Today’s Report of Indian Stock Market

Outlook on markets today

The Sensex closed at 17924, down 154.93 points or 0.86% and the Nifty ended at 5429 down 54 points or 0.98%. It was first weekly collapse for markets in 2012. Among the 13 sectoral indices, five bunged superior. Top Gainers - BSE Metal up by 1.08%, BSE TECK up by 0.56% and BSE IT stirring by 0.55%. Top Losers - BSE CG down by 2.96%, BSE Realty down by 2.28% and BSE Bankex down by 1.95%. Profit booking appear after current gains as concerns increase over the state of the universal financial system, including rising oil prices. India’s widening financial shortage also added to obscurity. Volatility was high owing to F&O expiry for Feb 2012 this week. There was also a lot of uncertainty ahead of events like the upcoming financial statement.

ICICI Bank and HDFC Bank were among the big losers as market potential for a rate cut in March was tempered by the rally in world oil prices, which could make it difficult for the central bank to relieve strategy. Housing Development Finance Corp fell as much as 6.2% after Citigroup Inc sold its entire chance in the company for about $1.9 billion.

Market cinch was weak at ~0.60x as investor sold large cap stocks. On temporary origin FIIs bought equity of Rs.8955.30Cr while domestic institutions sold equity of Rs.836.71Cr.

Many chief Asian markets slip but Japanese stocks rise as the yen weakens against the euro on trust of a larger euro-zone bailout package.

We expect a flat opening for the Indian markets today following the mixed nod from the Asian markets.

Monetary and Mutual Developments

The Centre has asked fertilizer firms not to lift imported nutrients, especially potash and DAP, planned to reach ports in February and March, due to poor command, a move that could save up to Rs 1,000 crore in the subsidy bill of this monetary.

A Group of Ministers (GoM) today accepted a new asset policy for the urea sector, to make the nation independent in the input soil nutrient.

Vibrant Stocks

Oil and Natural Gas Corporation (ONGC) is spending Rs 26,000 crore to enlarge 10 oil and gas bunch in western and eastern offshore, to enlarge crude production by up to 4 million tonne per annum by 2013-14.

NTPC to invest Rs 24,000 cr in Andhra plant.

The Karnataka government has completed land acquirement for Tata Steel and Tata Metallic’s incorporated scheme at Haveri district, an official of the corporation said on Saturday.

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Daily Morning Report of Indian Stock Market

Observation on markets today

Indian markets plunge for the second day yesterday to reach their stumpy closing level in more than a week as investors took profits on expiry of monthly derivatives along with concerns about high oil prices. Volatility was high as traders turn over positions in futures & options (F&O) segment from the near-month February 2012 series to March 2012 series. Investors are also awaiting further confirmation on the health of the global financial system as high oil prices intimidate to fuel inflationary pressures and increase costs for companies, affecting their profitability. UBS also said in a note that India looks susceptible to profit taking in the short term after recent outperformance, rising oil prices and seasonally tighter financial conditions. The downward movement was mainly led by selling pressure in real estate, metal, auto and capital goods stocks while FMCG, power and oil & gas stocks spectator some buying activities which gave some support to the markets. Realty stocks edged lower on profit taking after recent strong gains. DLF, Phoenix Mills, HDIL and Unitech fall between 1.08-6.17%. Sterlite Industries fell 4.09%, with the stock extending Wednesday's 6.62% slide. As per media reports, the Vedanta Resources group may merge iron ore firm Sesa Goa with copper and aluminium maker Sterlite Industries to shorten and merge its corporate structure. PNB fell 1.96% as the board of directors of the bank at its meeting has permitted issuance of up to 1.28Cr equity shares to Government of India and up to 1.58Cr equity shares to LIC on preferential basis, at a premium of Rs.993.69.

- Market breadth was weak at ~0.61x as investors sold huge cap stocks. On provisional basis, FIIs bought equity of Rs.1.05bn while domestic organization sold equity of Rs.6.41bn in cash segment.

- Asian markets were plane today after growing crude oil prices and strain related to Iran weighed on the equities.

- We expect a flat to vigilant opening for the Indian markets today following the signal from the Asian markets.

Financial and Commercial Improvement

Amid the country facing an sensitive coal shortage, a ministerial panel, headed by Finance Minister Pranab Mukherjee, will meet on March 1 to address the environmental problem that hurt the coal productivity.

