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Reports India

Indian stock market and companies daily report (February 18, 2014, Tuesday)

February 18, 2014, Tuesday, 05:25 GMT | 00:25 EST | 09:55 IST | 12:25 SGT
Contributed by Angel Broking

Indian Markets are expected to open flat tracking flat opening trades in the SGX Nifty and most of the Asian indices.

The US markets were closed on Monday for a public holiday. The European markets ended Monday's trading session mixed with Britain's FTSE 100 rising 1.2% to 6,736 while France's CAC-40 dipping 0.1% to 4,335 and Germany's DAX dipping 0.1% to 9,657. Investors were pleasantly surprised by better than expected rebound in China's bank lending rate to 2.6tn yuan ($430bn) in January from December's 1.2 bn yuan. Investors were further cheered by the growth of 0.3% in economy of the 17-nation euro currency bloc, above expectations of 0.2% in the fourth quarter. It indicates the recovery is getting a foothold, both in the larger economies such as Germany and weaker ones including Italy.

The Indian markets posted modest gains on Monday, with firm global cues and Finance Minister P Chidambaram's interim budget proposals for 2014-15 underpinning sentiment.

Markets Today

The trend deciding level for the day is 20,432 / 6,064 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,525 - 20,525 / 6,090 - 6,106 levels. However, if NIFTY trades below 20,432 / 6,064 levels for the first half-an-hour of trade then it may correct 20,371 - 20,278 / 6,048 - 6,022 levels.

FY2015 Interim Budget Review

In the Interim Budget, the Finance Minister has effectively delivered on fiscal consolidation by reining in the fiscal deficit for FY2014 at 4.6% of GDP as against market expectations of 4.8% of GDP. The fiscal deficit print was the most keenly awaited number from the market perspective this time around as the Interim Budget is generally devoid of any major policy announcements and changes on the taxation front (except some tinkering in indirect taxes). For FY2015, the Finance Minister has estimated the fiscal deficit target at 4.1% of GDP presuming higher GDP growth and tax buoyancy but importantly it remains to be seen whether the estimates considered are retained by the new government that comes to the helm over the coming 2 - 3 months.

Reduction in excise duties

Despite fiscal constraints the government has provided some indirect tax respite ahead of the elections by reducing excise tax rates. Positively though, these excise duty cuts have been announced for sectors facing the major brunt of the slowdown such as Capital Goods and Industrial Electrical and Electronic segments and those with discretionary consumer demand such as automobiles. The Finance Minister announced reduction in excise duty on capital goods and consumer durables to 10% from 12% earlier to stimulate growth in these segments.

Excise duty cuts have also been announced for the automotive sector in the range of 3-6% to provide respite from the steep contraction in domestic sales. In addition, tax-related measures have been taken to encourage domestic production in segments such as mobile handsets, soaps and oleo chemicals, road construction machinery, and security paper for printing currency notes.

Lower-than-expected market borrowings

Gross market borrowings during FY2015 at Rs.5.97lakh cr are estimated to be lower than market expectations of Rs.6.3lakh cr and hence this is likely to be a positive for yields, at least in the near-term. The market borrowing program for FY2014 has also been revised lower as compared to the budgeted level.

Outlook and Valuation

Going forward, we maintain that the general elections due over the coming 2 -3 months are likely to take centre-stage for markets and their outcome would be crucial for determining market direction. In case a positive electoral mandate materializes, as markets are currently anticipating, it would likely result in positive momentum for cyclical stocks. We also maintain that growth momentum is likely to pick up going ahead given that the newly-formed government focuses on measures including structural reforms, clearing supply-side bottlenecks, expediting projects stuck in various stages of implementation and veers towards a good policy mix geared towards capital expenditure rather than subsidies. We continue to believe that improvement in the policy environment has the potential to boost infrastructure spending and crowd-in private investment, consequently resulting in a turnaround in the investment cycle in the economy.

Government de-allocates 10 coal blocks; more in pipeline

Media reports suggest that the government has cancelled 10 coal blocks allocated to various firms, and is expected to de-allocate another 21 coal blocks. Some of companies whose coal blocks have been de-allocated include AES Chhattisgarh, Bankura DRI Mining Manufacturers, Mideast Integrated Steel, Rungta Mines, Adhunik Corp, Uttam Galva Steels, OCL India and Ocean Ispat (Radhikapur West). The blocks have been cancelled on the basis of a review of 61 mines that had not achieved various milestones. None of these coal blocks are likely to affect estimates for our coverage companies. We continue to await further clarity on coal blocks de-allocation.

Result Preview

Glaxo Pharmaceuticals (CMP: Rs.3013 / TP: / Upside: )

Glaxo Pharmaceuticals for 4QCY2014, is likely to post sales of Rs.638cr, a yoy growth of 0.2%. On the operating front, the OPM's are likely to come in at 20.6%, a dip of 660bps, which is expected to lead to a dip of 24.8% to end the period at Rs.120cr.We recommend a neutral on the stock.

Economic and Political News

- Excise cut to cause upto Rs.1,200cr reveue loss to governement

- Govt, will look to into easing gold import curbs:FM

- Spending cut of Rs.75,000 not to impact growth

Corporate News

- Tata motors,General motors India to reduce vehicle prices

- Bangladesh inks exploration deals with oil India,ONGC

- Adani ports wins Ennore container terminal id