

ONGC will also see a muted growth in its sales on the back of the provisional estimate of 33% subsidy share for upstream companies. Its sales will yet grow 10% at Rs 15,017.9 crore. Its net profit will also grow 10%. Marketmen have a ‘buy’ rating on the stock with a target price of Rs 345.

Oil India is likely to report good set of numbers on account of expansion in net realisation during the quarter with higher volumes from its Namaligarh refinery. It will see a huge jump in its sales and profits as the refinery was shut during the corresponding quarter of previous year. Industry experts expect Indian Oil’s net realisation during the quarter to stand at USD 59.5/bbls, up from USD 50/bbls y-o-y.

Following are views of some brokerages on oil and gas earnings expectations in April-June quarter.

IIFL: "Refining margins have been higher on a sequential basis on account of improvement in gasoline spreads, which will result in better performance of RIL’s refining segment. Crude oil production from MA-1 field and gas production from KG-D6 field are likely to be tad lower on a sequential basis. Sharp y-o-y jump in production from Rajasthan field would lead to robust results for Cairn India and will translate into higher total production for ONGC. APM gas price hike will further improve ONGC’s performance.

Infosys results keenly eyed amid wage hikes, global worries

The first quarter earnings season will gain momentum with technology bellwether Infosys announcing its first quarter (April-June) numbers on Tuesday. The results, which come amidst economic uncertainties in Europe and margin pressures back home, will set the tone for the overall IT sector performance this quarter.

Infosys had disappointed the street in the fourth quarter with earnings and rupee guidance for the current fiscal well below what analysts had expected. Also, the unexpected resignation of TV Mohandas Pai, HR head and a long-serving member of the company, sparked speculation of a rift in the senior leadership team.

The stock has been under pressure since then, shedding 8%, compared with a 6% decline in the CNX IT Index. The market therefore will be keenly glued to the developments over at the Bangalore-based company, especially after better than expected results by overseas rivals Accenture and Oracle.

During the quarter ICICI’s KV Kamath was named the Chairman at Infosys. He will replace founder and current chairman NR Narayana Murthy who will retire on August 20.  

Most Indian software services providers, including Infosys, are expected to report better earnings for the first quarter as demand is likely to be strong despite macro-economic worries. Revenue growth is likely to be "healthy" 20% year-on-year in April-June.

Infosys' margins will be under pressure due to the wage hike it implemented in the quarter. The company raised wages by 10-12% for offshore employees (people working in Infy locations in India) and 2-3% for onsite employees (people working at client locations). Pricing is also likely to be flattish (up about 1%) in the quarter.

"Infosys had guided to a 400 bps sequential decline in margins in Q1 FY12 due to 260 bps quarter-on-quarter decline due to wage hikes, a 70 bps q-o-q decline due to rupee appreciation and a 70 bps q-o-q decline due to higher visa costs. Management has commented that it has been unable to significantly improve utilisation due to the unevenness of demand and the mismatch of skill-sets between demand and supply," according to Manish Nigam and Sagar Rastogi of Credit Suisse.

The rupee, however, has depreciated 0.5% sequentially in April-June, and this Edelweiss Securities says will limit the margin decline to 200-250 bps. Infosys is also expected to raise its full year guidance.

"We expect Infosys to guide for a 5-5.5% sequential revenue growth for Q2 FY12. We expect the EPS guidance for FY12 to be revised upward to around Rs130-131 from Rs126.05-128.21 earlier," says brokerage Sharekhan.

The growth this fiscal, however, is still expected to lag some of its peers. Credit Suisse expects Infosys' EPS (earnings per share) and revenue growth to be around 15% and 24% respectively, while smaller HCL Technologies , for instance, is expected to report 27% topline growth and 45% EPS growth for the full year.

"Change in FY12 guidance and assumptions, growth momentum in non-BFSI (banking and financial services), Europe and discretionary spend, pricing comments, supply-side pressures and impact on attrition/margins hereon," will be the key factors to watch out for according to ICICI Securities.

Rushil Decor to list shares on July 7

Rushil Decor , a manufacturer of decorative laminated sheets, has fixed July 7 as a listing date for its equity shares. It has fixed issue price at higher end of price band of Rs 63-72 a share for its initial public offering of 54 lakh equity shares (excluding promoters contribution of 2,43,750 shares).

Company raised Rs 40.64 crore (including promoters' contribution of Rs 1.75 crore) through the issue, which will be used for setting up of medium density fibre board plant and for working capital requirement.

The issue, which opened for subscription during June 20-23, was subscribed 2.62 times.

Retail and non-institutional investors helped the issue, with their subscription of 6.5 times and 1.35 times over reserved portion, respectively.