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Indian stock market and companies daily report (September 21, 2012, Friday)

Contributed by Angel Broking

The Indian markets are expected to open in the green tracking positive opening of SGX Nifty and most of the Asian indices. Further, governmentRs.s notification regarding increased limits in FDI in retail, civil aviation, broadcasting and power exchanges is expected to boost investor sentiments.

The US markets moved down during early trade on account of disappointing jobs report. The Labor Department released a report showing that jobless claims came in above estimates in the week ended 15th September 2012, at 385,000 from 382,000 last week, as against an expectation of 373,000. A report showing a continued contraction in Chinese manufacturing activity also helped to drag stocks lower, although selling pressure was relatively subdued.

Indian shares fell notably on Thursday, mirroring weak cues from Asia and Europe as disappointing economic data from China, Japan and Europe stoked worries that the global slowdown could be more severe than meets the eye.

Markets Today

The trend deciding level for the day is 18,362/5,557 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,431 - 18,514/5,579 - 5,603 levels. However, if NIFTY trades below 18,362/5,557 levels for the first half-an-hour of trade then it may correct up to 18,279 - 18,210/5,532 - 5,510 levels.

No need to cancel dual tech licenses issued in 2007: DoT

In major relief to the dual technology telecom players such as RCom and Tata Teleservices Ltd (TTSL), the Department of Telecommunications (DoT) has informed the Supreme Court that licenses granted to those players in 2007 should not be cancelled. DoT has filed an affidavit in the apex court stating that the decision to permit the use of dual technology by these companies required no interference as the GSM licenses the companies held were different from those cancelled by the verdict in the 2G case.

DoTRs.s affidavit came after the Supreme Court sought a reply on Cellular Operators Association of IndiaRs.s (COAI) query of asking the apex court to withdraw the dual technology licenses granted to RCom, TTSL, HFCL in 2007 and redistribute the same through auctions as laid down in its February 2012 judgment. According to COAI, these licenses were mala fide, in context of the Supreme CourtRs.s verdict in the 2G spectrum case which terminated 122 mobile permits. Further, COAIRs.s petition stated that the governmentRs.s decision to grant dual-technology licenses was illegal, since this fell between September 2007 and March 2008, the same time other mobile permits were given which were annulled by the Supreme Court. DoT said that the present application is totally misconceived and based on a misreading of the judgment dated 02.02.2012. The decision of the answering respondent dated 17.10.2007 granting permission for use of dual technology, which has been impugned in the present appeal, did not fall for consideration in the judgment dated 02.02.2012. It further added that the present application by the COAI "deserves to be dismissed". This move is positive for dual technology players in the telecom industry but we maintain our Neutral view on the telecom sector given the low business returns and uncertain environment which might pose huge risk to the overall profitability of these companies.

Government notifies foreign investment amidst protest; FDI in insurance may be hiked to 49%

The government has braved the heat and against the backdrop of a nation-wide bandh called by opposition parties, it notified the increase in limit for foreign investment in multi-brand retail, aviation, power exchange and broadcasting.

It is now expected to go ahead with insurance reforms by raising the foreign direct investment (FDI) limit in the insurance sector to 49% from 26%. FDI in insurance, according to news sources, is expected to come up in the Cabinet meeting that has been postponed till Tuesday next week. Media reports are also suggesting that the Cabinet Committee on Economic Affairs (CCEA) would take up the issue of enhancing FDI in the pension sector as well. If passed, the higher limit of FDI in insurance is expected to benefit institutions like HDFC, ICICI Bank and State Bank of India which have a significant presence in the insurance market.

CCI issues notices to 17 automotive manufacturers

According to press reports, Competition Commission of India (CCI) has issued show cause notices to 17 leading automobile manufacturers on an alleged anti-competitive practice of selling spare parts at higher prices to consumers. The probe is being conducted after a complaint that certain car makers are exploiting their dominant market position by selling auto spare parts to customers at high prices and also by making available spare parts only through their authorized dealers, who in turn sell them on high rates. Media reports suggests that the CCI would take a final decision on the alleged anti-competitive practices after taking into account the explanations of the carmakers as well as the report of the Director General of the Commission. The CCI has scheduled hearings next month to seek explanations regarding the practice being followed by certain section of automobile manufacturers operating in India. While we await further action from the CCI on this front, we maintain our estimates for our coverage stocks.

Ambuja Cements, Grasim to lose coal blocks

The Inter Ministerial Group (IMG) on Thursday decided to de-allocate two more coal blocks. The de-allocated coal blocks are Dahegaon Makardhokra IV allocated in June 2009 to IST Steel & Power Ltd and Ambuja Cements. The other coal block facing de-allocation is Bhaskarpara in Chattisgarh allocated in November 2008 to Electrotherm (India) and Grasim Industries. We maintain our Neutral view on Ambuja Cements.

MM launches Quanto at a competitive price of Rs.5.8lakhs

Mahindra and Mahindra (MM) launched its much awaited compact sports utility vehicle (SUV) Quanto at an attractive price point of Rs.5.8lakhs (ex-showroom Thane) for the base version and Rs.7.4lakhs for the higher end model. Quanto, the smallest SUV in MMRs.s product portfolio is based on the Ingenio platform (same as Xylo) and is powered by a 1.5litre mCR100 diesel engine giving an output of 100bhp and 240nm of torque. The new SUV which boasts of an impressive mileage of 17.2kmpl will be manufactured at MMRs.s facility in Nashik and will immediately go on sale through a network of 200 dealers. While the company currently has a capacity to manufacture 7,000 units of Xylo and Quanto together, the actual production will depend on the consumer demand.

MM has been successful in launching the new vehicle at an attractive price point mainly due to the length of the vehicle which is below four meters. A vehicle lesser than four meter in length and engine capacity not exceeding 1500cc for diesel vehicles (1200cc for petrol vehicles) attracts an excise duty of 12% as against 27% for bigger cars. We believe that with the the launch of the compact SUV, MM has created a new segment which will enable buyers of diesel hatchback and entry level sedans to upgrade to the utility vehicle segment. Quanto is currently the cheapest SUV in the market and due to competitive pricing it will take on Maruti SuzukiRs.s Swift and HyundaiRs.s i20. With the launch of Quanto we expect MM to further consolidate its position in the utility vehicle segment amid rising competition and will also enable MM to sustain the growth momentum in the automotive segment. At Rs.785, the stock is trading at 14.3x FY2014E earnings. We maintain our Accumulate rating on the stock with SOTP based target price of Rs.879.

Economic and Political News

- Rolling back excise on diesel to deal Rs.6,000cr blow

- Government initiates process of 9.5% stake sale in NTPC

- FDI in retail to benefit farmers, consumers and artisans

Corporate News

- Orchid Chemicals and Pharmaceuticals plans entry into the therapeutic biz

- Glenmark Pharma gets tentative nod from US FDA for migraine tablets

- JSW Steel likely to delay West Bengal plant construction

- Dr ReddyRs.s launches new ENT, skin drugs

- JSL gets CDR cell nod to reschedule Rs.9,000cr debt payments