Reports » India
Indian stock market and companies daily report (April 02, 2014, Wednesday)
Indian markets are expected to open in the green tracking positive start to SGX Nifty and most of the Asian indices. The optimism in global markets is on the back of the increase in US manufacturing activity.
US stocks moved higher over the course of the trading day on Tuesday, adding to the gains posted in the previous session. The continued strength on Wall Street was partly in reaction to a relatively upbeat reading on US manufacturing activity in the month of March. According to the Institute for Supply Management, index of activity in the manufacturing sector crept up to 53.7 in March from 53.2 in February. Additionally, a separate report from the Commerce Department showed a modest uptick in construction spending (inched up by 0.1%) in the month of February.
Meanwhile, Indian markets rose modestly on Tuesday after the RBI left its key interest rates unchanged and signaled that further policy tightening in the near term is unlikely if inflation continues along the intended glide path. The central bank's policy announcement came along the expected lines. Going ahead, release of US economic data may continue to impact global trading on Wednesday, with ADP scheduled to release its report on private sector employment in the month of March.
The trend deciding level for the day is 22,409/6,710 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 22,523 - 22,599/6,744 - 6,766 levels. However, if NIFTY trades below 22,409/6,710 levels for the first half-an-hour of trade then it may correct 22,333 - 22,219/6,687 - 6,653 levels.
RBI keeps rates unchanged in line with expectations
The Reserve Bank of India (RBI) in its First Bi-monthly Monetary Policy Statement, kept the policy repo rate unchanged at 8.0%, in line with our and market expectations. Consequently, the reverse repo remains unchanged at 7.0% and the Marginal Standing Facility (MSF) at 9.0%. The Cash Reserve Ratio (CRR) too has remained unchanged at 4.0% of banking system's net demand and time liability (NDTL).
The RBI's policy actions are increasingly gearing towards bringing headline CPI inflation to 6.0% by January 2016, consistent with the Urjit Patel Committee report's recommendations. The rationale for holding rates during the policy meeting is also on account of letting the rate hikes taken in September 2013-January 2014 to work their way through the economy. The RBI has decided to increase the liquidity provided under 7-day and 14-day term repos from 0.5% of NDTL of the banking system to 0.75% and decrease the liquidity provided under overnight repos under the liquidity adjustment facility (LAF) from 0.5% of bank-wise NDTL to 0.25%. Going forward too, policy is likely to remain data-dependent and the policy statement indicates that in case inflation decelerates, as is being expected, further policy tightening is unlikely, at least in the near-term.
Status quo maintained on policy rates
Headline Wholesale Price Index (WPI) as well as Consumer Price Index (CPI) inflation eased during February 2014, owing to cooling off in food prices led by the continued normalization of vegetable prices in particular. The WPI based inflation moderated for the third straight month to 4.68% during February 2014 as compared to 5.05% in January 2014 and 7.28% in February 2013. CPI inflation moderated for the third straight month to 8.10% in February 2014 as compared to 8.79% in January 2014. Nonetheless, core CPI inflation has continued to remain sticky at about 8.0% and owing to this, the RBI has continued to maintain that 'some demand pressures are still at playRs. in spite of the sluggishness in growth.
Stance remains cautious on upside risks to inflation
The policy statement also states that on account of seasonal factors going forward further softening in vegetable prices is unlikely. In addition, the policy has also pointed to certain upside risks to inflation emanating from possible El Nino effects; uncertainty on setting of minimum support prices and other administered prices especially of fuel, fertilizer and electricity; outlook for fiscal policy; geo-political developments and their impact on international commodity prices. We continue to believe that going forward too monetary policy actions are likely to remain data-dependent.
Auto Monthly - March 2014 Ashok Leyland
Ashok Leyland registered a steep decline of 26.6% yoy to 10,286 units, broadly inline with our expectations, led by a 20.3% yoy decline in MHCV sales. The MHCV sales remains impacted mainly due to the slowdown in economic activity. The LCV sales too registered a substantial decline of 40.7% yoy. On a sequential basis, overall volumes surged 30% yoy driven by 38.5% yoy increase in MHCV sales.
Hero MotoCorp reported in-line volumes led by continued traction in rural markets. Total volumes surged 11.9% yoy (3.9% qoq) to 524,028 units. According to the Management, retail sales of the company grew by 7% during FY2014 as against wholesale sales growth of 2.8% yoy .
