Indian Markets Outlook for the week (05-09.11.2012)

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Domestic stock indices are likely to open higher today taking positive cues from the overseas markets but profit booking ahead of the weekend may limit the upside. Global indices rose due to positive economic data from the US and China, which led to hopes of some stabilisation in the global economy. In the domestic market, Jul-Sep earnings will keep action stock-specific.

Wipro shares are expected to rise 2-3% more due to better-than-expected earnings. In the quarter, the company's consolidated net profit stood at 16.11 bln rupees, higher than estimates of 15.35 bln rupees. Wipro guided for information technology services sales of $1.56 bln-$1.59 bln in Oct-Dec compared with $1.54 bln in Jul-Sep.

Wipro shares rose more than 3% Thursday as viewed positively the move to demerge the company's non-core businesses--consumer care and lighting, infrastructure engineering, and medical diagnostic products and services businesses--into a separate company. We expect the market to be listless and drift to a narrow trading range of 5450-5650 in the near term.

However, we do not foresee much downside on earnings hereon and this will firmly support the market at the lower end of the range. Apollo Tyres, Crompton Greaves, Jet Airways (India), Marico, Mangalore Refinery and Petrochemicals, Multi Commodity Exchange of India, Rural Electrification Corp, Shree Renuka Sugars, and Sobha Developers, among others, will detail their quarterly earnings.

Indian Markets Outlook for the week: 01.10.2012 - 05.10.2012

The bias for Indian equities is likely to remain positive next week though bouts of profit booking could kick in as key indices have gained 8.5% in September. Further, caution before the release of Jul-Sep corporate earnings starting the second week of October will keep indices in a range in the truncated week. The Indian stock market will be closed on Tuesday for Gandhi Jayanti. Intraday, the Nifty touched a near 15-month high of 5735.15 amid firm cues from overseas markets after Spain outlined a budget that focussed more on spending cuts and less on tax hikes. On Monday, overseas markets will continue to lend initial cues to investors. Yesterday, US index futures pointed to a higher open on the Wall Street ahead of the release of a slew of data on manufacturing, consumer sentiment, personal income, and consumption in the country.

Back home, the Nifty's close above its crucial resistance of 5700 and a rollover of mostly long positions to the index's October futures suggest a positive bias in coming sessions. The September derivatives series expired on last Thursday. Nifty spot trading in the range of 5550-5800 next week. However, though the bias is positive, relatively lower rollovers to Nifty October indicated investors are reluctant to hold positions for long periods. Rollovers in Nifty futures were at 63% versus a three-month average of 68%, market-wide rollovers stood at 79% compared with an average of 82%. Rollovers in Bank Nifty futures stood at 53%, sharply below their average of 73%. Given this (lower rollovers), it is likely that we see some pressure among the banks in the short term as the market consolidates further but overall the set up looks likely to find further buying. The weekly price action is showing a bullish flag set up between 5640 and 5700 and a concerted break above 5700 could signal the next leg higher. The outlook continues to be positive moving into the October series. Among sectors, stocks of pharmaceutical companies, which gained yesterday as the government's announcement on drug pricing came as a relief to the market, may extend gains next week.

Late on Thursday, a group of ministers suggested fixing the ceiling price of a drug according to the weighted average price of all drug brands with over 1% market share in a particular segment. The move will bring pricing of 348 essential drugs under the government's purview and bring down average prices by 10%. The move is likely to impact Sun Pharmaceutical Industries, Lupin, Glenmark Pharmaceuticals, and Dr. Reddy's Laboratories' 2013-14 (Apr-Mar) earnings 1-2%. The estimated impact will likely be more pronounced for companies like Ranbaxy (Laboratories), Cadila (Healthcare) and Cipla at 2-5%, we expect, and most severe for GlaxoSmithKline Pharmaceuticals at 11-12% at the EBITDA (earnings before interest, taxes, depreciation, and amortisation) level. Stocks of Ashok Leyland could fall on Monday as ratings agency CRISIL has cut the company's rating outlook to negative, saying it expects volumes to de-grow due to weak demand.

