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Indian stock market and companies daily report (January 10, 2013, Thursday)

Contributed by Angel Broking

The Indian market is expected to open on a positive note mirroring the positive opening trades on the SGX Nifty and on major Asian bourses.

The US markets traded on a positive note during trading on Wednesday after ending the previous two sessions in the red. The markets benefited from optimism about the outlook for corporate earnings following the release of quarterly results from Alcoa (AA). The major averages ended the day firmly in positive territory but well off their best levels of the day. Meanwhile, the European markets finished in positive territory on Wednesday. Banks were among the best performing stocks of the session. Investors were encouraged by the fourth quarter profit reported by aluminum producer Alcoa, which is viewed as the start of the earnings reporting season in the United States.

The domestic markets erased early gains to end modestly lower on Wednesday despite firm Asian and European cues after the US earnings season got off to a positive start. FMCG, consumer durable, metal and capital good stocks fell sharply, overshadowing gains in auto and oil &gas stocks.

Markets Today

The trend deciding level for the day is 19,706 / 5,983 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 19,785 - 19,903 / 6,008 - 6,045 levels. However, if NIFTY trades below 19,706 / 5,983 levels for the first half-an-hour of trade then it may correct up to 19,588 - 19,509 / 5,947 - 5,922 levels.

Government proposes market price of diesel for bulk consumers

Media reports suggests that the Oil ministry has proposed to charge market price for diesel to bulk consumers such as railways, state transport companies and industrial users including cement, steel and mining players. These bulk buyers consume ~18% of the total diesel in the country. Increasing diesel price for bulk consumers is expected to lower the governmentRs.s subsidy burden by ~Rs.13,000cr and is expected to have a positive impact on upstream (ONGC, Oil India and GAIL) and downstream companies. We await further clarity on the matter and till then maintain our under-recoveries estimates for FY2013 and FY2014. The move if implemented would increase the cost of generating diesel based power for cement manufacturers. However, we believe cement manufacturers will be able to pass on the increase in cost through price hikes and hence do not expect much impact on their profitability.

MM to invest US$900mn in Ssangyong over next four years

As per media reports, Mahindra and Mahindra (MM) and Ssangyong Motor (SYMC) plans to jointly invest US$900mn to develop three new vehicle platforms and six engines over the next four years. The report further stated that the investments would be made in phases. While the first phase would happen over the next year and a half; the company has not developed any concrete plans for investments beyond the first phase. In the first phase the project will be financed partly through external commercial borrowings, partly through internal accruals and partly from issue of fresh equity. While the quantum of investments is huge, the company has not given any clear indication on the nature of the financing and has also not disclosed the investment plans in details. We would wait for further clarity on this front. Due to limited upside from current levels, we recommend Neutral rating on the stock.

Indian Metals & Ferro Alloys (IMFA) Management meet note

We met the management of IMFA to get an update on its business.

Company background: IMFA is the largest and backward integrated ferro alloy producer in India. IMFARs.s production facility is spread over Choudwar and Therubali units in Orissa and comprises of six furnaces with production capacity of 2,75,000 tonnes. IMFA has capability of producing ferro silicon, ferro manganese and ferro chrome. Currently, the company has stopped production of ferro silicon and ferro manganese. In FY2012, the company produced 1,96,160 tonnes of ferro chrome.

Coal block mining lease awaited: The company has received Stage II forest clearance for its Utkal coal mine. However, the company is awaiting signing of mining lease (no timelines stated for the same). Power costs constitute 30-50% of cost of production for ferro chrome producers. Hence, once operational, the captive coal from this mine would help the company reduce its power costs significantly. Currently, the company meets ~50% of its coal requirement as linkage from Coal India and remaining 50% is sourced via e-auctions.

Expanding power capacity: During January 2013, the company commissioned 1st unit of 2x60MW of captive power plant at Choudwar in Orissa. Its current power generation capacity stands at 198MW. The 2nd unit of 60MW power plant is expected to be commissioned in February 201 3.

Currently we do not have a rating on the stock.

Economic and Political News

- SIAM downgrades auto industry growth as sales fail to accelerate

- Overall trade deficit a cause of concern: Commerce Secy

- PM warns of sub-6% growth this year

- Govt increases railway fares by up to 25%, after a decade

Corporate News

- KFA staff move court seeking airlineRs.s closure

- GSK gets Sebi nod for GSK ConsumerRs.s Rs.5,200-cr open offer

- GVK to be cautious while bidding for airports abroad