Mahindra & Mahindra
Mahindra & Mahindra reported better-than-expected sales benefitting from the sharp reduction in excise duty announced during the Interim Budget and also on account of the election led buying in some regions. Total volumes stood flat yoy at 69,309 units. Automotive sales declined marginally by 0.5% yoy to 51,636 units led by 30.5% yoy growth in three-wheelers and 17.4% yoy growth in exports. The four-wheeler pick-up sales too reported a modest growth of 2.5% yoy. The passenger vehicle sales on the other hand continued its downward slide (down 9.3% yoy); quantum of fall though was lower than past few months led by reduction in excise duty which has increased consumer inquiries in the last two months. Tractor sales too moderated during the month and grew by 2% yoy led by 6.6% growth in domestic sales. Tractor exports declined 38.1% yoy during the month.
Maruti Suzuki's total sales declined 5.5% yoy to 113,350 units, which was slightly lower than our expectations of 119,000 units, led by weakness in the domestic demand. Domestic sales declined 5.2% yoy despite the successful launch of Celerio, on account of the weakness in the Mini and Super Compact segments. While Mini segment (petrol models) declined 11% yoy; Super Compact (Dzire) segment registered a fall of 14.1% yoy. The Compact segment however registered a strong growth of 9.3% yoy primarily led by the incremental volumes of recently launched Celerio, which has been received very well by the consumers and currently commands a waiting period of six months. Maruti Suzuki plans to double Celerio production to 10,000 units in next few months. The utility vehicle sales stood flat due to higher competition from Ford and Renault. Export volumes too continued its downward trend and registered a decline of 8% yoy mainly due to termination of supplies in the European region.
Tata Motors standalone volumes declined 29.6% yoy to 51,184 units as continued slowdown in domestic commercial vehicle (CV) sales impacted the overall performance. Domestic CV sales (down 41.3% yoy) registered a decline for the 11th consecutive month with MHCV and LCV sales witnessing a decline of 16.4% and 50.1% yoy respectively, despite elevated discounts and aggressive financing schemes on offer. Domestic passenger vehicle sales though reported moderate growth of 2.4% mainly due to the base effect. While domestic passenger car sales registered 9.6% yoy growth; utility vehicle sales declined 16.4% yoy during the month. On a sequential basis though, volumes grew by 28.1% led by 39% growth in CV sales.
TVS Motor Company
TVS Motor Company reported strong volume growth of 17.4% yoy to 196,826 units, which was better than our expectations, driven by strong volume growth across all the segments. Two-wheeler sales grew strongly by 16.2% yoy as scooter sales surged 63.2% yoy and motorcycle sales increased by 10.3% yoy. Scooter sales were boosted by the success of Jupiter but partially offset by run-down of Scooty ahead of an upgrade which is scheduled to be launched in 1QFY2015. Moped sales too grew by 2% yoy led by the festival demand (Ugadi). Three-wheeler sales grew strongly by 57.7% yoy driven by an impressive 62% yoy growth in exports. Total exports continued its strong run witnessing a robust growth of 28.3% yoy during the month.
JSW Steel cuts steel prices for April 2014
JSW steel in its filing to the stock exchanges has stated that it has cut the price of HRC steel by Rs.500-750/tonne and wire rod prices by Rs.500/tonne w.e.f from 1st April 2014. The cut in April is coming after several months of price hikes since the October 2013. The cut this time is due to the decline in global HRC prices and INR appreciation against the dollar in last one month which makes import parity price of steel come down. The move is on expected lines and we believe other steel players will also follow and cut prices going forward. Hence, we maintain our Neutral rating on JSW Steel.
Economic and Political News
- RBI Governor warns of turmoil in markets if polls deliver unstable government
- India's potential growth rate below 6%: RBI report
- El Nino may have a bearing on inflation: RBI
- Poll Panel approves hike in fixed cost of urea by Rs.350/ tone
- CPI for factory workers eases to two year low of 6.7% in February 2014
- KEC International sells land near Mumbai to Tata Housing for Rs.212cr
- Alstom bags Rs.182cr contract from Power Grid
- Tata Power appoints Ramesh N Subramanyam as CFO
- US to emerge as new growth engine for IPCA
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