Indian stock market and companies daily report (February 29, 2012, Wednesday)

Indian Markets are expected to open in the green taking cues from the SGX Nifty and Asian markets which are trading higher in the opening trade. The US Markets edged up higher on Tuesday buoyed by a report from the Conference Board showing a substantial improvement in consumer confidence in the month of February. The strong consumer confidence numbers for February over shadowed the 4% drop in consumer durables orders for the month of January. US markets were also boosted by optimism about the impact of the European Central Bank's long term refinancing operation announcement which is due today. Dow Jones closed higher than 13,000 for the first time since May 2008. The major European markets which saw some volatility during the course of the day, ended the day on the upside.

Indian markets closed positively on Tuesday after snapping the four day losing streak. The markets would be tracking the GDP figures for 3QFY2012 due to be released today.

Markets Today

The trend deciding level for the day is 17,679 / 5,358 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,828 – 17,926 / 5,409 – 5,442 levels. However, if NIFTY trades below 17,679 / 5,358 levels for the first half-an-hour of trade then it may correct up to 17,582 – 17,433 / 5,324 – 5,273 levels.

Nedgroup Insurance selects TCS BaNCS Insurance for policy administration

TCS announced that its universal financial services platform, TCS BaNCS, has been selected by Nedgroup Insurance Company, a South Africa-based short-term insurer specializing in homeowner’s cover, personal accident, vehicle-related covers and other value-added insurance products. TCS BaNCS Insurance, part of TCS BaNCS, will serve as the new policy administration system for Nedgropup’s short-term insurance services. TCS BaNCS serves the top banks in Africa through banking and capital markets suite of solutions; this will be TCS BaNCS’ first insurance customer in Africa. We maintain our Accumulate recommendation on the stock.

JSW Steel reports January production numbers

JSW Steel’s January 2012 crude steel production grew by 39% yoy and 5% qoq to 0.8mn tonnes. The company has iron ore inventory, which could last for another 4-5 months. The company is awaiting the Supreme Court’s decision to lift/partially lift the mining ban in Karnataka. We maintain our Neutral view on the stock.

Infotech Enterprises – Analyst meet update

We recently attended the analyst meet of Infotech Enterprises (Infotech) held at Hyderabad. The meet focused on giving investors an idea about the company’s systems and processes through presentation by various business heads, subvertical heads and demo of a range of company’s projects. The major take away from the meet was that the company is on the right track in terms of making investments to strengthen its product portfolio and is taking initiatives to improve its financial metrics. Infotech’s performance over the past six quarters has been mixed, with operational margins being the major disappointment, which the company is now focusing to improve.

Focus on systems and process to provide scalability: During the meet, Mr. BVR Mohan Reddy, Infotech’s Chairman and Managing Director, highlighted that the company is now focusing on strengthening its leadership along with improving its systems and processes and making them scalable. Further, the company will take in SAP integration, as currently three of the company’s subsidiaries are operating independently. Along with integrating processes, Infotech is trying to expand its footprint in other addressable markets with existing clients.

Healthy market opportunity: As per Zinnov Consulting, a leading IT consulting firm, the engineering market is expected to reach US$40bn by 2020 from US$10.4bn currently (led by industries such as aerospace, automotive, consumer electronics and telecom). Infotech, being a leader in the aerospace and telecom engineering spaces, has strong relationships with clients in these areas and, hence, can capitalize on this opportunity.

Focus on improving client mining: Infotech’s management is currently focusing on adding and increasing its wallet share from ‘must have’ accounts across its target verticals. The company is doing this by changing the incentive structure of customer-facing roles and is investing considerably to improve client mining and account management skills.

Outlook and valuation: Infotech has been witnessing a 5.2% CQGR in its USD revenue over 2QFY2011–3QFY2012 because of inorganic growth due to the acquisition of Daxcon and Wellsco. Further, the company has witnessed price increases from some of its selective clients, which instills confidence in the company’s performance going ahead. Thus, over FY2011-13E, we expect the company to post a USD and INR revenue CAGR of 17.6% and 23.2%, respectively.

Infotech has been consistently underperforming on the operating margin front, which the company is now focused to address by levers such as improving utilization level, rationalizing SG&A expenses and shifting more work offshore. This year, management expects the company’s operating margin to exit at ~17%, which can be easily achieved now, given the sharp INR depreciation. We expect EBITDA and PAT CAGR to be at 30.0% and 16.6% (lower due to tax rate moving to 33% from 17% in FY2011), respectively, over FY2011-13E.

At the CMP of Rs.144, Infotech is trading at 8.4x FY2013E EPS of Rs.17.1. We maintain our Accumulate recommendation on the stock with a revised target price of Rs.162.

