Stock Alert : 28.10.2011

* BHARTI AIRTEL: The Delhi High Court has rejected the company's plea against the Telecom Disputes Settlement & Appellate Tribunal's order to pay 250 mln rupees fine.
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* CENTURY ENKA: Parvati Tea replaces Jay Shree Tea as a promoter of the company.
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* FUTURE VENTURES: Will subscribe to 2.5 mln zero-percentage optionally- convertible debentures each of Capital Foods Exports Pvt Ltd and Future Consumer Enterprises Ltd.
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* GOKALDAS EXPORTS: Company may get an order from Wal-Mart Stores for 6 mln pieces per year.
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* INFOSYS: Is looking for acquisitions worth up to $700 mln in the pharmaceutical sector.
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* JSW STEEL: Japan 's JFE Steel has shown interest to buy more stake in the company's Salboni project in West Bengal .
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* MIRC ELECTRONICS: Has posted Jul-Sep net loss of 96.1 mln rupees and net sales at 4.24 bln rupees.
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* MMTC LTD: Source says government unlikely to divest its stake in the company this financial year due to volatile equity markets.
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* ORACLE FINANCIAL SERVICES: Reported Jul-Sep net profit of 1.65 bln rupees, down 21.8% on year; revenues rose 6% on year to 6.2 bln rupees.
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* POWER GRID CORP: Has informed the stock exchanges that its board last week approved investments of 10.46 bln rupees for two projects.
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* RAIN COMMODITIES: Has approved buyback at up to 41 rupees per share. To spend up to 350 mln rupees on the share buyback. Has posted Jul-Sep consolidated net profit at 1.17 bln rupees, net sales of 12.95 bln rupees.
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* SESA GOA: Has posted Jul-Sep consolidated net profit at 12.8 mln rupees, way below analysts' estimates of 2.78 bln rupees; net sales at 7.84 bln rupees.
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* TV18 BROADCAST: Will launch 'CNBC-TV18 Prime HD', a high definition, premium business news service, on Oct 26.
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* USHA MARTIN: Thailand arm's operations hit by floods; assets "broadly" insured.
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* WIPRO: To restructure its computer infrastructure management services business by merging the global and domestic functions.
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* YES BANK: Ups savings bank rate by 200 basis points to 6%, Base Rate by 25 bps to 10.50%, and benchmark prime lending rate 25 bps to 19.75%
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Auto Stocks Outlook for the week (24-28.10.2011)

Auto Stocks Outlook for the week (24-28.10.2011)

Automobile stocks are seen taking cues from the monetary policy review next week. The Reserve Bank of India is widely expected to go in for at least another 25 basis points hike in policy rates during the upcoming review on Oct 25. The central bank has already hiked its policy rates a dozen times in the last 18 months to tame inflation.

 A rate hike would always be negative for auto stocks. Whether it (RBI) hints at a pause is what the markets are keen to learn. Passenger car sales in the country are already dwindling because of costly loans and high fuel prices. From April to September, domestic car sales have dropped over 1% from the same period last year.

In comparison, car sales had grown almost 34% on year during the first six months of the last fiscal year. Society of Indian Automobile Manufacturers has even downgraded its passenger car sales growth forecast for the current financial year to 2-4%, the slowest since 2008-09 when sales had risen by a mere 1.4%.

This is the second time in 2011-12 that Society of Indian Automobile Manufacturers has revisited its sales growth forecast. It had originally estimated domestic car sales to grow at 16-18% in the current financial year, but later revised the figure to 10-12%. Maruti Suzuki would be detailing Jul-Sep earnings Oct 29. We expects Maruti Suzuki's profit in the second quarter to decline by a sharp 34% year-on-year due to slower sales and yen hedges at sequentially lower levels.

Bank Stocks Outlook for the week (24-28.10.2011)

Stocks of banks are likely to remain in a range next week in view of the Reserve Bank of India's second quarter monetary policy review on Tuesday. Expiry of the October derivatives series, and banks' Jul-Sep earnings would also drive sentiment. Wednesday and Thursday, India's financial markets are shut due to the Diwali festival. On Wednesday, there will be ceremonial trading--or 'muhurat' trading--for a couple of hours.