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Indian Markets Outlook for the week: 17.09.2012 - 21.09.2012

Equities are likely to open around 2% higher yesterday on perception that the government's decision to hike diesel prices is seen taking the pressure of a likely sovereign ratings downgrade by rating agencies. Also aiding sentiment is the increased risk appetite following the liquidity push announced the US Federal Reserve overnight. Global rating agencies had said India faced the risk of a ratings downgrade if the government did not act to cut the fiscal deficit. The fuel price hike is seen aiding the fiscal consolidation process. US and Asian equities climbed 1-3% after the US Fed announced a third round of quantitative easing, which could potentially release 1.3 trln rupees. Global recovery hopes too got stoked as the Fed raised its US gross domestic product growth estimate for 2013 to 2.5-3.0% from 2.2-2.8% earlier, and for 2014 to 3.0-3.8% from 3.0-3.5% earlier.

Back home, the government's decision to hike diesel prices will boost investor confidence in its ability to work towards the much-awaited reforms, and allay fears of a ratings downgrade of the country. Moody's Investors Services and Fitch Ratings recently warned that India's credit rating may be cut if the government does not control its fiscal deficit. Last Thursday, the government allowed oil marketing companies to raise the price of diesel by 5 rupees per litre and also said that the sale of liquefied petroleum gas cylinders at subsidised rates will be capped at six per family every year. The government did not announce any change in kerosene and petrol prices, but cut the excise duty on petrol by 5.5 rupees a ltr.

Prices of diesel, kerosene, and LPG are regulated by the government, and oil marketing companies are compensated for selling these fuels at subsidised rates. Stocks of Bharat Petroleum Corp, Hindustan Petroleum Corp, and Indian Oil Corp are seen rising 5-7% yesterday on the back of the price hike. On Thursday, their stocks ended up 0.6-2.0%. Even though the hike in diesel price will put upward pressure on inflation, we believe the Reserve Bank of India will now have room to lower interest rates, as it has been stressing that an improvement in India's fiscal consolidation is key for such a move. Last Thursday’s decision is also likely to raise hope that the government may now consider clearing the proposals for opening up multi-brand retail and the aviation sector to foreign direct investment. Yesterday, investors will also eye India's Wholesale Price Index-based inflation for August Friday. The August headline Inflation is likely to be 7.10% versus 6.87% in July and 9.78% a year ago.

STOCK ACTION:

Among specific stocks, Strides Arcolab may rise as the company has received the US Food and Drug Administration's approval for its sterile injectables facility in Poland.

Ranbaxy Laboratories will see some traction, as the company plans to spend $40 mln for setting up a manufacturing unit in Malaysia.

Essar Oil may see some downside on news that the company has been asked by the Supreme Court to pay 52 bln rupees of tax dues to the Gujarat government in eight quarterly tranches. The company had sought a period of four years from the court.

Mawana Sugars may gain on news that the company will sell 49% stake in its arm Siel Industrial for 1.35 bln rupees.

 

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Indian Markets Outlook (New): 17.09.2012 - 21.09.2012

Stock indices are seen firm early next week following the sharp rally yesterday, and as the government's move to allow foreign direct investment in aviation and multi-brand retail is seen keeping overall sentiment positive. The government has allowed 49% investment by foreign airlines in domestic carriers, 51% Foreign Direct Investment in Multi-Brand Retail and 100% FDI in Single Brand Retail and also approved stake sale in five public sector companies. While these moves are slightly positive, most have largely been factored in so the upside on these announcements may be limited. The Reserve Bank of India's mid-quarter monetary policy review on Monday may not have a major impact on the market as the central bank is expected to maintain status quo on policy rates given the high inflation. However, investors will watch out for the central bank's remarks on the state of the economy, and its stance on inflation.

India's inflation rate, based on the Wholesale Price Index, rose to 7.55% in August from 6.87% in July. We expect headline WPI inflation to rise above 8% by end-2012, and hence do not see any scope for the RBI to cut rates until the end of 2012. The market will also eye corporate advance tax payment data for Jul-Sep, due on Saturday. Next week, dealers see the National Stock Exchange's Nifty, which ended at a seven month high yesterday, trading in a range of 5450-5600. The 50-stock index ended up 2.6% at 5577.65. BSE's 30-stock Sensex closed 2.5% higher at 18464.27, its highest closing level in 2012.

Although the bias is positive, the upside is seen restrained as Eurozone and domestic concerns have not completely been addressed. (Despite the US Federal Reserve's decision) We believe the persistent Eurozone crisis and more importantly, domestic fiscal constraints and policy paralysis would cap the gains on domestic bourses as the focus would once again shift towards more sustainable and decisive moves from both the government and (RBI) to perk up investments and consumption.

SECTORS VIEW:

The bias for banking, real estate, automobile, and capital goods companies' stocks are seen positive next week, but sustenance of gains depend on the outcome of the RBI's policy. Aviation stocks could rise more on Monday following the Cabinet's move, but gains may not sustain as the development has already been factored in.

