Reports » India
Indian stock market and companies daily report (October 15, 2013, Tuesday)
Indian markets are expected to open in green tracking positive opening in most of the Asian markets following Wall Street's advance overnight as US Senate leaders expressed optimism over reaching a deal to raise the nation's debt limit and fully reopen federal operations.
US markets moved higher in yesterday’s trading session as lawmakers appeared to be inching towards an agreement to raise the debt ceiling, three days before U.S. borrowing authority is set to expire. The Senate leaders are said to be considering a proposal from Sen. Susan Collins, R-Maine, that would fund the government and raise the debt ceiling in exchange for changes to Obamacare. The latest proposal would reopen the government at current spending levels until January 15 and extend the federal borrowing limit until early February, according to aides familiar with the talks. Meanwhile, the European markets ended Monday's session with mixed results. Investor sentiment was impacted by weaker than expected drop in Chinese exports in September as well as concerns over the continued stalemate in US budget talks.
Indian markets maintained its upward journey for the fifth consecutive session on Monday with the benchmark indices closing near a month high despite higherthan- expected September inflation data at 6.46%, mainly driven by higher food prices.
The trend deciding level for the day is 20,584 / 6,107 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,670 – 20,732 / 6,130 – 6,148 levels. However, if NIFTY trades below 20,584 / 6,107 levels for the first half-an-hour of trade then it may correct up to 20,522 – 20,436 / 6,089 – 6,065 levels.
Negative inflation surprise
The Wholesale Price Index (WPI) based inflation surprised negatively by coming in at 6.46% during September as compared to market expectations of 6.0%. WPI inflation inched towards a seven-month high and compares with readings of 6.10% in August 2013 and 8.07% in September 2012. The pick-up in headline print can be attributed mainly to primary articles (owing to higher food as well as non-food inflation) and manufactured articles. Consumer Price Index (CPI) inflation for September 2013 also surprised negatively as it picked up to 9.84% as compared with expectations of a 9.5% print.
Inflation in primary articles at 13.54% has touched a 29-month high in September 2013 as compared to 11.72% in August 2013 and 9.22% in the corresponding period of the previous year. Food as well as non-food inflation contributed to this sequential increase in inflation in primary articles. Food inflation inched up slightly to 18.4%, remaining elevated owing to continued high vegetable (89.37%) and fruit (13.5%) inflation. Inflation in non-food primary articles also reported an increase to 5.17% as against 1.06% in the previous month.
Although inflation in fuel and power continued to remain in double-digits for the third straight month, during the month it moderated to 10.08% as compared to 11.34% in the previous month and 12.0% in September 2012. However, on a sequential basis, the index witnessed considerable rise as inflation in mineral oils reported a 3.7% mom rise driven by Aviation Turbine Fuel and diesel prices.
The secular trend of moderation in inflation of manufactured articles for 12 straight months ceased during September 2013. Manufactured products inflation reported a rise to 2.03% as against 1.90% in August 2013. Manufactured food inflation decelerated for the seventh consecutive month to 1.61% from 1.70% in the previous month. Core (non-food, non-fuel) inflation slightly picked up to 2.1% from 2.0% in August 2013, mainly reflecting the pass-through impact of INR depreciation.
The combined (rural + urban) Consumer Price Index (CPI) inflation for September 2013 inched up to 9.84% as compared to 9.52% in August 2013. Worryingly, the contribution to a spike is driven by food, fuel as well as core inflation. Similar to trends in WPI inflation the food component in CPI is driven largely by vegetable and fruits inflation. Core CPI inflation continues to remain above the 8.0% mark. It picked up for the third straight month to 8.4% as compared to 8.2% in the previous month.
Headline WPI inflation has meaningfully picked up over the last three months. Even as food inflation is anticipated to ease going ahead, it is unlikely to lead to a substantial moderation in headline WPI inflation (also likely to be impacted by imported inflation and low base). In addition CPI inflation has also risen and remains sticky at near double-digit levels, keeping elevated inflationary expectations intact. We expect the RBI to hike the repo rate by 25bp to 7.75% in its next policy review due on October 29, 2013.
The INR has appreciated by more than 10% from its record low and is now stabilizing at present levels, providing comfort to policymakers on the currency front. In view of this, we believe that the RBI is likely to get some headroom for easing some of the exceptional short-term liquidity tightening measures. We expect the RBI to reduce the marginal standing facility (MSF) rate by 25bp. We thus expect the corridor between the repo and MSF to normalize at 100bp from 150bp currently.
TTMT global sales down 15.8% yoy; JLR witnesses strong growth in September 2013
Tata MotorsRs. (TTMT) global sales continued to trend downwards in September 2013, declining by 15.8% yoy (up 7.2% mom) to 87,316 units, led by the poor performance in the domestic passenger and commercial vehicle segments. While, global commercial vehicle sales posted a decline of 30.5% yoy; global passenger vehicle volumes registered a modest growth of 0.8% yoy mainly due to the 40.3% yoy decline in the domestic passenger vehicle volumes.
