Reports » India
Indian stock market and companies daily report (December 13, 2013, Friday)
Indian markets are expected to open in the red today tracking a weak opening in SGX Nifty which is trading lower by 0.7%. Disappointing data on IIP and CPI released on Thursday is expected to weigh on the markets as it could result in the RBI increasing rates in its policy meet next week. Most of the Asian markets are trading in the negative territory.
US markets closed lower on Thursday as concerns over Federal Reserve's tapering of the stimulus program in the near future continued to weigh on the markets. A report released by Commerce Department showing slightly stronger than expected retail sales growth in the month of November added to the market worries. The report said retail sales rose by 0.7% in November following an upwardly revised increase of 0.6% in October. Economists had expected sales to increase by 0.6%. Another report released by labour department showing jump in weekly jobless claims was shrugged off by markets due to the seasonal factors. European markets too finished in the red for third consecutive session due to concerns over Fed tapering.
Indian markets fell for the third consecutive session on Thursday ahead of the release of IIP and CPI inflation data for the months of October and November respectively.
The trend deciding level for the day is 20,977 / 6,251 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 21,052 - 21,179 / 6,272 - 6,308 levels. However, if NIFTY trades below 20,977 / 6,251 levels for the first half-an-hour of trade then it may correct up to 20,850 - 20,775 / 6,216 - 6,195 levels.
IIP and CPI Inflation disappoint
As per Quick Estimates on the Index of Industrial Production (IIP), industrial growth in October 2013 reported contraction of 1.8% as compared to growth of 2.0% in the previous month and 8.4% in October 2012. The industrial production for October 2013 surprised negatively by coming in lower than market expectations of a 1.2% decline.
In terms of sector-wise classification, the Mining sector reported 3.5% de-growth as against 3.3% growth in September 2013 and decline of 0.2% in October 2012 mainly due to the contraction in coal production during the month along with continued pressure from crude oil and natural gas production. The Manufacturing sector reported a 2.0% decline during the month on the back of a high base of 9.9% expansion in October 2012. After having supported the overall index for 3 straight months, the Electricity sector reported modest 1.3% growth as compared to 12.9% in the previous month and 5.5% in October 2012 mainly on account of contraction in thermal generation. For November 2013 electricity production is likely to report a moderate improvement owing to a low base in the previous year and recovery in thermal generation.
As per the use-based classification, Capital Goods index posted a modest growth of 2.3% as compared to 7.0% in the corresponding month of the previous year. Consumer durables contracted (for the eleventh straight month) by 12%, weighing on overall production by about 200bps and this reflects continued weakness in the demand environment.
The combined (rural + urban) Consumer Price Index (CPI) inflation during November 2013 come in at 11.2% as compared to 10.2% in October 2013 and 9.9% in November 2012. The inflation in food articles (accounting for almost 50% weightage in the index) edged higher to 14.7% as against 12.3% in the previous month. Fuel inflation continued to remain at 7.0%. Core CPI inflation also continued to remain sticky at 8.0%-levels. We expect that with containing of inflationary pressures and expectations as its priority, the RBI is likely to hike the repo rate by 25bp during its upcoming monetary policy review on December 18.
Oil Ministry allows freedom to companies to charge marketing margin
Oil Ministry has given freedomto companies including Reliance Industries and GAIL to determine their marketing margins on sale of gas. However, the companies do not have freedom to charge marketing margin on urea and LPG. Regulation in charging marketing margin has been one of the key overhang on gas transmission companies after PNGRB had issued an order to lower marketing margin to Indraprasth Gas. Hence, we believe this move by Oil Ministry is likely to have positive impact on stock prices of gas transmission companies in the shortterm. We maintain our estimates and ratings on the companies under our coverage until further review.
Improvement Service selects TCS to Refresh Citizen's Account
TCS has been selected by the Improvement Service to implement a Citizen Account Service for Scottish citizens. This will allow citizen's in Scotland access numerous digital public services from a single user profile. The project is TCSRs. first public sector win in Scotland and will improve efficiency and cost-effectiveness for local authorities and other service providers through increased automation. The Improvement Service was set up in 2005 to help improve the quality and efficiency of public services in Scotland by offering advice, consultancy and program support. The Citizen's Account Service will be based on TCSRs. DigiGOV Framework which has been successfully implemented in other parts of the UK, India and South Africa. The system is built on open source technology and is delivered through a Rapid Transformation Methodology to ensure a speedy implementation. Once deployed, the service will simplify access to public services for Scottish citizens by giving each person a single user profile to be used across numerous public services. We maintain our Buy rating on the stock with a target price of Rs.2,500.
