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Indian stock market and companies daily report (April 15, 2014, Tuesday)
The Indian Markets are expected to open higher today tracking a positive opening in SGX Nifty which is trading higher by 0.4%. Most of the Asian markets too are trading in the green.
US markets which fluctuated during the later part of the trade closed notably higher on Monday. The market gained strength due to the release of a report from the Commerce Department showing that retail sales rose by more than expected in the month of March. The report showed that retail sales jumped by 1.1% in March after increasing by an upwardly revised 0.7% in February. Traders also reacted positively to quarterly earnings news from Citigroup. European markets inched higher on Monday aided by reports that Eurozone industrial production expanded moderately in February.
Indian Markets fell modestly on Friday due to weak trade data and caution ahead of industrial output data due for release later in the day. Weakness in global markets too impacted the Indian markets during Friday's trade.
The trend deciding level for the day is 22,612 / 6,770 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 22,696 - 22,764 / 6,796 - 6,816 levels. However, if NIFTY trades below 22,612 / 6,770 levels for the first half-an-hour of trade then it may correct 22,544 - 22,459 / 6,750 - 6,723 levels.
Trade deficit widens to USD10.5bn in March 2014 on lower exports
According to provisional data released by the commerce ministry the trade deficit for March 2014 widened slightly to USD10.5bn from USD8.1bn in the previous month and USD10.4bn in March 2013. This can be attributed mainly to exports contracting by 3.1% for the second consecutive month even as non-oil imports reported continual de-growth for the tenth straight month.
Exports reported de-growth of 3.1% during March 2014 as compared to 3.7% in the previous month and 6.6% growth in March 2013. Imports during March 2014 came in 2.1% lower over a contraction of 4.3% in March 2013 as a result of deterioration in domestic demand as well as curbs on gold imports. Import compression for the tenth straight month is led by lower non-oil imports. During March 2014, non-oil imports contracted by 11.8% as compared to 24.5% in February 2014 and growth of 4.3% in March 2013. Oil imports reported strong 17.7% growth in March 2014 largely on account of a low base since it had reported a 16.1% contraction during March 2013.
For FY2014 as a whole, the trade deficit stands at about USD139bn as compared to USD190bn in FY2013. During the fiscal year the trade deficit has reported a steep decline of about 27% despite modest exports growth of 4.0% largely driven by the 8.1% decline in imports. Gold and silver imports are down by about 40.0% to USD33.5bn during FY2014. We continue to maintain our CAD estimate for FY2014 at about 2.0% of GDP as compared to 4.8% of GDP in the previous fiscal year.
Industrial output contracts by 1.9% in February 2014, surprises negatively
Industrial activity as measured by the Index of Industrial Production (IIP) disappointed as it reported a 1.9% contraction during February 2014 as against market expectations of 0.8% growth during the month. The decline in industrial output compares to a marginal growth of 0.8% in January 2014 and 0.6% in the corresponding month of the previous year. The weakness in consumption as well as investment segments has weighed on the index substantially (by about 400bp).
On a cumulative basis, the IIP reported a slight 0.1% decline in the April -February period of FY2014 despite a low base of 0.9% growth in the corresponding period of the previous year.
IIP: Performance on Sector-wise classification
In terms of sector-wise classification, the Electricity sector reported strong doubledigit growth at 11.5% during February 2014 on a low base as the segment contracted by 3.2% in February 2013 and continued to support the overall index. Excluding the performance of electricity production, the IIP would have reported a steeper decline in growth by 2.9% during February 2014. Going ahead in March 2014, the electricity sector is expected to report moderate growth ranging between 4.0-5.0%.
The Manufacturing sector reported a contraction of 3.7% during February 2014 as against a flat performance in the previous month and 2.1% growth in February 2013. This is largely on account of sharp de-growth in production of industry groups such as Rs.Radio, TV and communication equipment & apparatusRs. (34.1% decline), Rs.Electrical machinery & apparatus n.e.c.Rs. (24.6% decline) and Rs.Wearing apparel; dressing and dyeing of furRs. (21.3% decline).
The Mining sector reported modest growth of 1.4% month during February 2014 for the fourth straight month as compared to 1.9% in the previous month and decline of 7.7% in February 201 3. We maintain that this stabilization in production is in line with our expectations and going ahead too, the sector is likely to be aided by the low base and traction in production from opening up of certain mines.
IIP: Performance in the Use-based category
The persistent weakness in Consumer durables production and decline in Nondurables production during the month has resulted in production of overall Consumer goods contracting by 4.5% during the month. It compares with a 0.5% decline in January 2014 and marginal 0.8% growth during February 2013. Consumer Durables production continued to contract for the fifteenth straight month and came in 9.3% lower as compared to a decline of 8.3% in the previous month and 2.6% in February 2013.
JLR registers modest growth in wholesale volumes in March 2014
Jaguar and Land Rover (JLR) registered a modest growth of 1.5% yoy in wholesale sales to 43,311 units in March 2014, which was marginally lower than our expectations of 46,000 units. The performance was impacted due to the sluggish off-take in Land Rover sales which stood flat during the month. While sales of recently launched models like new Range Rover and new Range Rover Sport is expected to have sustained; we believe that older models like Evoque, Freelander, Discover and Defender has witnessed considerable slowdown during the month.
Jaguar sales though continued its strong traction witnessing a growth of 7.3% yoy largely led by growth in XJ model.
Going ahead, we expect headwinds in Tata Motors standalone business to continue in the near term due to weak macro-economic environment, which is expected to continue impacting the domestic volumes. Nevertheless, we expect JLR to sustain its strong performance driven by continued momentum in the global luxury vehicle market, success of the recently launched models and strong product launch pipeline. We retain our positive view on Tata Motors and maintain our Accumulate rating on the stock with an SOTP target price of Rs.487.
Infosys (CMP: Rs.3,231/ TP: Rs.3,550/Upside: 10%)
Infosys is slated to announce its 4QFY2014 results today. We expect the company to post 0.3% sequential decline in USD revenues to US$2,095mn as the company indicated that it had continued to see weakness in client spending and it may only be able to meet the lower end of its annual revenue growth guidance of 11.512.0% for FY2014. The Management indicated that at the broad level some of the clients have seen slowdown in their businesses; these are across various verticals, leading to unanticipated project ramp downs and cancellations in 4QFY2014. In rupee terms, revenues are expected to come in at Rs.12,966cr, down 0.5% qoq. EBITDA margin is expected to show marginal decline of ~30bp qoq to 27.5% on account of increase in S&M spends. PAT is expected to be at Rs.2,788cr.
Key points to watch out for are: 1) USD revenue growth guidance for FY2015 which we expect it to be conservative at 6-8%, 2) client budget outlook, 3) impact of senior management exits and 4) growth versus margin tradeoffs. We maintain our Accumulate rating on the stock with a target price of Rs.3,550.
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