Reports » India
Indian stock market and companies daily report (December 04, 2012, Tuesday)
The Indian market is expected to open in the red today tracing negative opening trades in the SGX Nifty and major Asian indices.
The US markets moved mostly lower over the course of the trading day on Monday after failing to sustain an early upward move. The initial strength on Wall Street came on the heels of positive manufacturing data out of China, with the PMI rising to 50.6 in November from 50.2 in October. The downturn in the markets was partly due to disappointing report on manufacturing activity in the US; the PMI in the US fell to 49.5 in November from 51.7 in October, with a reading below 50 indicating a contraction in manufacturing activity. Meanwhile, a separate report from the Commerce Department showing a bigger than expected increase in US construction spending in October helped to limit the downside for the markets. The European markets ended higher on mixed global reports. Eurozone finance ministers will meet again in Brussels today, to discuss details of the buyback of Greek bonds held by investors at a discounted rate.
Meanwhile, Indian shares ended a lackluster session modestly lower on Monday, as investors took some profits off the table following a four-day rally, awaiting the outcome of a voting in Parliament this week on the FDI in multi-brand retail issue.
The trend deciding level for the day is 19,326 / 5,875 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,395 - 19,486 / 5,895 - 5,919 levels. However, if NIFTY trades below 19,326 / 5,875 levels for the first half-an-hour of trade then it may correct up to 19,236 - 19,1 67 / 5,851 - 5,830 levels.
Vote on FDI in multi-brand retail in Lok Sabha
The crucial debate on FDI in multi-brand retail is expected to take place in the Lok Sabha today. With pressure from the opposition parties mounting for debate on FDI with a vote, the speaker last week allowed debate under Rule 184 in the Lok Sabha. Subsequently, voting on the issue in the Rajya Sabha will take place under rule 168. Since the decision on permitting FDI in multi-brand retail up to 51% is an executive decision, the vote on FDI is non-binding. However, the vote is key to ending the logjam in parliament since it convened on November 22, 2012.
The government had earlier indicated that they are confident of their numbers in case of a debate with vote. We believe that outside-supporters to the UPA government - BSP and SP are likely to refrain from the vote but they have so far hesitated to take a clear stand. We believe that winning the vote would give a further thrust to the government's reforms drive and encourage it to push through difficult legislations.
Auto sales numbers - November 2012 Ashok Leyland (AL)
Ashok Leyland (AL) reported lower-than-expected volumes in November 2012 with total volumes registering a decline of 6.4% yoy (7.8% mom) led by continued weakness in the medium and heavy commercial vehicle (MHCV) segment. The CV volumes (ex. Dost) posted a steep decline of 36.5% yoy (9.6% mom) during the month. However, Dost sales sustained its momentum and registered sales of 2,883 units (down 4.9% mom). Going ahead, while we expect the MHCV sales to remain weak due to slowdown in industrial activity; we expect the sales momentum in Dost to continue with it getting introduced across India (currently available in seven states). At '28, AL is trading at 9.7x FY2014E earnings. We recommend Accumulate rating on the stock with a target price of '31.
Bajaj Auto (BJAUT)
BJAUT reported in-line volumes of 372,293 units (flat yoy and down 9.5% mom) primarily due to sluggish sales in the motorcycle segment. The motorcycle sales declined 1.6% yoy (9.5% mom) led by weakness in the domestic as well as export markets. Of the total motorcycle volumes, Discover and Pulsar accounted for ~70% of the volumes and continues to be benefitted from the new launches, Discover 125ST and Pulsar 200NS. Three-wheeler segment registered a healthy growth of 7.2% yoy (down 9.4% mom) during the month. Export volumes registered a decline of 4% yoy (1.6% mom) as volumes in Sri Lanka are yet to recover completely. The management indicated that the retail sales outpaced the wholesale sales in November (sales of ~300,000 units) which resulted in inventory correction at the dealer end. The company is planning to launch a new 100cc motorcycle in January 2013 and expects the volumes to benefit from the new launch. At '1,927, BJAUT is trading at 15.7x FY2014E earnings. We maintain our Neutral view on the stock.
TVSL expects to finalize a partnership with BMW by end of FY2013
The management of TVS Motor (TVSL) has re-iterated that the company is in talks with BMW's motorcycle division, BMW Motorrad for a technology tie-up and expects to finalize a partnership by end of FY2013. Earlier in July 2012, TVSL had indicated that they are looking for technology collaboration with BMW Motorrad with an intention to widen its product portfolio and focus on the high-end motorcycles segment. While the exact nature of the partnership is not yet disclosed, reports indicate that the partnership will likely involve a technology sharing pact and may also extend to joint marketing.
We see this as a positive development for the company as the technological sharing pact will help TVSL acquire technological know-how to develop more powerful motorcycles and extend its premium product portfolio, where it currently has the Apache (160cc and 180cc). While the development is certainly positive for the company in the long run, it is unlikely to alter the current positioning of the company in the domestic motorcycle industry in the near term as BMW currently offers products in the greater than 600cc category which has a very limited domestic market. At '40, the stock is trading at 7.2x FY2014E earnings. We recommend Accumulate rating on the stock with a target price of '45.
Economic and Political News
- November PMI accelerates to 5-month high at 53.7
- Fitch warns on Indian economy, need for reform
- Raise I-T exemption limit, restore excise, service tax to 8% levels: Assocham
- FEMA amendments need to be passed by both houses, says BJP
- Jagran Prakashan to raise up to Rs 150 cr via securities
- Network18 to sell stake in Newswire18 for Rs 90 cr
- GMR gets stay on Maldives airport contract termination
- Airtel launches emergency alert service
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