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Market OutlookIndia Research
November 25, 2011
Dealer’s Diary
Indian markets are headed for a flattish opening following mild weakness across Asian markets. The domestic indices edged higher after a choppy trade yesterday
over reports that showed easing of food inflation on a yearly basis. An early rally
in European stocks also aided partially recovery in the stocks.
Global cues remain mixed. The European markets declined after an early rally as
Germany differed on views over Euro bonds. German reluctance to backstop the
debt of Eurozone has raised concerns that borrowing costs for the member
countries will continue to rise. US bourses remain closed on account of
ThanksGiving holiday.
The domestic bourses have slightly gained after extending recent steep losses.
Policies initiatives are gaining traction, with approval for 51% FDI in multi brand
retail and 100% in single brand retail. Thus, markets are likely to cheer the news;
nonetheless they will struggle to find direction as global issues are worsening day
by day.
Markets Today
The trend deciding level for the day is 15,747 / 4,722 levels. If NIFTY trades
above this level during the first half-an-hour of trade then we may witness a
further rally up to 16,013 – 16,168 / 4,805 – 4,854 levels. However, if NIFTY
trades below 15,747 / 4,722 levels for the first half-an-hour of trade then it may
correct up to 15,592 – 15,325 / 4,673 – 4,590 levels.
Indices S2 S1 R1 R2
SENSEX 15,325 15,592 16,013 16,168
NIFTY 4,590 4,673 4,805 4,854
News Analysis Eurozone update
Cabinet approves FDI in retail sector
HCC-led JV bags order worth ` 987cr
Refer detailed news analysis on the following page
Net Inflows (November 23, 2011)
` cr Purch Sales Net MTD YTD
FII 1,726 2,797 (1,071) (2,414) (1,899)
MFs 694 470 224 443 5,573
FII Derivatives (November 24, 2011)
` cr Purch Sales Net Open Interest
Index Futures 5,220 5,528 (308) 11,893
Stock Futures 7,533 7,228 305 24,632
Gainers / Losers
Gainers Losers
Company Price (`) chg (%) Company Price (`) chg (%)
IFCI 24 12.8 Mundra Port 118 (4.7)
Pantaloon Retl. 201 12.3 SAIL 85 (3.2)
Indiabulls Fin. 132 10.2 HPCL 281 (2.9)
Opto Circuits 219 10.0 Container Corp 913 (2.8)
Sun TV 270 8.4 EIH 83 (2.5)
Domestic Indices Chg (%) (Pts) (Close)
BSE Sensex 1.0 158.5 15,858
Nifty 1.1 50.0 4,756MID CAP 1.4 77.2 5,591
SMALL CAP 0.4 22.9 5,999
BSE HC 1.7 98.2 5,953
BSE PSU 1.0 64.6 6,653
BANKEX 1.0 93.2 9,743
AUTO 2.5 202.2 8,472
METAL 0.2 16.7 10,040
OIL & GAS 0.9 74.6 8,030
BSE IT 1.3 70.5 5,517
Global Indices Chg (%) (Pts) (Close)
Dow Jones (2.1) (236.2) 11,258
NASDAQ (2.4) (61.2) 2,460
FTSE (0.2) (12.2) 5,128
Nikkei (1.8) (149.6) 8,165
Hang Seng 0.4 70.7 17,935
Straits Times 0.0 0.6 2,677
Shanghai Com 0.1 2.5 2,398
Indian ADRs Chg (%) (Pts) (Close)
Infosys (2.7) (1.4) $49.6
Wipro (2.9) (0.3) $9.1
ICICI Bank (3.3) (0.9) $27.4
HDFC Bank (3.8) (1.0) $25.2
Advances / Declines BSE NSE
Advances 1,460
Declines 1,313 658
Unchanged 119 55
Volumes (` cr)
BSE 2,013
NSE 12,222
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November 25, 2011 2
Eurozone update
The situation in the Eurozone appears to be worsening day by day. The scenario is
stretching the Eurozone’s leaders and institutions to the farthest limits. Despite
various proposals, dialogues and rounds of meetings, EU leaders are struggling to
find a direction to improve the dire state of the countries, namely Greece, Spain
and Italy. The episode has touched new depths as it ousted two prime ministers in
three days. In case of Greece, the deeply unpopular austerity measures are set to
kick-off, as Greece is likely to go ahead with Euro130bn bailout package in order
to avert default. All in all, the crisis has undoubtedly invaded the once considered
muscular pillars of the global economy.
Concerns loom large; Greek Central Bank warns about the possible Eurozoneexit
In a harsh warning, Greece's Central Bank cited a possibility of Greece’s
unmanageable exit from the Eurozone. Stemmed from the fact that the country is
in the fifth-year of recession, the economy is projected to shrink by ~5% this year.
The long continuing debt crisis in Greece has flagged concerns about its
sustainability in the Eurozone. According to experts, exit from the Eurozone would
be disastrous, as it will lead to a disorderly financial situation and severely impact
foreign banks having exposure to the nation. In addition, this could derail the
already slowing global economic recovery.
