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Indian stock market and companies daily report (October 12, 2012, Friday)

Contributed by Angel Broking

The Indian markets are expected to open in the green today, tracking a positive opening of the SGX Nifty in early trade. Most of the Asian markets too are trading in the positive zone.

The US market closed flat for the day despite upbeat jobs report released during the day. The markets failed to sustain an early upward move before ending the day flat. The early strength in the markets is partly attributable to bargain hunting as the markets had declined in three previous consecutive trading sessions. The jobs report said that initial jobless claims tumbled to four-year low of 339,000 in the week ended October 6 from the previous weekRs.s revised figure of 369,000. The European markets rallied higher on Thursday despite the S&PRs.s downgrade of Spanish sovereign ratings due to some positive corporate news from the European region.

The Indian markets ended the day higher on Thursday, with key benchmark indices notching gains of ~1%. The markets which remained weak till pre-afternoon trade recovered later to end the day strongly on account of positive data which emerged from Europe. The markets would keenly observe the IIP data and quarterly results which are expected to be released today.

Markets Today

The trend deciding level for the day is 18,745 / 5,689 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,908 - 19,011 / 5,740 - 5,773 levels. However, if NIFTY trades below 18,745 / 5,689 levels for the first half-an-hour of trade then it may correct up to 18,642 - 18,478 / 5,656 - 5,605 levels.

World Bank lowers IndiaRs.s growth projection in FY2013 to 6%

The World Bank in its latest Rs.India Economic UpdateRs. lowered real GDP growth forecast for the economy to 6% in FY201 3 as compared to its earlier estimate of 6.9% (in its Rs.Global Economic ProspectsRs. report) in June 2012. It also expects inflation to remain high driven by high food prices and reach 8% at end-March 2013 despite deceleration of average retail inflation in emerging and developing countries from 7% during 2011, to 6% during the first eight months of 2012.

The World Bank has attributed the slowdown in growth mainly to structural issues namely power shortages, corruption, investor uncertainty and tightening constraints of land and infrastructure. It acknowledged the positive impact of recent reform measures and highlighted additional reforms to drive growth such as the reform of direct taxes, the implementation of the long-delayed GST, and passage of the land acquisition and mining bills.

Earlier this week, the IMF slashed IndiaRs.s growth forecast, for CY2012, sharply to 4.9% citing the adverse impact of factors such as slow approvals for new projects, sluggish structural reforms, elevated policy rates and slowing external demand.

The World BankRs.s forecast for global growth in 2012 as well as 201 3 is largely inline with the IMF forecasts. It estimates high-income countries to grow by 1.4% during 2012 and developing countries to grow by 5.3% during the same period. In addition, akin to the IMFRs.s outlook, it reiterates concerns on growth slowing considerably both in advanced and emerging economies in case of tail-risk scenarios materializing from the Eurozone crisis.

Further, given the inflationary situation and high fiscal deficit, it has emphasized the limited room to revive growth through monetary policy or fiscal stimulus. However, government expenditure can be rationalized by cutting subsidies and increasing investments particularly in infrastructure.

External trade deficit worsens during September 2012

On account of the continuing weak external demand environment, due to slowing growth in advanced economies, IndiaRs.s trade deficit during September 2012 widened to USD 18080.38 million as compared to USD 15622.4 million in August 201 2 and USD million 131 94.87 million in September 2011.

The trend of de-growth in exports continued for the fifth straight month. Exports during September 2012 declined sharply by 10.78% as compared to their level in the corresponding period in 2011 and stood at USD 23698.30 million. On a cumulative basis, exports for the period April-September FY2013 registering degrowth of 6.79% in USD terms.

Imports during the month reported a growth of 5.09% yoy in USD terms increasing steeply from de-growth of 5.1% yoy in USD terms witnessed in August 2012. Imports for September 2012 stood at USD 41778.68 million. Due to an increase in crude oil prices during the year, oil imports registered growth of 30.74% yoy in USD terms while non-oil imports reported a de-growth of 4.46% yoy in USD terms. Cumulative imports for the period April-September FY2013 declined by 4.36% yoy in USD terms and stood at USD 232927.13 million.

Overall, the trade deficit during 1HFY2013 amounted to USD 89251.47 million marginally lower than the deficit of USD 89397.39 million in the corresponding period of the previous year. Going forward, we believe that the recent appreciation in the INR is also likely to hurt export growth to some extent.

