Reports » India
Indian stock market and companies daily report (September 19, 2013, Thursday)
Indian markets are expected to open gap up tracking positive opening in broadly all the major Asian markets, sparked by the US Federal Reserve's surprise move to leave its stimulus measures intact.
The US markets ended in positive territory on Wednesday after the Federal Reserve abstained from reducing its bond buys. The FOMC voted to maintain its US$85bn monthly bond buying program as the Fed remains worried by the lack of progress on the labor market and the tightening of financial conditions. The Fed noted that the asset purchases are not on a preset course and their pace will remain contingent on the economic outlook and the assessment of the likely efficacy and costs of such purchases. In the meanwhile, European stock markets, which closed before the Fed's announcement, rebounded on Wednesday as investors waited to see if the US Federal Reserve will announce a reduction in its monthly asset purchases.
Meanwhile, the domestic markets ended notably higher on Wednesday as investors braced for modest Fed stimulus tapering. The rupee traded strong on renewed capital inflows and closed at 63.38 against dollar. After the much awaited Fed's announcement, Indian investors will closely look for the Reserve Bank of India's monetary policy due tomorrow.
The trend deciding level for the day is 19,917 / 5,917 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 20,059 - 20,155 / 5,970 - 5,998 levels. However, if NIFTY trades below 19,91 7 / 5,917 levels for the first half-an-hour of trade then it may correct up to 19,821 -19,679 / 5,889 - 5,837 levels.
Fed surprises positively by continuing its liquidity infusion, rupee and markets to cheer
In its much-awaited monetary policy meeting, the Federal Reserve decided to continue liquidity infusion through asset purchases. The Fed would continue purchasing securities to the tune of USD85bn per month (USD45bn in treasury securities and USD40bn in mortgage-backed securities) to maintain downward pressure on interest rates.
The Fed would continue with an ultra-accommodative policy stance in order to support economic growth which has shown moderate expansion. The Fed reiterated that it would continue keeping interest rates at the near-zero level of 0.25% until unemployment remains above 6.5% and price stability is maintained at or below its 2% medium-term objective.
More importantly, the Fed also released economic projections along with the policy statement. According to its latest projections, real GDP growth is estimated to be lower in 2013 at 2-2.3% as against 2.3-2.6% estimated in June 2013, growth is expected to range between 2.9-3.1% in 2014 and 3-3.5% in 2015. Unemployment rate in 2013 is seen at 7.1-7.3% and estimated to fall to 6.4-6.8% in 2014 and 5.9-6.2% in 2015. Inflation is expected to inch up towards the 1.62.0% range until 2015.
Presently, unemployment rate in the U.S stands at 7.3% in August 2013 as compared to 8.1% in the corresponding month of the previous year. CPI inflation is also well below the Fed's medium-term target at 1.5% yoy in August 2013 as compared to 1.1% yoy in July 2013 and up 0.1% mom on a seasonally adjusted basis (0.2% mom in July 2013).
The next FOMC meetings in 2013 are scheduled for October and December. Domestically, the rupee has appreciated by about 4-5% since the beginning of the month in line with movement of EM currencies. We believe that stabilization at this level is positive from the overshot levels seen post May 2013. Fundamentally too the trade deficit looks to be on an improving trajectory. Our current account deficit for FY2014 is slated to moderate owing to the expected growth in exports, curtailing gold imports and depreciation rendering imported manufactured goods dearer thus aiding import substitution. It is estimated to come in at 3.8% of GDP much lower as compared to 4.8% of GDP in FY2013. Now, with the Fed delaying scaling back of its stimulus, concern on attracting capital flows to finance the CAD are also likely to recede to that extent.
We believe that these factors put together would improve the odds for RBI to eventually roll back its tightening measures taken in order to contain the forex volatility. At the same time though, the recent high WPI readings are unlikely to provide the RBI comfort on the inflation front so we believe that it is likely to maintain status quo on the repo rate and CRR. There is a higher probability that the RBI provides operational flexibility to banks with regard to easing the restrictions imposed on CRR in the upcoming policy.
The quantum of tapering to the tune of USD10-15bn during this meet was already getting factored into the markets. But now as uncertainty regarding the course of tapering even by the end of this year prevails, we expect the rupee to appreciate and rate-sensitives to witness a relief rally and move higher.