Sun Pharmaceutical, Lupin announces US FDA approval for generic Cymbalta
Sun Pharmaceutical Industries Ltd and Lupin has announced that the USFDA has granted its subsidiary final approval for its Abbreviated New Drug Application (ANDA) to market a generic version of Cymbalta, Duloxetine Delayed-Release Capsules USP, 20 mg, 30 mg and 60 mg. Duloxetine Delayed-Release Capsules USP, 20 mg, 30 mg and 60 mg are therapeutic equivalents of Eli Lilly & Company's Cymbalta Delayed-Release Capsules. These Capsules have annual sales of approximately US $5.5bn in the US. Duloxetine Delayed-Release Capsules USP is indicated for the treatment of major depressive disorder (MDD), generalized anxiety disorder (GAD) and diabetic peripheral neuropathic pain (DPNP).
Sun Pharmaceutical subsidiary, being one of the first-to-file ANDAs for generic Cymbalta with a para IV certification, is eligible for shared 180-day marketing exclusivity in the US. The product has lost its exclusivity in Dec 11,2013, and has around 6 players already having got the USFDA (the notable Indian players amongst them being Sun Pharma, Lupin, DRL, Aurobindo Pharma and Torrent Pharma and Teva Pharma) for the product. For the fourth quarter of 2013, Eilli Lilly estimates that US sales of Cymbalta will be approximately US$500mn, reflecting the loss of U.S. patent exclusivity on December 11, 2013 from its normal run rate of US $1.1bn as on 3QCY201 3. The product has a shared exclusivity and hence on a conservative basis, the product is expected to contribute around US $80-90mn and US$16-18mn on sales and net profit front during the 180-exclusivity period for these players. We maintain our neutral on the Sun Pharmaceuticals, accumulate on Lupin with a target of Rs.930, DRL buy with a price target of Rs.3008 and Aurobindo buy with a target of Rs.385.
MM to hike vehicle prices effective from January 2013
Mahindra & Mahindra (MM) has announced that it will be increasing the prices of its passenger and commercial vehicles by up to 2% effective from January 1, 2014. According to the Management, price increases have been carried out to mitigate the impact of rising input costs and increases in freight charges. The price hike by MM comes on the expected lines and follows similar moves by the major rival companies like Hyundai, Maruti Suzuki, Tata Motors, General Motors and Volkswagen which have already increased the prices citing similar reason. We expect the price increase to slightly offset the impact of input cost pressures on operating margins. Nonetheless, it may also dampen the consumer sentiments considering that MM had resorted to price increase earlier 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. At Rs.942, the stock is trading at 14.4x FY2015E earnings. We maintain our Accumulate rating on the stock with an SOTP based target price of Rs.1,023.
Cadila Healthcare in an out of court settlement with Warner Chilcott
Cadila Healthcare and Zydus Pharmaceuticals (USA) Inc. have entered into an agreement in principle with Warner Chilcott Company LLC to settle all outstanding patent litigation related to Asacol delayed-release tablets.
Under the terms of the agreement in principle, Warner Chilcott Company will grant Zydus a royalty-bearing license to market its generic Asacol HD beginning on November 15, 2015 or earlier under certain circumstances, following receipt by Zydus of final approval from the U.S. Food and Drug Administration (FDA) on its Abbreviated New Drug Application (ANDA) for generic Asacol HD.
Alternatively, if Zydus does not receive USFDA approval of its generic Asacol HD by July 1, 2016, Zydus will be permitted to launch an authorized generic version of ActavisRs. product beginning on July 1, 2016. Other terms of the settlement were not disclosed. Asacol HD had sales of US $122mn during the quarter that ended on June 30, according to Warner Chilcott. We maintain our buy, on the stock with a target price of Rs.894.
JPL announces buyback of equity shares
Jagran Prakashan is slated to buy back up to 50, 00,000 fully paid up equity shares of face value Rs.2 each, through tender process at Rs.95 per share. The aggregate maximum amount of buyback amounts to Rs.47.5cr, representing 5.26% of the net worth of the Company as on March 31, 201 3. The maximum number of equity Shares proposed to be bought back constitutes 1.51% of total number of equity Shares issued, subscribed and paid up. The date of commencement is 11th December, 2013 while closing date is 24 December, 2013. The buyback of equity shares is expected to lend support to the stock price. We maintain Buy on the stock with a target price of Rs.104.
Economic and Political News
- Com merce Ministry seeks change to duty exemption for SEZ goods
- Big Data, cloud, mobility to enable new business capabilities: Nasscom
- Gopalakrishnan pitches for passage of key economic bills
- Coal India to miss production target by 7 MT
- Five Indian cos. get FDA nod for anti-depressant drug
- MphasiS appoints Jotwani as head of infra services
- Tata Steel to introduce new value-added product for construction industry
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