ICICI Bank reduces rates across home & car loan segment

ICICI Bank has decided to cut rates across home and auto loans segment, by 100bp and 75bp respectively. The new rates are applicable only for the festive season from October till December. However, the clamor for shoring up higher risk adjusted yields offering retail assets, has further intensified as most of banks (largely PSUs) in the recent past, had reduced rates for their offerings in this segment. We believed that it would be impractical for any loan segment to maintain high risk adjusted yields for long and reduction of rates in the retail loan space has corroborated our view. We had never factored in higher RoERs.s for retail assets and hence our estimates and ratings remain same. We maintain our Buy view on ICICI bank with a target price of ?1,245. However intensified competition in the retail assets is expected to be negative for HDFC bank and IndusInd Bank, whose earnings and valuation are currently factoring in higher exposure to these assets, in our view and hence we maintain out neutral view on HDFC bank and IndusInd Bank.

MSIL lowers its volume growth forecast for FY2013 to 5-5.5%

Maruti Suzuki (MSIL) has lowered its volume growth outlook for FY2013 to 5-5.5% from 10-11% earlier. The scaling down of growth forecast by the management is on expected lines considering the continued slowdown in the sector due to high interest rates, slowing economic growth and increase in fuel prices. Further, the recent strike at Manesar plant which lasted for around a month led to loss in volumes. We had already lowered our volume estimates to 6% post the strike at Manesar plant and to factor in the weak demand environment. At Rs.1,370 the stock is trading at 14.8x FY2014E earnings which is in-line with its historical average of 15x. We maintain our Neutral rating on the stock.

Result Review

Electrosteel Castings (CMP: Rs.22/ TP: -/ Upside: -)

Electrosteel Castings 2QFY2013 net sales increased by 5.2% yoy to Rs.479cr. However, the EBITDA increased by a massive 79.3% yoy to Rs.81 cr and EBITDA margin expanded 704bp yoy to 17.0% due to higher top-line, lower raw material costs and lower other expenditure during the quarter. The interest costs for the company, however, increased by 72.9% yoy to Rs.26cr on account of increase in debt. Nevertheless, the reported net income increased substantially by 91.3% yoy to Rs.37cr mainly on account of increase in EBITDA. During 2QFY2013, there was an exceptional item relating to write back of forex losses provided during FY2012 and 1QFY2013 amounting to Rs.12cr. Excluding this exceptional item, adjusted net profit grew by 28.3% yoy to Rs.25cr.We keep our rating and target price under review.

Result Preview

Infosys (CMP: Rs.2,531 / TP: Rs.2,687 / Upside: 6%)

Infosys is slated to announce its 2QFY2013 results today. We expect the company to post 2.8% qoq growth in USD revenue at US$1,801 mn on the back of ~3% qoq volume growth. In rupee terms, revenues are expected to come in at Rs.9,940cr, up 3.4% qoq. EBITDA margin is expected to increase by 11 0bp qoq to 31.9% aided by INR depreciation. PAT is expected to be at Rs.2,314cr.

Key points to watch out for are: a) USD revenue growth guidance for FY2013, the company provided guidance of atleast 5% FY2013 USD topline growth in July 2012, which we expect to the company to maintain, b) outlook for 3Q and managementRs.s commentary on pricing trends, and c) hiring plans for the next year. We maintain our Accumulate rating on the stock with a target price of ?2,687.

HDFC Bank (CMP: Rs.625 TP: -/ Upside: -)

HDFC Bank is expected to announce another healthy set of results for 2QFY2013. We expect the bank to report a healthy NII growth of 24.1% yoy to Rs.3,654cr. Noninterest income is expected to register growth of 22.9% yoy to Rs.1,489cr, leading to an operating income growth of 23.8% yoy to Rs.5,144cr. Provisioning expenses are expected to decline by 16.9% yoy to Rs.304cr, leading to a healthy net profit growth of 30.2% yoy to Rs.1,562cr. At the CMP, the stock is trading at valuations of 3.5x FY2014E P/ABV. We recommend a Neutral rating on the stock.

HT Media (CMP: Rs.95 / TP: Rs.113 / Upside: 19%)

HT Media is slated to announce its 2QFY2013 results. Its top-line performance is expected to be subdued registering marginal 3% yoy growth to Rs.504cr on account of sluggish ad revenues (due to slowdown in GDP growth). OPM is likely to be flat yoy at 14.5%. Consequently, recurring Profit is expected to grow by 2% yoy to Rs.48cr. At the CMP, HTML is trading at 11.7x FY2014E consolidated EPS of Rs.8.1. We maintain our Buy recommendation on the stock with a target price of Rs.113.

Economic and Political News

- Food Min urges states to expedite lifting of PDS grains

- Exports slump 11% to $23.7bn in September

- India Inc raises US$2.4bn through ECBs in August 2012

- Government raises urea price by Rs.50 per tonne

Corporate News

- CIL to raise production capacity by 180 MT in 5 years

- GAIL to give advance to PLL for 2.5 mt capacity at Dahej

- RPowerRs.s 700 Mw hydro project receives clearance from CEA

- Unitech to sell its Uninor stake to Telenor