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Indian stock market and companies daily report (January 03, 2014, Friday)
Indian Markets are expected to open on a negative note tracking weak start to SGX Nifty and most of the Asian indices after weak data emerging from China fueled concerns that the Chinese economy is slowing down. According to reports, China's PMI for the non-manufacturing sector fell to 54.6, the lowest reading since August.
US markets started the New Year on a sharp negative note as concerns about the outlook for the global economy weighed on the markets following the release of a report showing that growth in Chinese manufacturing activity slowed in December. In US, the Institute for Supply Management released a report showing a slight slowdown in the pace of manufacturing growth (index down to 57.0 in December from 57.3 in November) in December. The Labor Department also released a report showing that initial jobless claims fell to 339,000 in the week ended December 28, in line with economist estimates. A separate report released by the Commerce Department showed that construction spending rose in line with economist estimates in the month of November.
In India, markets erased early gains to end sharply lower on Thursday as weak PMI data and negative cues from Europe in the afternoon dampened investor sentiments. Trading today could be impacted by remarks from a number of Federal Reserve officials, including Fed Chairman Ben Bernanke.
The trend deciding level for the day is 21,022 / 6,264 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 21,198 - 21,507 / 6,316 - 6,411 levels. However, if NIFTY trades below 21,022 / 6,264 levels for the first half-an-hour of trade then it may correct up to 20,71 3 - 20,537 / 6,169 - 6,117 levels.
CCEA clears changes to Mega Power Policy
The Cabinet Committee on Economic Affairs (CCEA) has approved amendments in the Mega Power Policy which would benefit power generation companies if they fulfil certain mandatory conditions. To avail the benefits under the Mega Power policy the power generator must tie up at least 65% of the installed capacity through competitive bidding and the remaining 35% of the installed capacity should be through regulated tariff according to the host state's regulations. Earlier 85% of the capacity had to be tied up with states under competitive bidding. Currently, as per the policy thermal power projects of 1,000MW and above capacity and hydro power projects of 500MW and above capacity are allowed duty-free equipment imports. These benefits can be availed after submission of provisional mega power project status certificate along with a fixed deposit receipt from any scheduled bank as a security for a term of 36 months. The maximum time period for provisional mega projects for furnishing final mega certificates to the tax authorities (after tying up capacity through competitive bids) has been extended to 60 months instead of current provision of 36 months from the date of import.
Shah commission recommends cap on mining for orissa
Media reports suggests that the government-appointed Justice MB Shah Commission, set up to probe allegations of illegal mining in the country, has recommended auctioning of all future iron ore leases in Odisha and a cap on current output and sale through e-auctions. The report also suggests restricting production of iron ore in the state to 50-55 million tonnes per annum. The state government of Orissa has also served penalty notices to companies like Sail, Tata Steel, Essel mining etc. The cabinet has however refered the report to a committee of secretaries (CoS) for recommending the steps needed to contain illegal mining in the state. We await further clarity on this matter and until then maintain our estimates and rating on the coverage companies.
Auto Monthly - December 2013
Ashok Leyland (AL) registered 16.7% mom growth in volumes to 6,275 units, slightly ahead of our estimates, as the medium and heavy commercial vehicle sales recovered (up 43.3% mom) after a steep decline witnessed in November. On a yoy basis though, the performance continues to remain weak and posted a sharp decline of 14% yoy due to a 25.6% yoy drop in medium and heavy commercial vehicle sales.
Hero MotoCorp (HMCL) reported 3.1% yoy decline in total volumes to 524,990 units, which was in-line with our estimates. The performance continues to be led by strong traction in the rural markets due to good monsoons, although demand in the urban markets continues to remain lackluster due to slowdown and increased competition. According to the Management, the five year warranty scheme on the entire range of motorcycles and scooters is receiving a strong response from the consumers.
Tata Motors (TTMT) registered dismal performance yet again as the domestic commercial (CV) and passenger vehicle (PV) volumes continued to contract following weak consumer demand, slowdown in industrial activity and increasing competition. Total volumes declined steeply by 42.3% yoy to 37,852 units with the domestic CV and PV segments registering a sharp decline of 45.8% and 34.6% yoy respectively. Within the CV space, medium and heavy and light commercial vehicle segments witnessed a decline of 22.4% and 52% yoy respectively. While in the PV segment, utility vehicle and passenger cars witnessed a decline of 6.6% and 41.9% yoy respectively. Export volumes too posted a decline of 26.8% yoy during the month.
TVS Motor (TVSL) reported in-line volumes with total sales posting a modest growth of 2.1% yoy as domestic sales witnessed a decline of 1.7% yoy. Nevertheless, export performance continued its strong traction registering a growth of 27.4% yoy driven by 20.5% and 65.6% yoy growth in two-wheeler and three-wheeler sales respectively. The domestic performance continues to be impacted by the slowdown in the two-wheeler and three-wheeler segments which registered a decline of 1.4% and 26.4% yoy respectively. With-in the two-wheeler segment, scooter sales grew strongly by 37.6% yoy led by the launch of Jupiter and also due to the base effect. Motorcycle and moped sales though declined by 4.4% and 11.7% yoy respectively.
UCO Bank puts up for sale NPA worth Rs.1,900cr
UCO Bank has put up for sale NPAs worth Rs.1,900cr in FY2014. Given the determined efforts across banks to improve their asset quality before the end of the fiscal, asset sale to ARCs has picked up off late, with media reports suggesting that few banks taken together have put up assets worth Rs.4,000cr for sale to ARCs during 3QFY2014. Earlier in 2QFY2014 as well, few banks like Bank of India, Allahabad Bank had sold asset to ARCs, realizing substantial gains which supported their earnings for the quarter. Assuming UCO Bank is able to sale a large part of the assets it has put up for sale, even for 45-50% of book value (which has been the recent realization rate in case of Allahabad Bank), then its earning for FY2014 is likely receive a huge boost. At CMP, the stock trades at valuation of 0.7x FY2015 ABV. We currently have a Accumulate rating on the stock, with a target price of Rs.80.
Economic and Political News
- CCEA clears changes to Mega Power Policy
- Extend anti-dumping duty to all stainless steel products: Ficci to govt
- Manufacturing PMI falls in December on slowdown in new orders
- Vodafone in talks to buy its controlling stake in Tata Teleservices
- SAIL Oct-Dec 13 sales grew 6% to 3mn tonnes
- Coal India misses April-December output target by 15MT
- Alstom T&D India bags Rs.54cr contract from Bihar transco
- Maldives for out-of-court settlement with GMR
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