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Indian stock market and companies daily report (February 22, 2013, Friday)

Contributed by Angel Broking

The Indian market is expected to open on a weak note tracking negative cues from SGX Nifty which is trading lower. A majority of the Asian indices too are trading in the red following data points from Europe that signal that the regionRs.s recession is deepening, and on concerns that China will do more to control economic growth.

The US market ended lower as traders continued to cash in on the recent strength in the markets, which lifted the major indices to multi-year highs. The concerns about the outlook for monetary stimulus from the Federal Reserve also weighed on stocks along with the disappointing reports on weekly jobless claims and Philadelphia manufacturing activity. According to the Labor Department report, initial jobless claims climbed to 362,000 in the week ended February 16th vs expectations of 359,000. Separately, the Philadelphia Federal Reserve report stated that the regional manufacturing activity fell to a negative 12.5 in February from a negative 5.8 in January. However, the National Association of Realtors released a report showing that existing home sales saw a modest rebound (up 0.4%) in January 2013.

Back home in India, markets suffered their biggest losses in seven months on Thursday amid a global sell-off, after minutes from the latest Federal Reserve policy meeting stoked concerns the central bank may scale back its bond-buying program sooner rather than later. Going ahead, market participants would keep an eye on the proceedings in the Budget session.

Markets Today

The trend deciding level for the day is 19,390 / 5,873 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,490 - 19,655 / 5,901 - 5,949 levels. However, if NIFTY trades below 19,390 / 5,873 levels for the first half-an-hour of trade then it may correct up to 19,225 - 19,125 / 5,824 - 5,796 levels.

Markets impacted by unfavorable global cues

Markets were jittery yesterday on unfavorable global cues. The Sensex posted a 1.6% fall and closed 317 points lower at 19325 mirroring the fall in global equity indices. This can be mainly attributed to the minutes of the Federal Open Market Committee (FOMC) meet on January 29 - 30, 2013 released yesterday which indicated that some officials expressed concern over the FedRs.s asset purchase program (even as most participants agreed that financial conditions had eased and helped to stimulate economic activity).

Excerpts for the minutes: "However, many participants also expressed some concerns about potential costs and risks arising from further asset purchases. Several participants discussed the possible complications that additional purchases could cause for the eventual withdrawal of policy accommodation, a few mentioned the prospect of inflationary risks, and some noted that further asset purchases could foster market behavior that could undermine financial stability."

Following this, they indicated that the Committee should be prepared to vary the pace of asset purchases through evaluation of changes in the economic outlook and costs of the asset purchases. In the end though the Fed voted 11-1 in January to keep its bond-buying program open-ended and at the same size and reiterated its stance on the monetary policy.

In its December policy along with an open-ended asset purchase program, the Fed had committed to keep interest rates at near-zero levels at least until unemployment remains above 6% -6.5%. It also decided to keep the target range for the federal funds rate at 0% to 0.25% at least through mid-2015. It maintained the bankRs.s holdings of longer-term securities at USD 85 billion each month thereby putting downward pressure on longer-term interest rates, supporting mortgage markets, and easing broader financial conditions.

GSM subscribers's. addition in January 2013 stood at 0.4mn

After falling drastically for two straight months, the subscriber base for the GSM industry grew marginally in January by 0.4mn. The subscribers added by the top three incumbents - Bharti Airtel, Idea and Vodafone were almost cancelled out by subscribers lost by Aircel, Uninor and others. The subscriber base of the GSM industry stood at 657.6mn. Idea added the highest number of subscribers in January at 2.5mn. Idea was followed by Bharti Airtel which added 2.3mn subscribers while Vodafone added a marginal 0.2mn subscribers. The addition of subscribers by incumbents post adherence to stricter KYC norms by TRAI is a positive sign as majority of the subscribers added are expected to be active. We continue to remain Neutral on the overall telecom sector.

4QCY2012 Result Review

ABB (CMP: Rs.615/ TP: Rs.573/ Downside: 7 %)

For 4QCY2012, ABB IndiaRs.s (ABB) top-line and bottom-line performance was below our expectations. Top-line declined by 5.3% yoy to Rs.2,082cr, mainly on account of an 18% yoy decline in revenues from the power system segment to Rs.599cr.

ABBRs.s operating margins continue to remain under pressure, coming in at 3.2%, due to lower margins in power systems and the process automation segment. Cost over-runs due to project delays and delay in payment of receipts have resulted in margin erosion. Consequently, ABBRs.s bottom-line sharply declined yoy to Rs.17cr (against Rs.64cr in 4QCY2011). On account of high valuation and declining order book, we recommend Reduce on the stock with a target price of Rs.573.

Gujarat Gas (CMP: Rs.290 / TP: - / Upside: -)

Gujarat Gas reported its 4QCY2012 results. The companyRs.s top line increased 17.9% yoy to Rs.756cr mainly on account of higher realization partially offset by lower volumes. Natural gas volume sold declined by 14.4% yoy to 270mmscm during the quarter. The decline was mainly in the industrial PNG segment. The companyRs.s cost of goods sold increased by only 5.7% yoy to Rs.603cr. Hence, EBITDA grew by 385.7% yoy to Rs.108cr aided by lower other expenses and muted staff costs. Other income declined by 47.0% yoy to Rs.10cr. Consequently companyRs.s net profit grew by 187.5% yoy to Rs.69cr. The company stated that it has received the sanction of the PNGRB to lay city gas distribution pipelines in Surat, Bharuch and Ankleshwar. We maintain our Neutral rating on the stock.

Economic and Political News

- Banks require Rs.2.7lakh cr capital for Basel-3: Crisil

- DoT announces third round of 2G GSM auction

- Government committed to enact Food Bill: President

- Healthcare providers to spend Rs.5,700cr on IT in 201 3: Gartner

- IndiaRs.s wheat exports may rise by 23%

- Pharma exports expected to touch Rs.75,000cr in 2012-13

Corporate News

- Exide gets CCI nod for stake buy in ING Vysya Life Insurance

- New energy norms to hike AC prices by 10%

- Pennar Industries bags Rs.50cr contract for pre-engineered buildings

- SAT adjourns RIL-Sebi case hearing till March 14

- TPG sells 1 0% stake in Shriram Transport Finance