Indian Markets Outlook for the week: 07 - 11.01.2013

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Benchmark stock indices are likely to take cues from overseas markets, and Oct-Dec earnings of Indian companies next week. US futures were trading nearly flat yesterday, ahead of employment data for December, due later. Back home, Gujarat NRE Coke, IndusInd Bank, and Sintex Industries will report their quarterly numbers next week, but among large-caps, the first one to detail its earnings will be Infosys, on Jan 11. India's industrial production for November, which will also be announced on Jan 11, will be a key sentiment driver. In the days up to Jan 11 though, most traders expect the market to consolidate, much like it has in the past two sessions.

They blame the lack of strong upside, despite the National Stock Exchange's 50-share Nifty closing above the psychological 6000-mark for two straight sessions, on the absence of significant triggers and dull participation from foreign institutional investors. Yesterday, the NSE Nifty ended at 6016.15 points, up 6.65 points or 0.1% from Thursday. The BSE's 30-share Sensex closed at 19784.08, up 19.30 points, or 0.1%. If Nifty continues to hold onto 5960 then higher levels like 6100 and 6150 would become possible before any meaningful correction. Among stocks, information technology stocks will largely align themselves according to movement in the rupee and earnings expectations from the sector.

With higher-than-expected impact of delays in decision-making and client shut-downs in 3Q (Oct-Dec), we expect Infosys to reduce the organic annual revenue guidance marginally. Infosys' management had reportedly told in December that the company's 5% revenue growth guidance for 2012-13 (Apr-Mar) could be at risk. We expects IT companies' operating margins to decline sequentially in Oct-Dec due to rupee appreciation and lower utilisation rates, and revenue growth to be limited to 2.5-2.9% quarter-on-quarter partly due to impact of hurricane Sandy. We remain overweight on the sector on stabilising demand in the US and a large number of global IT outsourcing deals coming up for renewal in 2H (Jul-Dec).

Among large-caps, we expects Tata Consultancy Services and HCL Technologies to outperform peers. Among mid-caps, it prefers Persistent Systems, Infotech Enterprises and CMC due to likely strong earnings growth in 2012-13. Stocks of state-owned oil marketing companies Bharat Petroleum Corp, Hindustan petroleum Corp, and Indian Oil Corp may remain buoyant as the government is considering deregulating diesel prices. The move may significantly reduce under-recoveries for these companies, though a rise in crude oil prices and weakness in the rupee remain key risks. Among others, L&T Finance Holdings, Mahindra & Mahindra Financial Services, Bajaj Finserv, and Aditya Birla Nuvo, which are seen as contenders for new bank licences, may also remain active on news the Reserve Bank of India may issue norms for the same before Jan 29. However, profit sales may drag Manappuram Finance and Muthoot Finance down after the two posted double-digit gains in the past two sessions on the RBI working group's proposal to hike the loan-to-value ratio.

Indian Markets Outlook for the week (17-21.12.2012)

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Indian equities may open flat to slightly down yesterday tracking weak overseas markets, but the downside is likely to be limited amid caution ahead of the release of India's November headline inflation data. A series of decisions by the Cabinet late Thursday, including approval of the land acquisition bill, may support investor sentiment but are unlikely to provide a significant or sustainable boost to the market. On the global front, US and Asian markets declined noting the lack of progress by US leaders on reaching an agreement on a debt reduction deal and Japan's weak tankan survey, which reflected increasingly negative business sentiment in Oct-Dec.

Back home, India's annual inflation rate based on the Wholesale Price Index, to be released yesterday, will set the tone for the Reserve Bank of India's mid-quarter policy review next week. The November inflation rate is likely to rise to 7.6% in November from a nine-month low of 7.45% in October. The market ended down on profit booking on Thursday due to caution ahead of the crucial data. On Thursday, the National Stock Exchange's 50-share Nifty ended at 5851.50, down 36.50 points, or 0.6% from Wednesday. The BSE's 30-stock Sensex closed at 19229.26, down 126.00 points, or 0.6%. If inflation data is lower-than-expected, it could give a boost to the indices but market players are sceptical about the gains sustaining. Most believe 5900-5950 will act as the immediate resistance zone for the Nifty.