A panel of ministers will meet on Feb 27 to confer a share sale in state-run oil voyager and producer Oil and Natural Gas Corp, Oil Minister S. Jaipal Reddy said.

Energetic Stocks

Shasun Pharmaceuticals would meet on February 27, 2012, to judge issue of equity shares on a special basis to private equity investor.

Coal India Ltd. will look for offtake obligation from power utilities before importing, as has been asked by the Prime Minister’s Office.

The state-owned coal sector monopoly was recently asked by the Prime Minister’s office (PMO) to meet the contribute obligation of the power sector even if it means resorting to imports.

Ashok Leyland is scheduling to set up a new creation facility near Chennai.

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Indian stock market and companies daily report (February 17, 2012, Friday)

The domestic markets are expected to open in green following positive opening across most of the Asian markets. The domestic bourses snapped three day rally yesterday and ended with modest losses as delays over Greece bailout added mild concerns for investors. Selling pressure remained subdued, however capped the downside for the markets.

Globally, European markets remained jittery in absence of resolution to the Greek sovereign debt crisis. Traders also digested the news of possible downgrade of 17 global financial institutions by Moody’s. US bourses ended on a positive note, thanks to upbeat U.S. job data which offset the negative sentiment generated over Greece’s bailout delay and Moody’s possible downgrade. The U.S labor department reported fall in initial jobless claims to 348,000 for week ended February 11th from the previous week's revised figure of 361,000.

On the domestic front, soothing of inflationary pressures and hopefulness of monetary easing has helped the markets to hold strong breadth. On the global front, positive economic data in US and China’s pledge to support the eurozone is expected to renew the sentiments in the markets. Markets will closely track the developments in the domestic as well as global markets.

Markets Today

The trend deciding level for the day is 18,127 / 5,512 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,210 – 18,266 / 5,541 – 5,560 levels. However, if NIFTY trades below 18,127 / 5,512 levels for the first half-an-hour of trade then it may correct up to 18,071 – 17,987 / 5,493 – 5,465 levels.

Spain’s borrowing costs climb, while yields drop for France

Spain sold EUR4.07bn (US$5.29bn) of debt maturing in 2015 and 2019. Average yield on the bills maturing October 2019 increased to 4.83%, compared to 4.54% when securities were last offered on January 19, 2012. Further, the average yield of notes maturing in July 2015 increased to 3.33%, from 2.86% at the previous auction on February 2, 2012. While a bond maturing in January 2015 was sold to yield 2.96%. After the sale, even the yield on Spain’s 10-year benchmark bond climbed 9 basis points to 5.53%, increasing the spread over German bunds by 13 basis points to 371 basis points. Spain’s rising borrowing costs indicate that investors’ concern towards solvency of the country’s US$807bn public debt has increased. Spain’s debt to GDP ratio at 74% is better than that of Greece (198%) and Portugal (111%), but the problem with the country’s economy is that unemployment (as a percentage of working population) at 21% is alarmingly the highest among eurozone countries. Further, the country’s economy has contracted by 0.3% qoq in the last three months of 2011, as per Madridbased National Statistics Institute. Government of Spain has a very tough task in hand, to strike a proper balance between austerity and growth measures so as to bring back the country’s economy out of this debt crisis.

France also sold a total of EUR8.45bn of notes maturing in 2014, 2015 and 2019. Average yields on two-year notes maturing in 2014 fell to 0.89% from 1.05% at a previous auction on January 19, 2012.

Both the sales came three days after Moody’s cut the ratings of six European nations, including Spain, and revised its credit outlook on France to ‘negative’.

RCom gets RBI nod for FCCBs redemption

RCom has received approval from the RBI to refinance redemption of its outstanding FCCBs worth US$1.2bn (~`5,825cr), the due date of which is March 1, 2012. The company said that RCom will benefit from extended loan maturity of seven years and attractive interest cost of ~5%. The refinancing is being funded by the Industrial and Commercial Bank of China (ICBC), China Development Bank (CDB) and Export Import Bank of China (EXIM). We maintain our Neutral view on the stock.