Stocks of companies in defensive sectors may trade mostly flat as the improved risk appetite may result in diversion of funds to other sectors. Any upside in metal and mining companies' stocks will be limited that despite the US Fed's monetary stimulus, global commodity prices may not rally due to weak demand from China. Stocks of metal companies that have strong balance sheets and cash-flow visibility. We like HZL (Hindustan Zinc) for its cost competitiveness and strong balance sheet. We cut our earnings estimates for Tata Steel and SAIL (Steel Authority of India) given the recent iron ore price corrections, but we continue to prefer Tata Steel in the steel space given its higher cash flow visibility from its India expansion. We would avoid JSW Steel given that its recent merger with JSW Ispat has sharply increased balance sheet risk. We maintain our UW (underweight) ratings on Nalco, NMDC, SAIL and Sesa Goa. Stocks of NALCO, Hindustan Copper, NMDC, MMTC, and Oil India may gain on the government's move to allow stake sale in them. Stocks from textiles and consumer goods sector are also expected to trade higher especially on Monday on government's move on multi-brand retail FDI announcement.

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Indian Markets Outlook: 10-14.09.2012

Key stock indices are expected to extend gains this week as the National Stock Exchange's 50-share Nifty closed above its crucial resistance zone of 5350 saturday. Last saturday, the NSE's 50-share Nifty ended at 5358.70, up 16.60 points or 0.31% from Friday. Gains were supported by positive cues from the US markets, which ended up after weak August jobs data raised hopes of quantitative easing by the Federal Reserve at its next meet Thursday. Traders will take cues from overseas markets this week, with eyes on US non-farm payrolls data for August. The data is eyed keenly as it will give clues on whether US Federal Reserve will look at another stimulus programme at its two-day policy meet this week. So long as the economy is continuing to make even modest progress, it would be better in our view, to hold further QE (quantitative easing) in reserve in case it is needed to deal with a major negative shock in the quarters ahead.The investment firm believes the US Federal Reserve will stick to just verbal indications that it is willing to take measures to support the economy.

Back home, eyes will be on India's industrial production growth in July, data for which will be released on Wednesday. Metal stocks may extend gains on short covering. Positive on Tata Steel, Sterlite Industries India, and Jindal Steel & Power. We believes the stock is likely to rise as government approvals will result in reserve upgrades, rise in production, and higher gas prices. A combination of this growth, benign consensus expectations, below average valuations, and buyback support makes us believe that the under-weight trade on Reliance (Industries) is over. On the other hand, stocks of state-owned oil marketing companies Bharat Petroleum Corp, Hindustan Petroleum Corp, and Indian Oil Corp may remain subdued as the government dashed hopes of a fuel price hike over the weekend saying there was no plan to do so immediately.

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Indian Markets Outlook for the week (27-31.08.2012)

Benchmark indices are likely to trade volatile next week as investors will rollover their positions in the August derivatives series to the next month due to the expiry of current month contracts on Thursday. Markets expect the National Stock Exchange's 50-scrip Nifty to trade between 5300 and 5480, but they are unsure of where the August contract will expire.

While some expect the expiry to be in a range of 5350-5400, others expect it to be closer to 5450 as there are a lot of long positions in Fifty’s August contract, which will get rolled over to September. Spot Nifty yesterday ended at 5386.70, down 28.65 points or 0.5% from Thursday, while the August contract closed at 5407.00, down 20.15 points or 0.4%. BSE's 30-stock Sensex closed at 17783.21, down 67.01 points or 0.4%. In the week to date, the spot indices have risen by a mere 0.4%, with the Nifty swinging between 5340 and 5450 due to a lack of any triggers. Yesterday, total turnover in the cash segments of the BSE and the NSE stood at around 108 bln rupees versus 120 bln rupees on Thursday.

Overseas markets will remain on the radar, especially amid an absence of any major domestic events. The market will particularly eye a meeting of Greek Prime Minister Antonis Samaras and German Chancellor Angela Merkel, due on yesterday, where in the former will seek an extension on the deadline given to debt-troubled country to meet its budget austerity requirements. Germany's Finance Minister Wolfgang Schaeuble has already contested the idea of giving Greece the additional time and said that doing so will only raise the cost to creditors. Samaras will meet French President Francois Hollande on Saturday to discuss the issue.