On Tuesday, the RBI is expected to raise the repo rate--the rate at which it lends to banks under its Liquidity Adjustment Facility--by 25 basis points to contain inflationary pressures. Wholesale Price Index-based inflation rate was 9.72% in September, way beyond the central bank's projection of 7.00% by March end.

Prime Minister's Economic Advisory Council Chairman C. Rangarajan Thursday said repo rate, at 8.25%, was still lower than the pre-crisis level of 9.00%, and the RBI would have to act to tame inflation. If inflation rises, the responsibility of (the) central bank becomes greater when inflation remains at a level which is way above the comfort zone. Therefore, in that situation, it becomes absolutely necessary for (the) central bank to act and that is what they are doing.

Besides the RBI's policy review, the quarterly performance of banks will be in focus next week. Axis Bank, Kotak Mahindra Bank, Union Bank of India, and Allahabad Bank are among the banks that will announce their Jul-Sep earnings in the week. Axis Bank's Jul-Sep net profit is expected to rise 25% from a year ago to 9.16 bln rupees due to strong growth in loans and fee income.

Pharma Stocks Outlook the week (24-28.10.2011)

Stocks of drug makers are likely to trade in a narrow range along with the broad market next week in the absence of much action in the sector. However, the street will keep an eye on the Jul-Sep earnings of the companies. There is nothing much to watch for except the earnings. However, the expectations are quite subdued as far as the results are concerned.

Margins of drug makers are seen remaining under pressure with increasing competition in the market. Companies such as Dr Reddy's Laboratories, Ranbaxy Laboratories Ltd and GlaxoSmithKline will announce their Jul-Sep results next week and in the first week of November.

Domestic formulation business for most companies (DRL, Ranbaxy and Cipla in particular) is likely to witness high single-digit growth on back of increasing competition. As a result, margins are expected to be under pressure. According to the report, companies with short-term loans and high forward covers may have to bear the brunt with rupee depreciating against dollar.

Ranbaxy is likely to be worst hit while Sun Pharma to be better off. We expect the profit growth of pharmaceutical companies is likely to be marginal due to higher interest costs led by rising interest rates, and a higher effective tax rate on account of the increased minimum alternative tax rate and the exhaustion of tax benefits for export-oriented units.

FMCG Stocks Outlook for the week (24-28.10.2011)

FMCG Stocks Outlook for the week (24-28.10.2011)

The stocks of fast moving consumer goods companies are expected to continue outperforming the market, with Hindustan Unilever and ITC being in focus due to their Jul-Sep earnings next week. ITC will detail its quarterly performance on Monday, and Hindustan Unilever, Dabur India, and Colgate Palmolive India on Oct 31. These two companies enjoy the maximum weightage on the BSE FMCG Index and their earnings are expected to be the big trigger for this category.

Godrej Consumer Products last week declared a 2.6% on-year fall in its Jul-Sep net profit at 1.28 bln rupees on account of a higher interest, advertising and marketing expenses and raw material cost. The stock ended down 1.13% on friday at 405.25 rupees on the National Stock Exchange.

However, see the Godrej Consumer counter getting back to its previous levels in a few sessions due to continuing demand for products. The FMCG stocks are seen to be favoured by investors due to strong fundamentals, which attract investors from other sectors such infrastructure, real estate, which have not performed well.

Cement Stocks Outlook for the week (24-28.10.2011)

Stocks of most cement majors are seen moving in a narrow range with a positive bias next week, as the negative sentiment of UltraTech Cement Ltd's poor Jul-Sep earnings has been factored in, and we expect cement makers performance to improve in the coming months. The country's largest cement maker by capacity, Thursday posted a 60% sequential decline in net profit for Jul-Sep at 2.79 bln rupees, and a 10% fall in net sales at 39.10 bln rupees.

UltraTech Cement reported Jul-Sep results below our as well as consensus estimates, on account of lower-than-expected margins. However, we see brighter prospects for H2FY12 (Oct-Mar) given the recent cement price hikes and expected spurt in volumes post-October as the festive season draws to a close.

