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Indian stock market and companies daily report (January 04, 2013, Friday)

Contributed by Angel Broking

The Indian market is expected to open flat, tracking SGX Nifty, which is trading marginally in the negative in opening trade. Most of the Asian markets, barring Nikkei and Shanghai are trading in the red.

The US markets ended the day lower, reacting negatively to the minutes of the latest Fed meeting, which suggested that the central bank could end its quantitative easing program earlier than anticipated. The minutes showed that several members said it would probably be appropriate to slow or stop the central bank's asset purchases well before the end of 2013 as they cited concerns about financial stability or the size of the balance sheet. The European markets ended Thursday's trading session with mixed results.

Indian shares rose modestly on Thursday, extending gains for a third consecutive session, as encouraging economic data from the US and China provided optimism that the global economic recovery is gaining traction.

Markets Today

The trend deciding level for the day is 19,748 / 6,004 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,803 - 19,841 / 6,022 - 6,035 levels. However, if NIFTY trades below 19,748 / 6,004 levels for the first half-an-hour of trade then it may correct up to 19,71 0 - 19,655 / 5,992 - 5,974 levels.

Govt. appoints nodal banks for SEB restructuring in 10 states

Power Secretary had at the end of November 2012, guided that the implementation of CCEA approved discom restructuring package can be expected to kick start in a month with nearly seven states coming forward to take up the scheme. The government has now appointed nodal banks for preparing financial restructuring plans pertaining to the restructuring of SEBs of nearly 10 states. The following banks (normally the main lender) are appointed for the SEBs in respective state.

In our view, the implementation of the proposal is positive for the banking sector, as discom debt restructuring had been an overhang on the banking stocks off late. Almost all public sector banks have meaningful exposures to these discoms, leading to warranted investor concerns on the quality of the loans given out to them. We always had a view that it would be incorrect to classify SEB loans (quasi government in nature) as impaired assets and, had always factored/assumed that the government would step in and take control of the situation eventually and hence were not accounting for these in calculation of our adjusted book values. Post the efforts taken by the government, we feel the discom loan restructuring would not be seen in the same vein as standard NPAs by the market, leading to a positive change in the outlook of the quality of books of the banks. Though in near to medium term it might impact the profitability of banks as yields on half of the book would get reduced, however over medium to long term the outlook on quality of asset given to discoms might improve, as they adhere to approved turnaround plan.

Maruti Suzuki reports an in-line volume growth in December 2012

Maruti Suzuki (MSIL) reported an in-line volume growth of 3.2% yoy (down 7.8% mom) to 95,145 units in December 2012 driven by a healthy growth of 5.9% yoy in the domestic market. However, export volumes posted a decline of 11% yoy (up 6.1% mom) during the month. The domestic performance was driven by strong growth in the compact (8.9% yoy), super compact (42.3% yoy) and utility vehicle segments led by the new launches - Swift, Dzire and Ertiga. Nonetheless, the Mini segment registered a decline of 15% yoy (10.6% mom) despite the launch of Alto 800, due to weakness in demand for petrol cars. Going ahead, we expect the company to report a modest volume growth of 6% yoy in FY2013. However, due to expected easing of interest rates in 4QFY2013, we expect the demand to revive in FY2014 leading to a 12-13% volume growth in FY2014. Nonetheless, at the CMP of '1,543, the stock is trading at 16.3x FY2014E earnings, which we believe is on the higher side. Hence we maintain our Neutral rating on the stock.

CCI approves stake purchase by PNB in MetLife India Insurance

The Competition Commission of India has approved the 30% stake purchase by PNB in MetLife India Insurance Company. Earlier at the end of last quarter, PNB had also received the approval of the IRDA, when it had revised the structure of the deal slightly. As per media reports, the cost of stake purchase for PNB is only ~'60cr and the bank would also receive an upfront commission of '500cr from Metlife. The approval by CCI is also expected to pave way for transfer of a part of J&K Bank's stake in Metlife India to Metlife Corporation and a part to PNB, which would lead to one-time treasury gains of ~'300cr for J&K Bank (assuming stake sale to PNB is done at the price at which the stake is sold to Metlife Corporation), which we have appropriately factored in our estimates for 2HFY2013. Since the recent run up in stock price of PNB, it trades at 1.0x FY2014E ABV. We believe further upside from hereon would depend on performance on the asset quality front and hence we recommend a Neutral rating on the stock. At CMP, J&K Bank trades at 1. 1 x FY2014E ABV and we recommend an Accumulate rating on the stock with a target price of '1,410.

Punj Lloyd arm Sembawang Engineering bids for construction biz of Australia's Macmohan Holdings

Punj Lloyd's subsidiary Sembawang Engineering and Constructors Pte Ltd has made an offer to acquire the construction business of Australia's Macmohan Holdings Ltd. As per media reports, Sembawang is willing to offer AUD$25mn (approx. US$26.25mn) to Macmohan for the construction business and it intends to purchase Macmohan's construction businesses as "going concerns or as a separate standalone offer" in first part. For the second part, it will make a "counter proposal to the asset purchase agreement made by Leighton Holdings Ltd, on identical terms, for an additional consideration of AUD 5 million. The offer is subject to satisfactory due diligence and Sembawang's board approval by January 31, 2013. We seek further clarity on funding of the acquisition and continue to maintain our Neutral rating on the stock.

Economic and Political News

- EGOM on Telecom to meet again on January 7

- Govt. to notify 30% investment ceiling norm for LIC soon

- Transformation of agriculture should be top priority: PM

Corporate News

- Finance Ministry to seek Cabinet nod for PSU bank recapitalization next week

- R Power fires up Butibori plant, Sasan to follow

- JSW Steel hikes prices of all products by 2%

- Jet yet to seek regulatory nod for Etihad deal

- Punj Lloyd arm bids for construction biz of Australian firm