In case inflation is higher than estimated, the Nifty could test its support of 5800. Investors will also keep an eye on European Union leaders' two-day summit on economic and monetary union in Brussels, which began on Thursday. Among stocks, stocks of telecommunication companies are seen rising as the Union Cabinet on Thursday approved a 30% lower base price for the auction of 1,800 MHz spectrum in four circles that had not received bids in November's exercise due to a high reserve price. Fertiliser stocks may also get a boost after the Cabinet approved the new urea investment policy to incentivise capacity addition in the country. Punjab National Bank, Canara Bank, and Bank of Baroda may find their stocks under pressure as Moody's cut their deposit and issuer ratings outlook to "negative" from "stable" on increased risk from arising from asset quality. Profit booking may persist in ACC and Ambuja Cements, but we believe the downside may be limited. Note that the companies already pay 0.6%-0.7% of sales to Holcim Group and the additional royalty would affect the EPS (earnings per share) incrementally only by 2-3% for both the companies.

The two stocks had risen nearly 2% intraday Thursday on a report that Holcim planned to increase royalty to 1% of sales instead of the planned 2%, but erased gains to end down around 1.8% each on profit booking. ITC may slip further to 280-282 rupees after its weight on the FTSE Global Equity Index Series was drastically cut to 24% from 75% earlier. Weakness may also persist in Hindustan Unilever due to continued concern its royalty payment to UK-based parent Unilever may increase as media reports said Unilever's Indonesian arm had agreed to pay higher royalty.

Indian Markets Outlook for the week (10 - 14.12.2012)

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Benchmark indices are likely to decline next week as investors will book profits as the uncertainty over easing foreign direct investment rules in multi-brand retail is now finished. After the government won the vote in Lok Sabha earlier this week, yesterday the Rajya Sabha also voted in favour of permitting 51% FDI in multi-brand retail. The move did not have a substantial impact on the market as it had already factored in a favourable verdict from the Upper House after the Bahujan Samaj Party on Thursday said it would support the government in the vote. This (approval for FDI in multi-brand retail) has given hope that further reforms will be taken up in the remaining part of the Winter session of the Parliament.

We expect the government to take up further fiscal reforms over the next few days. The developments on the 'fiscal cliff' issue in USA will also be keenly watched and a resolution on the same will be positive for the markets. Next week, the market will look to overseas equities and India's industrial production data for October, due Wednesday, for cues. Stock specific momentum would continue till the Nifty holds above these levels. Among stocks, retail companies' stocks may succumb to profit booking after having risen this week on hope FDI in retail would be approved by both houses.

Information technology stocks may remain subdued in the aftermath of a disappointing 2013 revenue outlook from Cognizant Technology Solutions and on account of a strong rupee. Hexaware Technologies, which slid 9.2% to 96.60 rupees on cutting its Oct-Dec and 2012 revenue guidance, is expected to weaken further to close to 92 rupees. The development has led us to cut our CY12 (2012) revenue/EBITDA/EPS (eanings before interest, tax, depreciation, and amortisation/earnings per share) estimates by 0.9%/7.1%/6.8%, respectively and CY13 (2013) revenue/EBITDA/EPS estimates by 4.7%/18.7%/17.7%, respectively. It is also likely to impact cash flow and we expect the IT firm to cut dividend payout for CY13E from 44% to 30%.