We expected that even as two other majors, ACC Ltd and Ambuja Cements Ltd may miss the estimated growth for Jul-Sep, the companies will see a rebound in the coming quarters. ACC and Ambuja Cements will detail their Jul-Sep earnings on Nov 1. While pricing remained under pressure in Jul-Sep due to subdued demand, companies have taken production cuts to raise prices by 5-20 rupees per 50 kg bag across regions in the country since September end.

Cement producers have reduced production levels leading to shortage in the market with no sales in the non-trade segment and supplies being diverted to trade segment to exploit the premium of 10-15 rupees per bag. The low base effect of 2010-11 (Apr-Mar) might continue to help growth numbers seem better till January.

Capital Goods Stocks Outlook for the week (24 - 28.10.2011)

The festival of lights will bring no joy to capital goods stocks next week as poor quarterly performances and unfavourable macroeconomic conditions are seen weighing on the investor sentiment. A grim outlook for the year ahead by sector bellwether Larsen & Toubro Ltd has further battered the already weak sentiments prevailing for the sector. Larsen & Toubro today reported a better than expected Consolidated net profit at 7.98 bln rupees for Jul-Sep, a  4% growth from the same period last year and net sales at 112.45 bln rupees, higher by 19%.

The engineering and construction major, however, shocked the Street with a sharp downward revision in its order book guidance for 2011-12 (Apr-Mar) to a 5% rise from 15% growth earlier. The revision sent the company's shares into a tizzy.
The Street will also be keenly watching the Reserve Bank of India's second quarter review of annual monetary policy for the current financial year on Tuesday. The central bank to hike the repo rate, at which it lends to banks under the Liquidity Adjustment Facility, by 25 basis points to rein in inflation.

A hike in interest rates would force capital goods companies to put expansion activities on hold, which in turn will put pressure on their order books. However, he added that in the unlikely event of the central bank taking a pause, stocks in the capital goods sector could post some recovery. At present, concerns are high regarding sticky inflation, fuel prices and retarding capital expenditure, while damage from interest rates could be felt on corporate profitability with a lag effect in the ensuing quarters, Anand Rathi Financial Services said in a note.

IT Stocks Outlook for the week (24 - 28.10.2011)

After a steep fall last week, stocks of major information technology companies are seen trading range-bound with a positive bias next week. The market has factored in most of the disappointments of Jul-Sep earnings posted by sector majors and there should be some value-buying at these levels.

Reacting to disappointing Jul-Sep earnings of two sector majors, Tata Consultancy Services Ltd and HCL Technologies Ltd stocks of most software exporters declined 1-7% week-on-week. The CNX IT Index ended nearly 3% lower on-week yesterday. Tata Consultancy Services was the biggest loser, ending 7.4% lower, while HCL Technologies lost 6.2%. Mid-sized companies such as Satyam Computer Services Ltd and Tech Mahindra Ltd fell 6.0% and 3.9%, respectively. Despite a robust 6.25% sequential growth in Jul-Sep business volumes, TCS' net profit in the quarter grew a tepid 2.5% sequentially to 24.39 bln rupees. Revenue increased by 7.7% from the previous quarter to 116.33 bln rupees.

Lower foreign exchange losses coupled with better utilization of resources helped HCL Technologies mitigate the impact of its annual wage hike it undertook in July as it posted a 50% on-year rise in Jul-Sep net profit. The Street will wait for sector heavyweight Wipro Ltd to post its earnings on Oct 31 to take further cues. The stock market will remain closed on Wednesday and Thursday on account of Diwali and Balipratipada, respectively. The stock market will be open on Wednesday only for a few hours for mahurat trading.

Oil Stocks Outlook for the week (24 - 28.10.2011)

Stocks of state-owned oil marketing companies have come under pressure once again as crude oil prices have gained over the past two weeks, and the rupee has weakened further against the US dollar. These factors, along with weakness in the equities market, may lead to further downward correction in stocks of Indian Oil Corp, harat Petroleum Corp, and Hindustan Petroleum Corp.

