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Indian stock market and companies daily report (December 09, 2013, Monday)
Indian markets are expected to open in green today tracking a strong opening in the SGX Nifty which is trading higher by ~3.0% post the four states' assembly election results.
The US markets which traded lower over the past few sessions, rose higher on Friday reacting positively to better than expected monthly jobs report. The report released by labor department showed that non-farm payroll employment rose by 203.000 jobs in November following a revised increase of 200,000 jobs in October. The Economists had expected non-farm payroll employment to rise by 180.000 jobs in November. A report released by Thomson Reuters and the University of Michigan said that preliminary reading on the consumer sentiment index for December jumped to 82.5 from the final November reading of 75.1.
The Indian markets which moved in a narrow range closed marginally higher on Friday ahead of the announcement of the results of assembly elections held in five states. The exit polls which had predicted a strong showing for BJP in these elections had boosted the market sentiments.
The trend deciding level for the day is 20,990 / 6,255 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 21,057 - 21,117 / 6,280 - 6,300 levels. However, if NIFTY trades below 20,990 / 6,255 levels for the first half-an-hour of trade then it may correct up to 20,929 - 20,862 / 6,235 - 6,211 levels.
Markets likely to cheer clean sweep for BJP in assembly elections in 3 states and lead in Delhi
The results for the assembly elections in Rajasthan, Madhya Pradesh and Chhattisgarh and the lead tally in Delhi are likely to buoy market sentiments as they indicate at a positive reform-led mandate for the upcoming general elections. The Bharatiya Janata Party (BJP) witnessed an impressive sweep in Rajasthan as it won 162 seats amongst the 199 seats while the tally for the incumbent Congress stood at 21 seats.
The BJP also retained MP and Chhattisgarh on expected lines and surprisingly managed to lead the tally in Delhi. In Delhi, of the 70 seats the BJP won 32 seats, just 3 short of the half-way mark. The unexpected political wave of the Aam Aadmi Party, contesting its first elections, is particularly noteworthy as it won 28 seats. Their performances put together have decimated the ruling Congress government in the state for the past 15 years. In Chhatisgarh, the BJP and Congress were in a tight race but the BJP, the ruling party in the state, managed to retain power for the third time by winning 49 of the 90 seats.
The election results are also indicative of the gaining popularity and support to the BJP's prime ministerial candidate Narendra Modi. We continue to believe that in the run-up to the general elections, due in the next six months, politics is likely to dominate market sentiments and led by these state election outcomes expectations of a stronger reform-led mandate are likely to gain even more traction.
Auto makers to hike prices from January 2014
Leading automotive manufacturers in the country like Maruti Suzuki, Hyundai, Tata Motors and Honda have announced price hikes effective from January 1, 2014. The prices increases have been announced mainly to mitigate the impact of rising input costs primarily due to the INR depreciation. While Tata Motors will be increasing the prices by ~1% in the passenger vehicle business; the company is still deciding upon price increases in the commercial vehicle business. Maruti Suzuki and Hyundai Motors, however, has not yet specified the quantum of the price increases. We expect the price hikes to be in the region of 1-2% depending upon the models by both the companies. We expect the price increase to slightly offset the negative impact on the operating margins. Nonetheless, it may also dampen the consumer sentiments considering that all the companies had resorted to price increase in October 2013. The overall demand environment for passenger vehicle remains muted due to the slowdown in economic activity, relatively higher financing rates and increasing fuel prices. We maintain our Neutral rating on Maruti Suzuki and Tata Motors.
Johnson Controls and Hitachi announce global air conditioning joint venture
Johnson Controls, Inc., Hitachi, Ltd. and Hitachi Appliances, Inc. (parent company of Hitachi Home & Life Solutions Ltd.) announced that the companies have signed a non-binding memorandum of understanding for a transaction in which Johnson Controls will obtain a 60% ownership stake in Hitachi Appliances' global air conditioning business, excluding sales and service operations in Japan and certain other assets. The joint venture is expected to begin its operations in 2014, subject to final due diligence, board approvals, required regulatory approvals and other customary conditions. The joint venture will bring synergies from Johnson Controls' global reach and technological expertise of Hitachi. The details of the transaction are not yet available and hence we await further clarity on the same. Till then we recommend neutral on the stock.
Johnson Controls is a leading supplier of heating, ventilation, air-conditioning, building controls, refrigeration and security systems for buildings worldwide.
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