Indian Markets Outlook for the week (26 - 30.11.2012)

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Domestic stock indices are seen opening flat to positive yesterday amid subdued cues from overseas markets, and uncertainty over the Parliament's winter session proceedings will keep trade in a thin band. The US stock market was closed on Thursday for Thanksgiving Day, and the Japanese market is shut yesterday for Labor Thanksgiving Day. Back home, the first day of the winter session of the Parliament on Thursday witnessed heat waves, with both houses being adjourned following uproar on the government's decision to allow foreign direct investment in multi-brand retail. Prime Minister Manmohan Singh has called for an all-party meeting on Monday to discuss the FDI issue. The winter session would be a crucial test for the government to not just resolve issues but also to prove its political acumen.

Despite the continuing political worries, we see scope for the Nifty to test 5650-5680 as it managed to sustain above 5600 for the second session on Thursday. On the downside, the 50-stock index may find support at 5580. Among stocks, Hindustan Copper, which ended up 11.3% at 266.15 rupees on Thursday, will remain in focus yesterday as well as the government's ambitious 300-bln-rupee divestment programme will kick start with a 4% stake sale in the state-owned company through an offer for sale. The company has set a floor price of 155 rupees per share for the sale, which is at a steep 42% discount to Thursday's closing price. Blue Dart Express stocks will also see some price action as its promoter DHL Express (Singapore) Pte will yesterday sell 6.03% stake in the company via an offer for sale, the floor price for which has been set at 1,720 rupees a share. On Thursday, stocks of the company ended locked in 20% upper circuit at 2,059.55 rupees.

Stocks of Siemens will take cues from the company's Jul-Sep earnings, due yesterday. The company's net profit may rise by merely 2% on year to 1.81 bln rupees in Jul-Sep due to foreign exchange loss and slowdown in order execution and order intake. Cinemax India could gain on news that the company's promoters plan to sell stake in it. The stock will also be supported by a separate report that PVR is set to buy out the multiplex chain and has offered to buy the promoters' stake at 170-180 rupees per share. Stocks of NTPC may gain support from news that the Cabinet Committee on Economic Affairs has approved a 9.5% stake sale in the company.

HCL Infosystems is likely to see buying on news of the company's pact to exclusively distribute UK-based Intec's speciality-printing systems in India. Stocks of Bharti Airtel, Idea Cellular, and Mahanagar Telephone Nigam could register gains on the companies' subscriber data for October. Idea added 239,248 subscribers in October after losing 508,782 in September, while Bharti added 491,570 subscribers in October versus a loss of 981,621 subscribers in September. MTNL's subscriber base rose by 13,652 in October after shrinking by 14,756 subscribers in September. Stocks of Bharat Petroleum Corp may rise on a report that the company's 142.25-bln-rupee integrated refinery expansion project at Kochi has received clearance from the environment ministry.

Indian Markets Outlook for the week (29.10.2012 - 02.11.2012)

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Domestic corporate earnings and the Reserve Bank of India's second-quarter monetary policy review will drive the sentiment for Indian equities next week, with overseas markets providing further cues to investors. We expect the RBI to keep benchmark interest rates Unchanged, but to lower banks' cash reserve ratio to provide immediate liquidity. CRR is the minimum cash level that banks are required to park with the central bank. Investors have already factored in the likely cut in CRR, and therefore the market may not see any a sharp movement if the reduction is announced. Overseas markets will lend cues to investors on Monday. US index futures pointed to a lower opening on the Wall Street Yesterday, as investors awaited the release of third-quarter gross domestic product data.

Back home, this week, the two indices slipped 0.3% each, as investors focussed on companies' earnings. We expect the Nifty to trade between 5600 and 5750 next week, and expect the index to test the 5800 level only if it firmly trades above 5750. Among Nifty companies, Bharat Heavy Electricals, Dr Reddy's Laboratories, Grasim Industries, Maruti Suzuki India, Power Grid Corp of India and Wipro will release their Jul-Sep results next week. We expect Maruti to post lacklustre earnings for the fifth consecutive quarter in Jul-Sep. A hit on the company's sales volumes due to labour unrest during Jul-Sep may drag down its net profit by 19% on-year to 1.96 bln rupees.