Yes Bank and Union Bank raise dollar loans under concessional swap window of RBI
RBI had recently allowed banks to borrow overseas upto 100% of their unimpaired Tier 1 capital level (which was earlier capped at 50%) and swap the same with RBI at 100bp lower than the market swap rates. Yes Bank and Union Bank have raised dollar loans of USD 225mn and USD 50mn, respectively under concessional swap window of RBI. The effective cost of such borrowings after factoring in the swap costs is around 100-150bp lower than domestic borrowing for corresponding maturities, which would provide some respite to the banks on margin pressures (degree of respite depend upon the total quantum of such loans raised by individual banks and the differential of costs depending upon the maturity of these loans).
NMDC's Chhattisgarh operations attacked by Naxalites
NMDC's Chhattisgarh operations (Bacheli Complex) iron ore conveyor belt (80 meters long) has been reportedly attacked by naxalites. Bacheli Complex contributes ~40% to NMDC's total annual sales volumes. However, Management has clarified that there will be no impact on the production while it will take around one week to restore the conveyor belt (used for transportation of iron ore), post which normalcy in dispatches is likely to be restored. Management also stated that they will pre-pone the maintenance activities considering that its conveyor belt would not be available for one week. We believe that the impact on NMDC's financials due to this event is unlikely to be material at this point; hence, we maintain our estimates. However, we note that NMDC's operations are located in the area which is prone to naxal attacks. Even in the past, its operations have been materially affected due to naxal activities. Disruptions by naxalites remain one of the key risks to our Buy rating on the stock. We maintain our Buy rating on the stock with target price of Rs.148.
Minor fire breaks out at MSIL's diesel engine plant at Manesar
Maruti Suzuki (MSIL) has announced that a minor fire broke out at the company's diesel engine plant at Manesar on Wednesday. According to the reports, the fire started in one of the heat treatment furnace located close to the forging unit of the plant and lasted for around 30 minutes. However, it was controlled within minutes by the company owned fire brigade. The exact reason of the fire is still not clear. The company has stated that there has been no casualty due to the fire incident and the production at the plant continues to remain normal. At the CMP of Rs.1,398, the stock is trading at 13.4x FY2015E earnings. We maintain our Accumulate rating on the stock with a target price of Rs.1,571.
Bosch to set up a new manufacturing plant near Bangalore
According to media reports, Bosch is planning to invest Rs.1,500cr on Bidadi and Adugodi projects over the next seven years. As per the reports, the company is planning to relocate its existing manufacturing plant from the Adugodi area to Bidadi due to space constraint; however, the Adugodi plant would be used for the development of the R&D Centre and a Technology and Engineering centre. The construction at the Bidadi plant would be completed in two phases over 2016-17. Phase I would involve shifting of 1,000 employees from the Adugodi plant to the new location and is expected to commence production from 2015. Phase II construction would commence from 2015 and is expected to be completed by 2016 and nearly 3,000 employees would relocate to the new location in Phase II. We see the capacity expansion plans of the company as a positive in the long run despite the challenges that the company is currently facing, as it would enable the company to maintain its technological leadership in the automotive space. At the CMP of Rs.8,387, the stock is trading at 19.8x CY2014E earnings. We retain our Accumulate rating on the stock with a target price of 79,096.
Economic and Political News
- 33 districts in Bihar declared draught affected
- July FDI inflows up 13% to three month high: Government
- Government may soon permit FDI in Railways
- Government looking at easing tourist visa to garner foreign exchange
- Mines ministry asks states to step up efforts to curb illegal mining
- Power Min favours returning of surplus coal to Coal India
- Apollo Hospitals may dilute 7% in promoter firm to KKR
- Coal India set to import 15 MT coal for power producers
- Dabur forays into male grooming mart by launching OxyLife Men Creme Bleach
- Infosys launches new version of Finacle
- Ranbaxy import ban: USFDA found suspected hair, oil in tablets
- Suzlon unit REpower UK bags 4 contracts
Stock Market Forum
- Indian Share market down on global sentiments
11 December 2013
- Intraday NSE Stock Calls Free for 11/12/13
11 December 2013
- Petrichor (PTP.V) Closes First Tranche Convertible Debenture Financing for Gross Proc
10 December 2013
- Mcx technical report 10 december
10 December 2013
- Stock Nifty Technical Report 10 December
10 December 2013
- Equity Tips for Today free 10/12/13
10 December 2013
- Mcx commodity trend 09 december
9 December 2013
- Forex Technical Trend 09 December
9 December 2013
- Nifty weak nearly 1 per cent, due to decline in pharma and metal sector
9 December 2013
- Highbank (HBK.V) Update on Archeological Survey & Swamp Point North Aggregate Project
6 December 2013