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Indian stock market and companies daily report (December 23, 2013, Monday)
Indian markets are expected to open flat to positive tracking positive opening in most of the Asian markets on account of better than expected US GDP data as well as indications from IMF to raise US economic growth forecasts.
The US markets rallied on Friday, with the Dow and the S&P 500 reaching new record highs, after a government report showed the economy grew at its fastest pace in two years last quarter. The US economy expanded at an annual rate of 4.1% in the third quarter (estimate - 3.6%) due to stronger consumer spending and business investments. This added to optimism that the economic momentum is strong enough to withstand the Federal Reserve's recently announced decision to begin scaling back its stimulus program. Meanwhile, the European markets finished in positive territory on Friday, adding to the strong rally of the previous session. Investor sentiment received a boost from strong German consumer confidence data and the unexpected upward revision to US GDP. The positive economic data helped the markets to shrug off the EU's loss of its coveted AAA rating.
The Indian markets rose on Friday as investors took the Federal Reserve's decision to trim its stimulus efforts in their stride. Foreign institutional investors remained net buyers, easing investor apprehensions over capital outflows.
The trend deciding level for the day is 20,981 / 6,243 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 21,216 - 21,353 / 6,316 - 6,357 levels. However, if NIFTY trades below 20,981 / 6,243 levels for the first half-an-hour of trade then it may correct up to 20,844 - 20,609 / 6,202 - 6,129 levels.
Government increases import duty on natural rubber
According to media reports, the Central Government has increased the import duty on natural rubber with effect from December 20, 2013. As per the revised rates, the basic customs duty will now be charged at Rs.30/ kg or 20%, whichever is lower as against Rs.20/ kg or 20% whichever is lower, earlier. While the increase in the specific rate of import duty will pressurize the margins of domestic tyre manufacturers like, MRF, Apollo Tyres, JK Tyre & Industries and Ceat; we believe that the impact will be minimum given that the companies imports natural rubber through the advance license route against exports, allowing them to import at zero duty. Exports currently form 10-20% of the total sales for the domestic companies. We would seek more clarity from the management on this front; until then we broadly maintain our estimates for our coverage stocks. We maintain our Neutral rating on Apollo Tyres, JK Tyre & Industries and Ceat.
Infosys board member V Balakrishnan resigns - 8th big exit in 7 months
Infosys today announced the resignation of Director V. Balakrishnan, who was widely tipped to be in the race for becoming the company's next chief executive officer when the incumbent S.D. Shibulal retires in 2015. The resignation is effective December 31, 2013. Mr. Balakrishnan headed Infosys BPO, Finacle and India Business Unit. He was also the chairman of Lodestone, a consulting company Infosys acquired in September 2012. Mr. Balakrishnan had also served as the firm's chief financial officer earlier.
Infosys has been witnessing an exodus of its senior-level executives in the past few months. On Thursday last week, Subrahmanyam Goparaju, senior vice president and a member of the executive council that frames business strategy had resigned. Last month, Stephen R Pratt the firm's head of utilities and resources for North America had put in his papers. In September, Infosys head of BPO sales in Australia Kartik Jayaraman and BPO head Latin America Humberto Andrade had quit the company. Ashok Vemuri who was heading the company's operations in the Americas also resigned. Infosys vice president and financial services head for the Americas Sudhir Chaturvedi quit in the same month. In July, global sales head Basab Pradhan had announced his decision to leave Infosys. The exits come amidst organizational restructuring that Mr. Murthy is overseeing after returning to revive the sagging fortunes of the company in June. We believe that exit of Mr. Balakrishnan will not make any material impact at a business level as he was not heading a very big chunk of the company's revenues but the development does indicate that there is a severe management transition happening in the company. Though the impact of top management resignations at Infosys will not immediately make an impact to the topline of Infosys, it may have some effect over medium term. Senior level exits remain a concern with the company and we maintain our Neutral rating on the stock.
UBHL's sale of shares in USL void: Karnataka High court
The Karnataka High Court has annulled United Breweries Holding's (UBHL) sale of its stake in United Spirits to Diageo. The High Court order has come in response to a winding-up petition filed by creditors against UBHL for dues of about Rs.600cr, which is pertaining to Kingfisher Airlines. The High court order said that earlier company court order which allowed the share sale by UBHL to Diageo did not have the jurisdiction to do so. Diageo's 26.4% stake in USL includes shares it purchases from UBHL (6.9%), shares obtained from other UB group entities (2.22%) and shares obtained through preferential allotment (10%). The High court order has only cancelled the sale of share by UBHL to Diageo but has not declared the entire deal between UB group and Diageo void. As a result of this court order Diageo's stake in USL would reduce to 19.5%. Although UB group and Diageo are expected to appeal against the order in Supreme Court, we believe it would act as an overhang on the USL stock. The stock is expected to react negatively to the news in the short term. We continue to remain neutral on USL.
Economic and Political News
- Cabinet approves Rs.6,600cr interest free loans for sugar mills
- CCI to clear Rs.10lakh cr of projects, growth to revive: Ajit Kumar Seth
- Government considering cash subsidy for raw sugar export
- Government likely to launch 10th round of oil & gas block auction in Jan
- Impose 30% export duty on iron ore pellets: Assocham to government
- Inflation linked bonds to open on Monday
- Indirect tax collections up 5% in April-November, 2013
- More proposals in multi-brand retail expected: Anand Sharma
- Steel makers looking to raise prices by Rs.1,000/tonne next month
- Corporate bond market can reach 1 5% of GDP: CII survey
- DoT to calculate one-time spectrum fee afresh after auction
- ILFS JV gets Rs.145cr contract for rail flyover in UP
- Manufacturing companiesRs. profit fall faster in July-Sept quarter: RBI
- Nearly 6,600 new companies registered in October, 2013
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