Sterlite Technologies also may slip as the company's Jul-Sep net profit tumbled 67% on year to 42.1 mln rupees. Stocks of Fag Bearings India could trade weak as the company, post market hours yesterday, reported a net profit of 369.4 mln rupees for Jul-Sep versus 454.1 mln rupees a year ago. Some of the key non-Nifty companies reporting their results next week are Havells India, Glenmark Pharmaceuticals, IRB Infrastructure Developers, KEC International, Satyam Computer Services, Thermax, TVS Motor Co, Titan Industries, GlaxoSmithkline Consumer Healthcare, Godrej Properties, Hexaware Technologies, Apollo Tyres, Jet Airways (India), Rural Electrification Corp, and Godrej Consumer Products.

India Stocks Outlook for the week (22-26.10.2012)

Action in domestic equities is likely to be stock specific in the coming sessions, with several companies' Jul-Sep earnings scheduled next week. Trade will be volatile amid Dussehra holiday on Wednesday and expiry of October futures contract on Thursday. Also, outcome of the two-day European Union Summit, that ends yesterday, will provide some clues for trading next week. Caution before the summit could end prompted investors to book profits, which dragged the National Stock Exchange's 50-stock Nifty down 34.45 points or 0.6% to 5684.25. The BSE's 30-share Sensex ended at 18682.31, down 109.62 points or 0.6%. Market participants expect the Nifty to trade in the 5600-5750 range. A few have also pegged support for the index below 5600, close to 5580 points.

Companies that will report earnings over the weekend and early next week are Bajaj Auto, UltraTech Cement, Bank of Baroda, Cairn India, Idea Cellular, Housing Development Finance Corp, Larsen & Toubro, Hero MotoCorp, Lupin, Sterlite Industries, United Phosphorous, and YES Bank. Tata Consultancy Services will take cues from its quarterly earnings to be released later yesterday.
 
A strangle strategy is adopted by either buying or selling a call and a put option at different strike prices when high volatility is expected in the stock. L&T, that will release its quarterly earnings Monday, is seen posting a 11% on year rise in Jul-Sep net profit at 8.8 bln rupees and a 17% growth in net revenue at 131.14 bln rupees due to steady execution of orders.

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Indian Markets Outlook for the week (15-19.10.2012)

Key stock indices are likely to trade in a range next week, with action expected to remain stock-specific as companies' Jul-Sep earnings pick up pace. The bias is seen weak, though, following the 0.6% fall in indices yesterday. A disappointing Jul-Sep result, and weak 2012-13 (Apr-Mar) earnings per American Depositary Share guidance from Infosys yesterday offset gains seen on account of a better-than-expected 2.7% growth in India's August industrial production. On Monday, investor attention will be trained on September inflation data. India's annual inflation rate based on Wholesale Price Index is likely to rise to 7.68% in September, mainly on account of the hike in the price of diesel.

Among key companies reporting their results next week, Reliance Industries will be keenly eyed. Its result is due on Monday. Axis Bank, too, reports its Jul-Sep figures on Monday. Its net profit is likely to grow over 20% year-on-year to 11.19 bln rupees, despite expectations of negative surprises on the asset quality front and likely rise in restructured assets. MindTree, HCL Technologies, ACC, Ambuja Cements, Dish TV India, Praj Industries, ITC, Mastek, NIIT, Petronet LNG, Tata Consultancy Services, and Zee Entertainment Enterprises will also detail their Jul-Sep earnings next week. Pressure may persist on stocks of Infosys after it upset the Street yesterday with its numbers.We will keenly watch the interplay of volume and margins. Considering the volatile environment and the fact that H2 (Oct-Mar) is seasonally weaker, meeting this (2012-13 dollar revenue guidance of 5% year-on- year growth) will be good enough for the stock to perform, in our view.