Jaguar and Land Rover (JLR) however, continued its strong momentum witnessing a growth of 35.6% yoy (16.1% mom) to 35,874 units. The growth was led by the strong performance of the Jaguar and Land Rover models on the back of the success of the new launches and easing of capacity constraints. Jaguar continued its impressive run, posting a growth of 129.3% yoy (23.3% mom) to 6,438 units driven by the incremental volumes from the F-type and growth in the XF model led by the introduction of the Sportbrake, AWD and smaller engine variants. Land Rover sales too recorded a robust growth of 24.4% yoy to 29,436 units on the back of the dispatches of the new Range Rover and new Range Rover Sport.
Going ahead, we expect headwinds in the standalone business to continue in FY2014 due to weak macro-economic environment which is expected to continue impacting domestic volumes. However, 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 model launched in 4QFY2013. We expect JLR volumes to grow at ~13% CAGR during FY2013-15E and PAT to grow at ~25% CAGR during the same period. While we retain our positive view on Tata Motors; post the sharp ~20% surge in the stock price over the last one month, we maintain our Neutral rating on the stock.
Reliance Industries (CMP: Rs.870/ TP: Rs.953/ Upside: 10%)
Reliance Industries (RIL) reported better than expected top-line performance while bottomline was broadly in-line with our estimates. RIL's net sales increased by 14.8% yoy to Rs.103,758cr, above our estimate of Rs.96,117cr. Net sales growth was mainly led by higher petrochemical sales (+12.8% yoy to Rs.24,892cr) and Refining segment sales (+16.2% yoy to Rs.97,456cr). Gas production from KG D6 block declined to 13.8mmscmd. Gross refining margins (GRMs) stood at US$7.7/bbl in 2QFY2014 (US$9.5/bbl in 2QFY2013 and US$8.4/bbl in 1QFY2014). RIL's EBITDA was however flat yoy at Rs.7,849cr on account of lower profits from Refining and Oil and Gas segments. Refining segment EBIT declined by 9.9% yoy to Rs.3,174cr and Oil and Gas segment EBIT decreased 58.9% yoy to Rs.356cr. However, Petrochemical segment EBIT increased 43.9% yoy to Rs.2,504cr. Hence net profit increased by 1.5% yoy to Rs.5,490cr broadly in line with our estimate of Rs.5,555cr. We maintain our Accumulate rating on the stock.
TCS (CMP: Rs.2,215/ TP: -/ Upside: -)
TCS is slated to announce its 2QFY2014 results today. We expect the company to post revenue of US$3,323mn with 5.0% qoq growth, mostly volume led. In rupee terms, revenues are expected to grow by 16% qoq to Rs.20,935cr. EBITDA margin is expected to expand by 211bp qoq to 30.8%, aided by sharp INR depreciation. PAT is expected to be at Rs.4,369cr, up 15% qoq. TCS is expected to continue to show industry leading performance. Owing to recent sharp run up in the stock price, we maintain Neutral rating on the stock.
HDFC Bank (CMP: Rs.667/ TP: Rs.767/ Upside: 15.0 %)
HDFC bank is expected to announce healthy set of results for 2QFY2014. The NII is expected to increase by 24.0% yoy to Rs.4,628cr, while non-interest income is expected to come in at Rs.1,644cr, thus achieving a healthy growth of 22.3% yoy. On back of healthy growth of 23.6% yoy in operating Income, Operating profit is expected to grow by 30.0% yoy, due to a moderate growth of 16.9% yoy in operating expenses. Provisioning is expected to be Rs.362cr compared to Rs.293cr in 2QFY2013. Consequently the PAT is expected to increase by 30.0% yoy to Rs.2,027cr. The stock is currently trading at a valuation of 3.7x P/ABV FY2014E and 3.1 x P/ABV FY2015E. Hence, we retain Buy rating on the stock.
Economic and Political News
- Finance Ministry detects about Rs.1,000cr customs, excise duty evasion
- Garment exports up 15% in September, 2013
- Indian companies garner Rs.1,050cr via IPOs in HY201 4
- IPO market remains dismal; raises a mere Rs.1,050cr in first half of FY14
- Coal India production hit due to Cyclone
- Cooper Tire pension fund objects to Apollo's takeover
- Idea faces Rs.600cr penalty for wilful breach of licence norms after doing merger with Spice
- Infosys to focus on private sector as government-deal flows wane
- NHPC's Rs.1,000cr tax-free bonds issue to open on October 18, 2013
- ONGC to buy 12% of Brazil block from Petrobras for US$529mn
- RCom to sell iPhone 5c for Rs.41,900, iphone 5s for Rs.53,500
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