Economic and Political News
- Government hopes to achieve road project target for FY12
- Par panel to discuss report on DTC, may suggest hiking IT exemption limit
- EGoM okays 5% stake sale in ONGC

Corporate News
- Panel to take up Sasan coal diversion issue next week
- ONGC to expedite work on major oil, gas project in KG Basin
- ITC buys 4.62% in Hotel Leela from Russell Credit
- Magma Fincorp plans to start gold finance biz in H1 of FY13
- Supreme Court quashes Ansaldo venture bid For NTPC contract
- Promoters stake up to 48.53% in Reliance Infra after buyback

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Indian stock market and companies daily report (February 16, 2012, Thursday)

The domestic markets are expected to open sideways following flat opening across most of the Asian markets. The domestic bourses surpassed the psychological 18,000 mark yesterday, reaching the highest level in more than six months. The surge followed the strong rally across Asian markets driven by China’s pledge to invest in the euro zone bailout. Data showing sustained buying of Indian stocks by FIIs also boosted sentiments.

Global cues remained mixed. European markets edged up slightly as China signaled help amidst data that showed contraction of the Germany economy in the fourth quarter. Along with the positive remarks from Chinese officials, US traders also digested the news that the second bailout to Greece could be delayed and the US bourses displayed volatility ending slightly negative.

On the domestic front, optimism has gradually crept in. Soothing of inflationary pressures and hopefulness of monetary easing has led to broad based FII inflows. On the global front, China’s support to the eurozone is likely to renew the optimism of fixing the eurozone debt crises. Currently holding strong breadth, the markets will trace new catalysts for the rally to sustain.

Markets Today

The trend deciding level for the day is 18,145 / 5,512 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,289 – 18,376 / 5,563 – 5,593 levels. However, if NIFTY trades below 18,145 / 5,512 levels for the first half-an-hour of trade then it may correct up to 18,058 – 17,914 / 5,481 – 5,430 levels.

PM initiates action to address issues of coal supply for power projects

The Prime Minister has approved suggestions made by the Secretary level Committee for solving the issue of coal deficit faced by Power sector. As per the approved suggestions, Coal India Limited (CIL) will sign FSAs with power plants that have entered into long-term PPAs with power distribution companies and have been commissioned/would get commissioned on or before 31st March 2015. For power plants that have been commissioned up to 31st December 2011, FSAs will be signed before 31st March 2012. The FSAs will be signed for full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years with trigger level of 80% for levy of disincentive and 90% for levy of incentive. In case of any shortfall in fulfilling its commitment under the FSAs from its own production, Coal India Limited will arrange for supply of coal through imports or through arrangement with State/Central PSUs who have been allotted coal blocks.

In our view this news is positive for the power sector considering that the fuel shortage is the key issue currently faced by the sector. CIL had not signed any FSA’s with private power generators after March 2009. The main contention between CIL and Power companies was with regard to formers’ stance of having a trigger level of 50% beyond which it would not get penalized. However, we have concerns with regard to ability of Coal India to ramp up production. The company’s ability to ramp up production depends on quicker and easier approvals from environment ministry with regard to forest and environment clearance. We await more clarity on this development.

Result Review

INEOS ABS Ltd. - 4QCY2011

INEOS reported its 4QCY11 numbers. Top line for the quarter was flat at Rs.211cr yoy. Annual sales stood at Rs.826cr, 7.7% lower than our estimates of Rs.896cr. Operating margin for the quarter fell by 980 bps yoy from 16.4% to 6.4% mainly due to substantial increase in the raw material cost as percent of sales. Net profit stood at Rs.9.5cr, 56% lower yoy. Annual net profit came in at Rs.54cr, 22% lower than our estimates of Rs.69cr. As we roll over to CY2013E, we continue to maintain our Buy recommendation on the stock with the revised target price of Rs.733, based on PE of 15x for CY2013E.

Result Preview

GSK Pharma - 4QCY2011

Glaxo Pharma is slated to announce its 4QCY2011 numbers. For the quarter, we expect the company to post healthy top-line growth of 17.5% yoy to Rs.577cr. The company’s bottom line is expected to register a decline of 20.5% yoy to Rs.116cr, aided by margin contraction of 350bp yoy to 30.6%. We maintain our Neutral view on the stock.

Economic and Political News
- India set to harvest record 250mn tonnes of Food grains
- Finance Minister asks states to promote investment in farm supply chain
- CII asks for continuation of 10% standard rate of excise duty in its pre-budget memo

Corporate News
- Future licences won't be linked to spectrum allocation: Sibal
- Government mulls options to allocate NTPC’s stake in ICVL
- Volvo rolls out three new variants at lower price points
- Akzo Nobel India board agrees to partial rollback of royalty rate to parent
- Sterlite Industries to pay US-based Asarco US $82.8mn in damages

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