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Reports India

Indian stock market and companies daily report (March 13, 2014, Thursday)

March 13, 2014, Thursday, 05:40 GMT | 01:40 EST | 10:10 IST | 12:40 SGT
Contributed by Angel Broking

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

After recovering from an early move to the downside, US stocks showed a lack of direction throughout the remainder of the trading session on Wednesday. The initial weakness on Wall Street came on the heels of a sell-off in the overseas markets, with stocks in both Asia and Europe coming under pressure. While concerns about China and Ukraine also weighed on Wall Street at the open, traders seemed reluctant to make any significant moves. The subsequent recovery came as traders looked ahead to the release of closely watched reports on retail sales and producer prices over the next two days. Meanwhile, European stocks slipped to a monthly low on Wednesday, with losses seen across most sectors due to global economic worries.

The Indian markets closed on a positive note on Wednesday as strong foreign fund inflows offset a weak global trend.

Markets Today

The trend deciding level for the day is 21,863 / 6,517 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 21,959 - 22,061 / 6,546 - 6,576 levels. However, if NIFTY trades below 21,863 / 6,517 levels for the first half-an-hour of trade then it may correct 21,761 - 21, 666 / 6,487 - 6,458 levels.

CPI Inflation moderates to a 2-year low on further easing of food inflation

The combined (rural + urban) Consumer Price Index (CPI) inflation moderated further to 8.1% during February 2014 as compared to 8.8% in January 2014. This easing can be attributed to the sequential 125bp deceleration in food inflation. Food articles inflation accounts for almost 50% weightage in the index and it eased to 8.6% as against 9.9% in the previous month and 12.0% in December 2013. Core CPI inflation too moderated slightly to 7.9% as compared to 8.1% in February 2014 aided mainly by a base effect. Nevertheless, we expect the RBI to hold monetary policy rates in its forthcoming policy on April 1, 2014 and until there is a sustained downtrend in headline CPI inflation below the 8.0%-level.

Electricity production supports IIP growth

As per Quick Estimates on the Index of Industrial Production (IIP), industrial growth in January 2014 reported marginal growth of 0.1% as compared to contraction of 0.2% in the previous month and a 2.5% growth in January 2013. Healthy 6.5% growth in electricity production has supported the overall IIP performance even as the manufacturing sector continued to contract for the fourth straight month. Excluding the performance of electricity sector the IIP would have reported degrowth of 0.5% during the month. Going ahead too, the electricity sector is expected to report strong growth in February 2014 supported by a weak base. Cumulatively in the April - January period of FY2014 the IIP reported a flat performance despite modest 0.9% growth in the corresponding period of the previous year.

As per the use-based classification, Capital Goods index posted a de-growth of 4.2% as compared to a 2.5% contraction in January 2013. Consumer durables contracted (for the fourteenth straight month) by 8.3% but fared better than the 16.1% decline in production during December 2013 reflecting continued weakness in the domestic demand environment.

Infosys indicates 4QFY2014 to remain weak, 1HFY2015 may be slow

Infosys indicated that the company has continued to see weakness in client spending throughout the current quarter ending March 31, 2014, (4QFY2014) and the company may only be able to meet the lower end of its annual revenue growth guidance. In January, Infosys had forecast revenue growth at 1 1.5-12.0% in FY2014. The management indicated that at the broad level some of the clients have seen slowdown in their businesses; these are across various verticals leading to unanticipated project ramp downs and cancellations in 4QFY2014. In addition, the factors that led to slowdown in client sentiment in 4QFY2014 might impact the company's revenues in 1HFY2015.

As per the company, clients in financial services are investing more into regulatory compliance and risk-related initiatives, where Infosys has strong capabilities. However, Hi Technology, which is the largest sub-segment within the manufacturing segment of Infosys, continues to see headwinds. The retail segment also continues to see sluggishness over the past two months and this sector may continue to remain weak in CY2014.

The company had seen lot of attrition at the top management level during 2HCY2013, due to which the company's performance might remain choppy in the near-term. With optimistic IT spending environment, if TCS guides for a front-ended growth as is always the case since 1Q and 2Q are seasonally strong quarters for Indian IT companies, Infosys stock is expected to see some correction in the short-term. We have revised our USD revenue growth estimates for Infosys to 11.5% and 11% in FY2014 and FY2015, respectively. We maintain our Neutral rating on the stock.

JLR sustains its growth momentum in February 2014

Jaguar and Land Rover (JLR) sustained its growth momentum in February, with retail sales surging by 13.5% yoy to 30,487 units. The overall performance continues to be driven by the success of the new models and strong growth in China, where volumes grew by an impressive 44%. North America (up 12%), Asia Pacific region (up 16%) and Rest of the World (up 16%) markets too witnessed robust growth during the month. Sales in the European region (including UK) though continued its sluggish trend.

Jaguar volumes increased strongly by 15.3% yoy to 5,300 units, led by continued growth in the XF and XJ models. Geographically, Jaguar posted an impressive growth in China (up 41% yoy) and North America (up 35% yoy); however, sales in the UK and Europe declined owing to model launch activity in the corresponding month of 2013. Land Rover too grew by 13.1% yoy to 25,187 units, driven by continued ramp-up of the new Range Rover and the new Range Rover Sport. Geographically, the growth was strong across China and Asia Pacific region which clocked a strong growth of 44% and 20% yoy respectively.

We expect headwinds in the standalone business to continue in the near term due to weak macro-economic environment which is expected to continue impacting domestic volumes. Nevertheless, we expect JLR to sustain its strong performance driven by continued momentum in the global luxury vehicle market and aided further by the strong product launch pipeline and the success of the newly launched models. We retain our Buy rating on Tata Motors with an SOTP based target price of Rs.451.

Result Preview

Mphasis - 1QFY2014 (CMP: Rs.405/ TP: Rs.455/ Upside: 12%)

Mphasis is slated to announce its 1QFY2014 results today. We expect the company to record revenues of US$264mn, up 1.5% qoq, aided by growth from direct channel business. In INR terms, revenues are expected to come in at Rs.1,637cr, up 2.5% qoq. EBITDA margin is expected to decline by ~35bp qoq to 17.2%. PAT is expected to be at Rs.193cr. We currently maintain our Accumulate rating on the stock with a target price of Rs.455.

Economic and Political News

- Telecom user base rises to 92 cr in Jan: Trai

- RBI may auction bonds up to Rs.4 lakh cr in April-Sept

- IT & telecom sector saw substantial growth: Nasscom

- Media will not get a poll boost, says KPMG

- Indian aviation to attract $12.1 -billion investment: Ajit Singh

Corporate News

- Tech Mahindra gets nod to merge Mahindra Engineering

- Wipro-SGI enters into strategic partnership

- Tech M partners Alstom for global development centre

- IL&FS wins Rs.300cr Kolkata Metro project

- SBI Life to appeal against Irda's refund stand

- GVK Energy's PE investors to get stake in parent firm

- RIL gas case adjourned till March 24