The price of the Indian basket of crude oil touched almost $110 a barrel earlier last week after falling to below $100 a few weeks ago. Although crude oil prices softened slightly on Thursday to $107 a barrel, the trend is seen bullish. Weakness in the rupee has made matters worse. After holding at around 49.000 rupees a dollar levels, the Indian currency weakened to 50.000 rupees a dollar levels in the past two trading sessions. Despite these developments, the government has maintained silence on compensating the companies on the losses they have incurred in Jul-Sep on selling retail fuel at subsidised prices.

The petroleum ministry has sought 140 bln rupees for the three companies to partly compensate them for Jul-Sep under-recoveries. Currently, these companies are losing around 2.6 bln rupees daily on such under-recoveries. Even as the government drags its feet on the issue, Bharat Petroleum's quarterly earnings announcement is just 10 days away. Although the stocks of the three companies are seen weak, the downside will be limited at 1-2% from current levels. There are only three trading days next week, with the stock market being closed on Wednesday and Thursday due to Diwali festival.

Cairn India stocks are also seen weak after the company's profits suffered in Jul-Sep because of huge provisioning made to meet a condition set by the government to approve a stake sale in the company to Vedanta Resources. The government had asked the company to make royalty paid on the Rajasthan block crude oil cost-recoverable. So far, Oil and Natural Gas has been bearing the entire royalty burden even though it only has 30% stake in the block. Even after assuming higher oil prices and faster ramp-up, we believe that the stock does not offer significant upside from current levels.

India Markets Outlook for the week (24 - 28.10.2011)

The trend in domestic equities on Monday will depend on the outcome of the European Union summit on Sunday. The finance ministers of 27 European countries will meet on the day to discuss the debt crisis in Europe and come up with a solution. Goldman Sachs expects European leaders to announce steps such as 100-250 bln euro recapitalization of regional banks, cut of around 40-50% in Greece's debt through involvement of private banks, and speedy replacement of the European Financial Stability Facility with the European Stability Mechanism. Back home, investors are likely to avoid taking big bets Monday as they will wait for the Reserve Bank of India's review of macroeconomic developments post market hours. The RBI's observations are expected to provide hints on its policy moves on Tuesday.

Currently, the expectation is that the central bank will hike the repo rate at which it lends to banks under its Liquidity Adjustment Facility by 25 basis points as inflation remains "uncomfortably" high. The RBI's policy, along with the expiry of the October derivatives series and companies' quarterly earnings, will set the trend for the week. Next week, there are only three trading days Monday,  Tuesday, and Friday due to the Diwali festival. On Wednesday, there will be ceremonial, or 'muhurat', trading for a couple of hours.

Domestic stock indices could see a relief rally of up to 3-4% on Tuesday if the RBI takes a pause on its rate hikes or hints at such a move ahead. The National Stock Exchange's 50-stock Nifty ended at 5049.95 points, down 41.95 points or 0.8% from Thursday. The Bombay Stock Exchange's 30-stock Sensex ended at 16785.64 points, down 151.25 points or 0.9%. Nifty heavyweights such as Axis Bank, GAIL (India), ITC, Sterlite Industries, Dr Reddy's Laboratories, Kotak Mahindra Bank, NTPC, Sesa Goa, and Maruti Suzuki India are scheduled to announce their Jul-Sep earnings next week.

ITC, which will detail its earnings on Monday, is seen reporting a year-on-year rise of 19% in its Jul-Sep net profit to 14.8 bln rupees. GAIL will also report its quarterly earnings on Monday. The state-owned gas transportation company's Jul-Sep net profit is seen growing at a modest 16% to 10.75 bln rupees due to high subsidy burden amid rise in crude oil prices and weakness in the rupee.

The Nifty is likely to face resistance at 5200 points and get support at 4970. Stocks of Larsen & Toubro may remain under pressure next week and could even hit a new 52-week low. The stock declined nearly 4% to 1,335.30 rupees yesterday as the company cut its order book growth guidance for this financial year to 5% from 15%. Maruti Suzuki stocks may extend gains and rise 2-3% next week as the workers' strike at the company's Manesar plant has ended. Yesterday, the stock rose 1.6% to 1,094.55 rupees.

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