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Indian Markets Outlook for the week (08 - 12.10.2012)

The outcome of a meeting between officials of the government and the Securities and Exchange Board of India on today (Saturday) will set the tone for Indian equities early next week. In a bid to boost flows into equities, the government and the SEBI are likely to announce some investor-friendly steps. Lower transaction costs and easing collateral norms for foreign institutional investors are some of the measures that may be considered in the meeting. The market regulator is also expected to look at reducing the timeline for initial public offerings to seven days from the current 12 days. Any positive announcements would be a welcome move and could take indices higher, but profit booking at every rise after the recent rally is not ruled out. Later in the week, the Street will take cues from Jul-Sep earnings and industrial production data for August. IndusInd Bank will report quarterly earnings on Wednesday, and Infosys and HDFC Bank on Oct 12. India's 2QFY13 (Jul-Sep) earnings growth should be steady +10% YoY (Sensex ex-oil), largely in line with the last four quarters earnings trajectory. But, this steady earnings growth should not be the driver or a justifier of a decidedly more buoyant equity market.

The overall bias remains positive amid the government's continued efforts to boost investor sentiment by announcing a slew of key reforms and the strengthening rupee against the dollar. We believe investors looking to play the beta rally should increase exposure in banks, real estate and select infrastructure names and trim positions in IT services and pharma (on recent strong performance and expected rupee appreciation). We expect National Stock Exchange's 50-share Nifty to find strong support at 5700. However, even if the index breaches this level, we recommend buying on dips. Yesterday, the Nifty ended at 5746.95, down 40.65 points or 0.7% from Thursday after touching a low of 4888.20 points and a high of 5815.35, intraday. The BSE's 30-stock Sensex closed at 18938.46, down 119.69 points or 0.6%. Intraday, the index touched a low of 18757.34 and a high of 19137.29.

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Indian Markets Outlook for the week (24-28.09.2012)

Domestic stock indices are likely to consolidate next week as profit booking could kick in post the gains of more than 4% since last Friday. However, the underlying sentiment remains bullish due to hopes the government will roll out more reforms to support the country's growth. Next week will also witness the expiry of the September derivatives series.
   
This, along with overseas cues, will set the tone for the trend in local equities. Long-pending reforms by the government recently have brought much cheer to the market. Yesterday, the government notified investments in exchange-traded funds and mutual funds eligible under the proposed Rajiv Gandhi Equity Savings Scheme, and also a cut in withholding tax on interest payment on external commercial borrowings by Indian companies to 5% from 20%.

Market participants believe retail participation in the equity market will increase once the Rajiv Gandhi Equity Savings Scheme is implemented. In reaction to the announcements yesterday, the National Stock Exchange's 50-share Nifty and the BSE's 30-share Sensex hit their 52-week highs. The Nifty ended at 5691.15 points, up 136.90 points or 2.5% from Thursday, after touching an intraday high of 5720.00 and a low of 5575.40. The Sensex closed at 18752.83 points, up 403.58 points or 2.2%. Intraday, the index traded between 18411.20 and 18866.87.

We expect the Nifty to remain positive during the settlement week and the index may settle the September series near highs. However, 5800 levels may prove crucial for the Nifty and it may consolidate around these levels for some time. Traders expect profit booking on the Nifty above 5750 points. Support for the index is pegged at 5550 points.
   
stocks of power companies may extend gains next week amid hopes the government will announce reforms for the sector. Stocks of mid-cap companies may continue to rise. Reliance Capital shares may remain firm amid hopes the Cabinet, at its meeting Tuesday, may approve raising the limit for foreign direct investment in the insurance sector to 49% from 26%. yesterday, the company's shares surged more than 10% to 399.90 rupees. With the FDI limit opening, we believe along with existing partners, many foreign players will be interested to take minor stakes...insurance IPOs (initial public offers) may also be successful.

