Indian markets are expected to open range-bound following mixed cues from the global markets. Asian stocks are currently trading down on concerns of European debt crisis which has outweighed forecasted gains in US employment.
Indian shares erased early gains on Thursday, as weak Asian and European cues amid fresh concerns about the state of Europe's banks and lingering worries over potential euro-zone sovereign downgrades overshadowed rising expectations that the domestic central bank will cut interest rates at the upcoming policy review meet on January 24.
The US markets traded lower early in the day but ended in the green following release of some upbeat U.S. employment data. The early weakness on Wall Street was due in large part to a negative reaction to the results of a French bond auction, with the sale of 7.96 billion Euros worth of long-term French bonds drawing a higher yield than a month ago. Investors worldwide would keenly watch out for the US nonfarm payroll data and monthly unemployment rate data due for release today.
Markets Today
The trend deciding level for the day is 15,882/4,753 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 15,955 – 16,053/4,776 – 4,803 levels. However, if NIFTY trades below 15,882/4,753 levels for the first half-an-hour of trade then it may correct up to 15,784 – 15,711/4,727 – 4,704 levels.
Cement Dispatches – December 2011
ACC’s cement dispatches for December 2011 stood at 2.09mn tonnes, up bystrong 8.9% yoy. For CY2011, the company’s dispatches reported 11.4% growth to 23.58mn tonnes, though on a lower capacity base of the previous year. The company added ~3mtpa of capacity in CY2011, post which its overall capacity stands at ~30mtpa. Decent growth in dispatches reported by ACC and UltraTech in December 2011 hints at higher dispatches to the southern region, as both the companies have a decent exposure to the southern region. We continue to remain Neutral on ACC.
Maruti Suzuki to raise product prices next week
Maruti Suzuki (MSIL) has announced that it is planning to increase its product prices from next week to mitigate the impact of INR depreciation on input costs. While the company has not divulged any details on the quantum of the price increase, media reports indicate that the price hike will be in the range of 2-3%. The recent price hike comes on the back of price increase of Rs.10,000 carried out in November 2011 on all its diesel models.
MSIL, which has a substantial exposure to Yen (direct as well as indirect imports and royalty payment constitute ~27% of net sales), is likely to be severely impacted by the continued appreciation of Yen vs. INR (~12% qoq in 3QFY2012 and ~30% YTDFY2012). While the company has hedged its direct imports for 2HFY2012 for JPY/USD part of the leg at a rate of JPY79/USD, USD/INR part is still unhedged, which will have a negative impact on the company’s profitability in 2HFY2012. Meanwhile, MSIL has unveiled a new vehicle XA Alpha, a concept for compact SUV at the 11th Auto Expo being held at New Delhi. With the launch of the new concept vehicle and unveiling of MPV Ertiga on January 6, MSIL plans to expand its presence in the utility vehicle segment (UV), which is currently dominated by Mahindra and Mahindra.
At the current price of Rs.933, MSIL stock trading at 12.4x FY2013E earnings. We believe the recent correction in the stock price (~20% post 2QFY2012 results) factors in the impact of demand slowdown and labor problems on FY2012E volume growth and concerns regarding the adverse currency movement on margins. Thus, we continue to maintain our Accumulate rating on the stock with a target price of Rs.1,051.
Economic and Political News (edited)
- Weekly food inflation plunges to negative 3.36%
- Inflation may fall below 7% by March 2012: PM advisory panel
- Interest rates have peaked as inflation slows: RBI
- No threat to cancel license of any airline: DGCA
- Government to reach out to consumer bodies for FDI in retail
Corporate News
- RIL gas output dips below 39mmcmd in the week ended December 25, 2011
- M&M to invest Rs.800cr in Korean arm, SsangYong Motors, to develop products
- M&M to launch SUV Rexton in India in the next six months
- ONGC finds gas reserves off Daman
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