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Indian stock market and companies daily report (August 26, 2013, Monday)
Indian markets are expected to open in the green today tracking positive opening trades in the SGX Nifty and most of the Asian markets.
US markets moved mostly higher over the course of the trading day on Friday, recovering from the lows that were seen in the previous session. The markets reacted positively to weak new home sales data. The weaker than expected data offset some of the recent optimism about the housing market recovery and eased concerns about the Federal Reserve scaling back its asset purchases at its September meeting. The European markets rose higher on Friday, adding to gains of the previous session. The driving force behind the gains for the second day in a row was better than expected European economic data. While the strong German GDP data for the second quarter was unrevised from the initial estimates, the British GDP was revised upward.
Indian markets rose sharply for a second consecutive session on Friday, aided by optimism about the global economy. Further, reassuring comments from the RBI and Finance Minister P Chidambaram also boosted market sentiments. The Finance Minister told Parliament today that the RBI's liquidity-tightening measures aimed at curbing speculation in the forex market would also aid in moderating inflation.
The trend deciding level for the day is 18,426/ 5,443 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,640 - 18,761 / 5,508 - 5,544 levels. However, if NIFTY trades below 18,426/ 5,443 levels for the first half-an-hour of trade then it may correct up to 18,305 - 18,090 / 5,407 - 5,342 levels.
RBI penalises six more banks for KYC violation
The Reserve Bank has imposed monetary penalty on the six public sector banks for violation of KYC/Anti Money Laundering norms. The penalties were as follows Allahabad Bank (Rs.0.5cr) Bank of Maharashtra (Rs.0.5cr) Corporation Bank (Rs.1.50cr) Dena Bank (Rs.2.0cr) IDBI Bank (Rs.1.0cr) Indian Bank (Rs.1.0cr). Earlier RBI had fined 22 Banks including private and public sector Banks for violating norms.
RIL-BP announce new deepwater gas condensate discovery in Cauvery basin
Reliance Industries Limited (RIL) and its exploration partner BP have announced a new gas condensate discovery off the east coast of India in the Cauvery basin. The discovery, in the deepwater block CY-DWN-2001/2 (CYD5), is situated 62km from the coast in the Cauvery Basin and is the second gas discovery in the block. RIL is the operator in this block with 70% equity and BP has a 30% share. The company has notified this discovery named D-56 to the Government of India and Directorate General of Hydrocarbons (DGH). We await further clarity on the quantum of reserves addition from this discovery and until then we maintain our Buy rating on the stock with a target price of Rs.959.
ONGC to buy stake in Anadarko Mozambique gas block for US$2.64 billion
Media reports suggest that ONGC is planning to buy a 10% stake in a gas field of Anadarko Petroleum Corp in the offshore Mozambique for US$2.64bn. The deal for Mozambique's offshore Area 1 is expected to close around the end of this year. ONGC has been facing diminishing supplies from its aging oil and gas fields in India and has been buying interests in overseas assets. The exact details of the deal are still awaited and until further clarity emerges on the deal we maintain our Buy rating on the stock with a target price of Rs.352.
TTMT to observe block closure at the Jamshedpur plant
According to media reports, Tata Motors (TTMT) is likely to observe a three day block closure at its Jamshedpur plant starting from August 29, 2013. The Jamshedpur plant of the company manufactures medium and heavy commercial vehicles (MHCV) and has a capacity of around 150,000 units per year. The production shutdown has been undertaken considering the weak demand environment and is basically to avoid unnecessary buildup of inventory and align the production as per the market demand. We are not surprised by the company's decision given that the MHCV demand remains extremely weak and we believe that this exercise of aligning production in-line with the market demand will help the company curtail costs and prevent inventory build-up. Nevertheless, we remain positive on Tata Motors primarily due to the sustained momentum witnessed at Jaguar and Land Rover driven by the success of the new launches. We maintain our Buy rating on the stock with an SOTP based target price of Rs.355.
Baring to buy controlling stake in Hexaware for ~US420mn
Baring Private Equity Asia has agreed to buy a controlling stake in Indian outsourcing service provider Hexaware Technologies Ltd for about US$420mn. Baring will buy out promoters led by Atul Nishar and GA Global Investment Ltd's 41.8% stake for about US$260mn. It will then have to make a mandatory tender offer for up to 26% for ~US$160mn. It will buy Hexaware foundersRs. 27.7% stake and 14.1% from private equity firm General Atlantic at Rs.126 or Rs.135 per share for an aggregate Rs.1,575cr to Rs.1,687cr (~US$242-260mn), with the higher price payable should the private equity firm manage to acquire 50% or more. The price for the tender offer to acquire the additional 26% stake in Hexaware has been set at Rs.135 rupees a share, a premium of nearly 12% over its Friday closing market price.
The deal, which is subject to regulatory approvals, will be the fourth largest acquisition of an Indian company this year and fifth largest in the technology sector. Morgan Stanley and Credit Suisse advised Hexaware founders and General Atlantic on the deal. In India, buyout opportunities for private equity firms are rare and the deal highlights the surging interest in IT firms on expectations of lucrative outsourcing contracts from global corporations trying to cut costs and boost efficiency. The deal does not have an impact on the operational front as the existing management team led by Mr. P. R. Chandrasekar, CEO, will remain at the helm which will ensure continuity in relationships with all stakeholders. Mr. Atul Nishar, the current chairman, will continue as non-executive chairman of Hexaware.
While the news of possible stake sale by the promoters and General Atlantic was doing rounds for almost one and a half year, the valuation at which it will be done was keenly watched by investors. This agreement implies a premium of 4.2%-11.7% to the current market price. We maintain our Accumulate rating on the stock with a revised target price of Rs.134.
Bank of Maharashtra raises base rate by 25 bps to 10.25%
Bank of Maharashtra has raised its base rates by 25bp to 10.25%, effective from today. Recent liquidity tightening measures has exposed banks (more particularly the wholesale funded ones) to increased funding costs and thereby putting pressures on the margins. Earlier private lenders like Yes Bank, HDFC Bank, Axis Bank, HDFC & Andhra Bank have also raised their benchmark lending rates. We believe that as liquidity tightening measures are likely to remain over near term, transmission of higher-than-anticipated interest rates into broader segments can be expected, as other banks might also follow these banks.
Economic and Political News
- Enhancing capacity to protect cyber, telephony data: Sibal
- Fertiliser demand for all states fully met: Jena
- Health Ministry to set up expert panel to frame biotech law
- CCI to take up 1.72 lakh cr power projects on Monday
- 94 hydel plants stuck due to delay in clearances: Jyotiraditya Scindia
- Government to bid two UMPPs worth Rs 40,000 crore in a month
- EGoM clears changes to bidding norms for thermal power plants
- Low Nano sales hit compensation to vendors
- Cairn Energy values Cairn India stake at $955.6mn
- DCGI asked to check quality of drugs sold by Ranbaxy: Govt
- CII bats for floating of sovereign bonds
- CIL restructuring: Govt may zero-in on study consultant this week
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