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India Stocks Outlook for the week (21-24.08.2012)

Stock indices may continue to move in a tight range next week, with overseas markets lending cues on Tuesday after a long weekend back home. Indian financial markets will be closed on Monday for Id-ul-Fitr. Yesterday, indices ended off highs as the Comptroller and Auditor General of India, in a report tabled in parliament, pegged the financial gain that private companies made due to the government's flawed coal allocation policy at a staggering 1.86 trln rupees.

The CAG also blamed the government for vitiating the tender process in the award of Madhya Pradesh-based 4,000 MW Sasan ultra mega power project to Reliance Power and helping the private sector generation company derive undue benefits to the tune of 290.33 bln rupees in the process. The CAG also alleged that the civil aviation ministry and the Airports Authority of India connived against the government's interests to blatantly favour the Delhi International Airport Ltd.

National Stock Exchange's 50-scrip Nifty ended at 5366.30, up 3.35 points or 0.1% from Thursday, and BSE's 30-stock Sensex closed at 17691.08, up 33.87 points or 0.2%. Traders see the Nifty in the band of 5300-5450 next week. Traded volume is expected to remain low due to subdued foreign investor participation. Yesterday, the combined turnover in the cash segments of the BSE and NSE was around 124 bln rupees, largely unchanged from Thursday.

Stocks of power companies are likely to remain weak. Reliance Power and Tata Power Co may see another 3-4% fall in coming days as both the companies have been named by CAG as having been favoured in coal mine allocation. On yesterday, Reliance Power shares ended down 5.9% at 87.65 rupees, and those of Tata Power closed down 4% at 97.25 rupees.

GMR Infrastructure is also expected to remain subdued. The stock ended down 3.1% at 20.55 rupees yesterday after the CAG said the GMR Group was given 196-acre for its Delhi International Airport for 60 mln rupees, while current value of the land is 240 bln rupees.

Stocks of consumer goods companies are likely to trade with a positive bias as investors would prefer to stick to defensive bets. Rich valuations, however, will limit the upside. Hindustan Unilever, which touched a lifetime high of 505.45 rupees yesterday, could see some profit booking on Tuesday. We expect the stock to consolidate in the range of 485-505 rupees next week. The scrip ended 1.8% higher at 503.40 rupees.

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India Markets Outlook for the week (16-20.07.2012)

India Markets Outlook for the week (16-20.07.2012)

Domestic stock indices are likely to take cues from data on India's inflation in June, and the Apr-Jun earnings of companies next week. Monday is the day of the release of data on Wholesale Price Index-based inflation in June. Fears are that the already high inflation rate has inched upward in the month.The reading is expected to influence the Reserve Bank of India's first quarter policy review on Jul 31. However, see the Apr-Jun earnings of companies having a greater impact on stocks than the inflation data.

Yesterday, the National Stock Exchange's 50-share Nifty ended at 5227.25 points, down 8.00 points or 0.15% from Thursday, after moving between 5216.85 and 5267.15. The BSE's Sensex closed at 17213.70 points, down 18.85 points or 0.11%. Intraday, the 30-stock index touched a low of 17182.29 and a high of 17342.88.

The Nifty is expected to trade in the range of 5200-5350 next week.The Index is now near a critical support of 5220 which is lower end of the channel it has been trading in over the past one month...a break below which would change the short term trend to down and the next immediate support for the NIFTY would be between levels of 5000-5050.

Among Nifty heavyweights, Axis Bank, Bajaj Auto, Kotak Mahindra Bank, Dr Reddy's Laboratories, Hero MotoCorp, and Reliance Industries will detail their quarterly earnings next week. Bank of America-Merrill Lynch, in a report Thursday, agreed that the pace of earnings downgrades is slowing down. Bank of America-Merrill Lynch prefers stocks of companies in pharmaceutical and rate-sensitive sectors but is wary of fast-moving consumer goods stocks, which it finds expensive.