Bonds lose luster
Spain sold three-month bills at an average yield of 5.11%, which was more than
4.63% paid by Greece (for 13-week bills sold on November 15 and 4.895% paid
by Portugal for three-month bills on November 16). German bonds also saw one
of the poorest debt sale since the launch of single currency, as Bundesbank was
forced to retain almost half of the targeted sale of EUR6bn new 10-year note due
to a shortage of bids by investors. The new bonds, which promised to pay out a 2%
interest rate (lowest ever), were sold at an average yield of 1.98%.
France pushed hard on ECB intervention – Rift begins with Germany
European Central Bank (ECB) is viewed as a lender of the last resort and is pressedby France to expedite efforts by exercising its exceptional powers to buy unlimited
assets, including sovereign bonds. France fears that if no quick action is taken, the
Eurozone will be forced into a vicious cycle where austerity policy clearly arrests the
growth of the economy. Hence, France wants ECB to act promptly on its current
special measures program under which it can buy bonds of weaker Eurozone
nations and restore economic stability.
However, this move is strictly opposed by Germany as it feels that ECB lacks the
authority to carry on a major bond purchase operation. ECB’s most conservative
members also offered support to Germany’s view, but ECB’s president, Jean-
Claude Trichet, insisted that such measures were necessary to ensure stability inthe financial system. Experts believe that ECB may end up with no choice but to
become the lender of last resort.
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Fitch comes hard on Portugal; downgrades to junk
Fitch has cut Portugal’s credit rating by one notch to BB+, implying ‘junk’ or ‘non-
investment’ grade. Fitch reasoned the country’s large fiscal imbalances, high
indebtedness and bleak macroeconomic outlook for the downgrade action. Whilethe Eurozone must have seen this coming, it will further add to negative cheers for
the region.
FDI in retail cleared; 50% in multi brand and 100% in singlebrand
The Union Cabinet yesterday cleared 50% foreign direct investment (FDI) in multi-
brand retail and 100% FDI in single brand retail (under which companies in the
food, lifestyle and sports businesses operate stores). A decision in favor of the FDI
will allow global mega chains such as Walmart, Carrefour and Tesco to enter
India. The investment is subject to a minimum of US$100mn, of which half should
be in the form of back-end infrastructure such as cold chains, processing and
packaging. In addition, retailers will have to source at least 30% of their
requirements from the micro, small and medium enterprises (MSME) sector.
At present, the organized retail market is estimated to be worth around US$28bn
(around ` 1.45lakh cr) and could be nine times bigger by 2020. The retail sector
has welcomed the move, as it brings in the much required capital, which will help
the segment expand enormously in the next 3-5 years. In addition, consumers are
likely to be benefited with more choices and better prices. Although the Cabinetapproved the long awaited move, at the ground level the decision will have to be
taken by individual states as retail trade is a state subject and requires all requisite
clearances to come from local authorities.
We believe this move of the government is favorable to companies like Pantaloons
Retail, Shoppers Stop, Koutons Retail and Kewal Kiran Clothing Ltd., as opening of
the floor to foreign players will ensure JVs and flow of investments with local
retailers towards setting up of shops. Also CESC, which has a 94% stake in
Spencer’s Retail, will be benefited from this positive development, thus we maintain
our Buy recommendation on CESC with a target price of `379.
HCC-led JV bags order worth `987cr
Hindustan Construction Company (HCC) in a joint venture with DSD Brouckenbau
GmbH, Germany, and VNR Infrastructures Ltd. has bagged an order worth ` 987cr
from Northeast Frontier Railway to construct the superstructure of Bogibeel rail-
cum-road bridge over river Brahmaputra near Dibrugarh, Assam. HCC’s share in
this order is 51% ( ` 503cr), DSD Brouckenbau GmbH has 20% share and VNR
Infrastructures Ltd. has a share of 29%.
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Bogibeel rail-cum-road bridge will be a double-decked bridge having two railway
tracks on the lower deck and a three-lane road on the upper deck. The road level
will be 10.5 meters above the railway line. The total length of the bridge will be
4.3km. The project will be completed in 48 months. With this order, HCC’soutstanding order book now stands at ~ ` 16,678cr (4.1x FY2011 revenue). Owing
to concerns such as uncertainty on Lavasa project (on the complete project as
clearance from MOEF was for Phase 1only), slowdown in order inflow, high
debt and stretched working capital we maintain our Neutral view on the stock.
Economic and Political News
Cabinet clears Companies Bill; to be taken up this session
Food inflation falls to single digit at 9.01%
Sebi sets minimum allotment size of ` 5cr for anchor investors in an IPO
No immediate hike in fuel prices, indicates Reddy Air India faces whopping debt of ` 43,777cr
RBI approves loan extension to Air India
No proposal for hike in rail passenger fares at present say MoS for Railways
Corporate News
SBI abolishes penalty on pre-payment of housing loans
M&M says looking at more Korean assets, sourcing
Strides receives USFDA approval for two cancer drugs
Jet Airway's unpaid fuel bills up 65% in first half of FY12 Source: Economic Times, Business Standard, Business Line, Financial Express, Mint
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