Next week, US Federal Reserve Chairman Ben Bernanke's address to an annual gathering of central bankers in Jackson Hole, Wyoming, will also keep investors clued in. The market will eye the Central Statistics Office's data of India's gross domestic product growth for Apr-Jun, due on Aug 31. If the government does not very soon speed up policy reforms and improve foreign investments and economic growth, then this sideways (rangebound) movement in the market could break and equities could face a risk-off downward rally.
   
The Parliament was stalled for a fourth straight day yesterday due to an uproar over the Comptroller and Auditor General of India's report on coal block allocation. Among sectors, market participants are bullish on pharmaceutical, consumer goods, automobile, and private-sector banking stocks. Investors of telecommunications companies will eye the outcome of a Supreme Court hearing on a Department of Telecommunications plea on Monday, seeking extension of the deadline for conducting 2G spectrum auction to Nov 12 from Aug 31.

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Indian Markets Outlook for the week (13-17.08.2012)

Indices are seen in a narrow band next week, with quarterly earnings of companies likely to drive individual stocks. Investors will also eye inflation data for July, data for which will be released on Tuesday. Bank of America Merrill Lynch sees India's inflation rate, based on the Wholesale Price Index at 7.1% in July against 7.25% in June.

Markets see support for the National Stock Exchange's 50-share Nifty in the 5250-5280 band and resistance in the 5350-5380 range. Yesterday, the Nifty ended at 5320.40, down 2.55 points, and the BSE's 30-stock Sensex closed at 17557.74, down 3.13 points. Stocks of State Bank of India are seen extending losses expect sharp earnings downgrades for the bank following the dismal Apr-Jun earnings reported on yesterday.

Some of the companies scheduled to report earnings over the weekend and early next week are Oil and Natural Gas Corp, Reliance Communications, Reliance Capital, Coal India, Tata Steel, NMDC, ABG Shipyard, Essar Oil, Hindalco Industries, Housing Development & Infrastructure, Mercator, National Aluminium Co, Reliance Infrastructure, and Unitech.
   
ONGC, which will report earnings on Saturday, is seen posting a 29% year on year rise in net profit at 52.63 bln rupees, aided by high global crude oil prices and a weak rupee. Tata Steel's consolidated net profit in the June quarter is seen declining 88% on year to 6.45 bln rupees, due to subdued Europe operations, high interest cost, and low other income.

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Indian Markets Outlook for the week (06 - 10.08.2012)

Key stock indices will take cues from overseas markets next week due to a lack of triggers on the domestic front. European markets and US futures rose ahead of the July non-farm payrolls data, which was released post market hours yesterday. Post market hours, the Labor Department said that US non-farm payrolls rose by a seasonally adjusted 163,000 jobs in July. However, this was not enough to bring down the unemployment rate, which ticked up to 8.3% from 8.2% in June. European markets and US futures continued to trade higher after the data was released. Taking cues from European markets during the session, local stock indices ended off 1% lows. Local stock indices ended off 1% lows yesterday, taking cues from the European market.

Looking the options data Nifty is likely to trade in a range of 5000-5300 in the week ahead. This range may be breached on the upside next week as considerable amount of buying has been witnessed in call options. Scepticism still prevails over the sustainability of any gains though. With the growing risk posed by the monsoon, plus the obvious continuing risk of renewed 'risk off' from the eurozone, (CLSA's report titled) GREED & FEAR will shave the small overweight in India by a percentage point this week and add another percentage point to lower beta Malaysia said CLSA Asia-Pacific Markets in a report Thursday. The India Meteorological Department yesterday said that the southwest monsoon this year is slated to the worst in three years at around 85% of the long-period average, with high probability of a drought in northwest India.
In an absence of any policy measures, either overseas or back home, action in the market is likely to remain stock-specific, particularly as several companies are to report their Apr-Jun earnings next week. DLF, Steel Authority of India, Bharti Airtel, Mahindra & Mahindra, Tata Power Co, Cadila Healthcare, Steel Authority of India, MOIL, Punj Lloyd, Bharti Airtel, Ranbaxy Laboratories, Tata Motors, Tech Mahindra, Bharat Petroleum Corp, State Bank of India, Sun Pharmaceutical Industries, GVK Power & Infrastructure, Oil India, and Pantaloon Retail are some of the companies reporting earnings early next week. Lack of new project launches and a sluggish real estate market is likely to pull down industry major DLF Ltd's year-on-year net profit by 27% during Apr-Jun to 2.61 bln rupees. Steel Authority of India Ltd is likely to report an 11% on year rise in its profit after tax at 9.28 bln rupees for the quarter-ended June on better realisations. Both companies detail their results on Monday.

