The Indian markets are expected to open in green tracking positive cues from SGX Nifty. Asian shares and the euro were under pressure as European leaders argued over how to ease borrowing strains in Italy and Spain and stop the euro zone debt crisis spreading, with investors fearful of US reaction to the deadlock.
US stocks saw significant weakness throughout much of the trading day on Thursday, the markets staged a significant recovery attempt in the final hour of trading. The major averages climbed well off their worst levels of the day but still closed in negative territory. Lingering concerns about the financial situation in Europe contributed to the early weakness on Wall Street along with a negative reaction to the Supreme Court's decision to uphold President Obama's healthcare reform law, including the law's individual insurance mandate.
Continued expectations of government action to revive domestic growth helped Indian shares shrug off weak global cues on Thursday. The rupee also traded firm, bolstered by dollar selling by banks and exporters after PM sought to give a big push to the sagging economy.
Markets Today
The trend deciding level for the day is 16,981 / 5,145 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,043 – 17,096 / 5,164 – 5,178 levels. However, if NIFTY trades below 16,981 / 5,145 levels for the first half-an-hour of trade then it may correct up to 16,928 – 16,866 / 5,130 – 5,111 levels.
Coal India gets NTPC's de-allocated coal mines
Media reports suggest that Coal Ministry has given three de-allocated mines to Coal India (CIL) and has asked CIL to appoint mine developers to begin the production from these blocks at the earliest. The three allocated blocks include Brahmini, Chichro Patsimal and Damogoria blocks. We believe CIL will start developing these blocks, but it is unlikely to commence production from these blocks in the near term. Hence, we await further clarity on this matter. Thus, we maintain our estimates on CIL and recommend a Neutral rating on the stock.
SBI cuts its lending rates for exporters by 50bp
State Bank of India (SBI) has reduced its lending rates for export credit by 50bp w.e.f. June 23, 2012, responding to recent RBI action of enhancing the limit for export credit refinance (ECR) from 15% to 50%. We expect the bank to report NIM of 3.7% and 3.4% for FY2013 and FY2014, respectively. At the CMP, the stock is trading at 1.2x FY2014E ABV (after adjusting for value of subsidiaries). We recommend a Buy rating on the stock with a target price of Rs.2,469.
CG inaugurates new EHV switchgear manufacturing facility in Brazil
CG (Crompton Greaves Ltd) commenced operations of its new Extra High Voltage (EHV) Switchgear manufacturing facility in Brazil. It will manufacture a full range of EHV switchgear targeted at the Brazilian Utility market segment. It intends to differentiate by introducing its latest models and provide Brazilian customers with a 30 per cent reduced lead time. CG expects to reach $50mn during the first year of operations. CG has already received more than USD 6 million worth of orders from Utilities such as CEMIG, CPFL, CEEE, RGE and Toshiba. We maintain our Buy on the stock with a target of Rs.142.
Petrol price cut by Rs.2.46/litre
Oil marketing companies (OMCs) have reduced petrol prices by Rs.2.46/liter. OMCs had already cut petrol prices by Rs.2.02/liter on June 3, 2012. Petrol prices have been lowered due to declining global crude oil prices over the past one month. Brent crude oil price has declined from US$103/bbl on May 31, 2012, to US$93/bbl as on June 28, 2012. Since petrol prices are not included in the calculation of under-recoveries, we do not change our estimates for underrecoveries for FY2013. We maintain our Buy rating on ONGC with a target price of Rs.321 and maintain our Accumulate rating on GAIL with a target price of Rs.389.
DoT to slap penalties Rs.1,594cr on five mobile phone firms this week
The telecoms department (DoT) will this week formally slap penalties totaling Rs.1,594crore on five mobile phone firms, after it rejected their defence against charges that accused them of understating revenues and paying less levies. The DoT plans to send demand notices to Bharti Airtel, Idea Cellular, Vodafone, Tata Teleservices, Tata Communications and RCom by the month-end. Earlier this year, these companies were slapped with showcause notices after a DoT appointed panel endorsed the findings of external auditors, which said these operators had understated revenues by Rs.10,268cr during 2006-07 and 2007-08. Since telcos pay 6-10% of their annual revenue as license fee and 2-6% as spectrum usage charges, reporting lower revenue brings down the component they have to share with the government. The DoT had also obtained the law ministry's approval prior to sending out showcause notices. But all telcos had denied any wrongdoing and slammed the DoT panel's findings.
The department has estimated that Bharti Airtel will have to pay penalties to the tune of Rs.292cr while for Vodafone it will be Rs.254cr. The penalty for Idea works to Rs.113cr, Tata Teleservices at Rs.273cr and Tata Communications at about Rs.120cr while RCom will have to pay about Rs.551crore. This includes interest and other related fines for the alleged violations. We continue to maintain our Neutral view on the overall telecom sector owing to regularity uncertainties as well as increase in interest payments of various companies (Bharti Airtel, RCom) which has got forex debt in their books due to sharp INR depreciation.
PM moves to soften GAAR
As per media reports, Prime Minister Manmohan Singh has kicked off a review of the controversial changes that scared away foreign investors. PM has asked finance ministry officials to examine the whole gamut of tax issues concerning portfolio investors which include the General Anti-avoidance Rules (GAAR) intended to check tax evasion by creating structures sans commercial substance. With regard to the new provision to tax overseas transactions involving Indian assets for capital gains, the sources did not even rule out a clarification that no past deals would be taken up in such cases even if the assessment process was not complete. The PMO has sought clarifications on all tax issues (pertaining to investors) and expects clarifications on indirect transfers pertaining to FIIs will be issued in a few weeks.
EU summit works on short-term support for Spain, Italy
Italy and Spain, battling searing market pressure in the euro zone's widening debt crisis, blocked agreement on measures to promote growth at a European Union summit on Thursday to demand urgent action to bring down their borrowing costs. As per three EU sources, work was focused on using the euro zone's temporary EFSF rescue fund and a future permanent ESM bailout fund to buy new Spanish and Italian bonds as they were issued to underpin their bond auctions. The funds will have a maximum firepower of €500bn once the ESM is fully stocked in 2013, minus €100bn already earmarked to aid Spanish banks. It is expected that an agreement could be clinched at a meeting of the 17 euro zone leaders today after the regular 27-nation EU summit ends.
In draft summit conclusions, subject to amendment today, the leaders were set to ask the EU's top four officials to produce a detailed, time-bound roadmap in December leading to a genuine economic and monetary union. European Council President and European Commission President have set long-term goals of creating a euro zone treasury to issue joint bonds in the medium-term, and establishing a banking union with central supervision, a joint deposit guarantee and a resolution fund.
Economic and Political News
- Private airlines may get subsidy for flying to northeast
- Petrol price cut by Rs 2.46/litre, scope for more reduction
- Indian economic confidence slips in May on weak rupee, inflation
- Land deals in India to drop by 20% this yr to Rs 15k cr: C&W
Corporate News
- SAIL consortium may sigh pact with Afghanistan next month
- Bajaj Auto may hike prices as rupee fall raises input costs
- Gati forms JV with Japanese firm to reduce debt, interest cost
- Lanco commissions Bangalore-Mangalore toll road
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