Result Review – 4QCY2011

Bosch

For 4QCY2011, Bosch registered a strong 33.5% yoy jump in net profit to Rs.281cr driven by significant increase in other income and lower than expected depreciation expense. Top-line grew by an healthy 8.3% yoy to Rs.2,040cr.The company’s EBITDA margin witnessed a 109bp yoy expansion to 17.5% led by decline in staff cost and other expenditure due to which operating profit jumped 15.6% yoy to Rs.357cr. The stock rating in currently under review.

Abbott India

For 4QCY2011, Abbott India Ltd. (AIL) reported a ~6% qoq decline in its revenue to Rs.386cr, 10% below our estimate of Rs.424cr. For CY2011, the company's top line came in at Rs.1,477cr, marginally lower than our estimate of Rs.1,516cr. The company's results are not comparable to the previous year’s results on account of its amalgamation with Solvay Pharma India Ltd. (SPIL) during the year.

During the quarter, EBITDA margin came in at 11.9%, 106bp lower than our estimate of 13% on account of higher other income, which includes integration and amalgamation expenses; and stamp duty. Net profit stood at Rs.120cr, 11% below our expectation of Rs.135cr. We have slightly revised our earnings estimate downwards and expect the company's net profit to post a CAGR of ~30% over CY2011-13E.

We maintain our Buy rating on the stock with a revised target price of Rs.1,721, based on a target PE of 18x its CY2013E earnings.

Economic and Political News
- Higher import duty will hurt sector: Private power companies to PM
- January infra output reduces to 0.5% yoy
- Rising crude oil prices disturbing: Finance Minister

Corporate News
- ONGC, GAIL may offer Rs.9,800cr for Cove
- IOC gets state permit to draw river water for refinery
- GMR Infra in talks to sell US$200mn in road assets
- Essar Oil loses Rs.302cr insurance claim

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Daily Report of INDIAN Stock Market

Analysis on markets today

Indian markets saw prime one-day drop since September 2011 led by enormous shorts build up and loosen of long positions. UP election results predictable on March 6 and spear in crude oil prices to 10-month high may have depreciate investors' emotion. The fall was not only restricted to large caps but also to broader markets, which tanked more than 3%. All BSE sectoral indices closed in a negative terrain barring FMCG. Rate sensitives took huge beating as rate cuts by RBI may be late if crude oil prices keep intensifying. Realty and Metal indices were down 5%. Power, Bank, Capital Goods, Auto and Oil & Gas indices tanked 3-4%. Shares of Sesa Goa top the selling list, falling 10.5% after London listed metals and mining company Vedanta Resources accepted fusion of Sesa Goa and Sterlite Industries on Saturday. The new company called Sesa Sterlite.

Market breadth was feeble at ~0.29x as investors sold large cap stocks. On temporary basis, FIIs bought equity of Rs.329.09Cr while domestic organization sold equity of Rs.699.14Cr

Asia markets are mixed early Tuesday, with Japanese shares descending as a insolvency filing by chip maker Elpida Memory Inc. weighed on technology shares and the Hang Seng rose.

We expect a vigilant opening for the Indian markets which slid sharply during last two trading sessions on account of sharp increase in the crude oil prices.

Economic and Corporate Developments

The government at present signed three loan contract totaling $350 million with polygonal funding agency Asian Development Bank (ADB).

The Power Ministry will soon look for the Cabinet endorsement for REC's proposed $1 billion worth Foreign Currency Convertible Bonds (FCCBs) topic.

Lively Stocks

BP-Reliance Industries will present to the government a entirely integrated development plan for the KG-D6 block in the next few weeks to maximize use of the entire obtainable infrastructure to make more discoveries in the block off the country’s east coast.

Bajaj Auto is all set to control its newly-launched Duke 200 – a nude style street fighter motorcycle from its Australian partner KTM’s stable – with the launch of KTM's Power Parts and Power Wear frills and commodities soon.

Mahindra Lifespace launched suburban project in Nagpur. The company will build up 25.25 acres of land.

In order to convene the instruction from the Prime Minister’s Office to ensure supply for 20 years to power plants of 50,000 mega watt (Mw) that would be commissioned by March 2015, Coal India has to produce an additional 220 million tonnes (MT) of coal by then — considering the fact that it is shying away from imports. According to experts, this is close to impossible for a solid stumble from environment obstacle.

Jaiprakash Associates shareholders and creditors have accepted the hiving off of the cement business to a wholly-owned auxiliary, Jaypee Cement Corporation (JCCL).

Gitanjali Gems is close to obtaining a jewellery retail company in China and hopes to proclaim a agreement in the next 2-3 months, a top official said.

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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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