BGR Energy Systems, which reported its result post market close yesterday, may slip as its Apr-Jun net profit of 336.6 mln rupees. Future Capital Holdings stocks may also be in focus as the company yesterday said it will cease to have any exposure to the beleaguered Deccan Chronicle group after the former's promoter group decided to take over 1.7-bln-rupee loans given to the latter at book value.

Indian Markets Outlook for the week (30.07.2012-03.08.2012)

              Investors will eye overseas equities and Apr-Jun earnings for cues on Monday, but the market trend will mainly depend on the Reserve Bank of India's first-quarter monetary policy review on Tuesday. Yesterday, US index futures were up ahead of the Commerce Department's estimate for Apr-Jun gross domestic product. The RBI to keep policy rates unchanged, even though both inflation and India's economic growth have begun cooling down. Interest rate-sensitive sectors such as banking, automobile, real estate, and capital goods could be subdued before RBI's policy. 

               Stocks of IRB Infrastructure Developers are likely to gain on Monday as the company, post market hours, reported an Apr-Jun net profit of 1.42 bln rupees. Grasim Industries could be weak as the company's 7.18-bln-rupee net profit for Apr-Jun missed consensus estimate of 7.6 bln rupees. Rural Electrification Corp stocks may gain as the company's profit rose to 8.77 bln rupees in Apr-Jun from 6.62 bln rupees a year ago. Investors in Maruti Suzuki India will take cues from the company's Apr-Jun earnings on Saturday. The auto major reporting a 15% on-year
fall in net profit to 4.69 bln rupees due to high discounts on petrol models and fluctuation in currency.

                Weakness in the rupee against the dollar coupled with a better product mix and facility utilisation are likely to help Cipla post a 24% on-year rise in net profit to 3.13 bln rupees. Jaiprakash Associates' Apr-Jun net profit is likely to have risen by a tepid 2% on year to 1.09 bln rupees.

               Havells India, Kansai Nerolac Paints, Bhushan Steel, Hexaware Technologies, IDBI Bank, Petronet LNG, Titan Industries, GlaxoSmithKline Consumer Healthcare, Cummins India, Satyam Computer Services, Jet Airways, Marico, SKS Microfinance are some of the major non-Nifty companies reporting their earnings next week.

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Indian Markets Outlook for the week (09 - 13.07.2012)

Indian Markets Outlook for the week (09 - 13.07.2012)

Key indices are likely to move in a thin band early next week as investors will stay on the sidelines before the Apr-Jun earnings of Infosys and Tata Consultancy Services on Thursday. Aution ahead of industrial production data for May, which is also due on Thursday, will keep volumes low and trade choppy. Yesterday, the combined turnover in the cash segments of the BSE and National Stock Exchange was around 119 bln rupees versus 130 bln rupees on Thursday. As the earnings season begins, expecting a poor show from India Inc, which is plagued by weak demand environment and high interest cost. The headline profit growth for 1QFY13 (Apr-Jun) for Sensex companies is likely to be 13.7%. Secondly, sales growth is expected to start dragging earnings while margins stabilize at lower levels, aggregate Sensex (operating) margins are expected to show a drop of 115bps (basis points) to 16.7%.

In particular, energy, metal, and telecommunications companies are likely to report a fall in margins. On Monday, overseas markets will lend cues to investors. US index futures were trading weak ahead of June non-farm payrolls data later yesterday. The Nifty holding above the key 5300 level is likely to keep the index positive in coming sessions. However, any negative surprises from Infosys or TCS in their Apr-Jun results could lead the index to slip below its key support of 5250. We see 5200-5400 as the broad trading range for the index next week. Stocks of information technology companies are likely to remain subdued for most part of the week as investors will assess the results of sector leaders Infosys and TCS before taking any significant positions. Also, more than the quarterly results, outlook of the two companies on demand will be keenly eyed. We fear that Infosys, which had cut its revenue outlook in April, may again lower its projection. In April, the company had said it expects dollar-denominated revenue to grow by 8-10% in 2012-13 (Apr-Mar) compared with expectations of 11-14%. Any negative surprise from Infosys or TCS in the demand environment could lead to a de-rating of not only their stocks but the entire technology sector. Apart from Infosys and TCS, IndusInd Bank and Housing Development Finance Corp will be in focus next week as they release their Apr-Jun results.

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