Todays Market from Equitymaster http://www.equitymaster.com/tm.asp The happenings in the stock markets, including a pre-open and closing commentary. Todays Market from Equitymaster http://www.equitymaster.com/icons/eqtm_small1.gif http://www.equitymaster.com/tm.asp http://blogs.law.harvard.edu/tech/rss Markets cheer reforms & BJP victory http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Markets-cheer-reforms--BJP-victory
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It is a truncated trading week for the Indian markets on account of Diwali. Global markets staged a weak recovery in the first half of the week. The Japanese markets bounced back after a beating that it took last week. US markets were relieved when one of the US Fed governors stated that the fed should reconsider the end of QE.

In Europe, markets were up despite nervousness surrounding the possibility of the Euro Zone slipping back into recession. Markets continue to believe that the European Central Bank (ECB) will inject more liquidity into the system to prevent this possibility.

Back home, markets were in a buoyant mood leading up to Diwali as the ruling BJP did well in two state elections and the government has unveiled key reforms in the Energy sector. Also, the results season is on in full swing.

Key world markets during the week
Source: Yahoo Finance

Among the sectoral indices this week, Auto and Capital Goods stocks were clearly the top performers. On the other hand IT stocks ended the week on a muted note.

BSE indices during the week
Source: BSE

Now let us discuss some of the economic developments of the week gone by.

The telecom regulator TRAI has told the government that it will not be in a position to start the process of conducting the spectrum auction in February 2015 without receiving additional information. The regulator has asked the Department of Telecom (DoT) to clarify its position regarding the availability of spectrum. The government wants to auction spectrum for 3G services early next year in the 900 1,800, 2,100, 2,300 and 2,500 MHz bands. While the regulator has fixed the base price for the 900 and 1,800 MHz bands; it has asked the government to quickly make up its mind about exactly how much spectrum and in which service areas it wants to put up for auction. TRAI has also made a recommendation that all vacant 3G slots should also be put up for auction.

In a key development in the coal sector, the government has recently proposed an ordinance to allow e-auction of mines to private players while adding that state-run companies would be allocated mines directly. The process is likely to take three four months and the proceeds of auction would go to states where the respective mines are located. The decision follows de-allocation of coal blocks by Supreme Court. However, full commercial mining is not allowed yet, something that has disappointed the key sectors related to coal mining such as power. The Finance Minister Mr. Arun Jaitley has stated that the ordinance would only feature an "enabling provision" to allow the same in future.

In a key development in the energy sector, diesel prices have been deregulated and price formula for natural gas has been formalized. Just like petrol, diesel prices will be allowed to move as per market conditions. It will immediately lead to easing of diesel prices by Rs 3.5 per litre, since crude prices have come down considerably. The move will reduce the subsidy burden for government, upstream and downstream oil companies. In another development, gas prices have been raised by about a third to US$ 5.61 per million British thermal units (mBtu). Initially, the proposal was to double the prices. The move is likely to boost investment in the gas sector. However, Reliance Industries Ltd (RIL) will keep being paid the earlier price of US$ 4.2 per million British thermal units until they make good the shortfall in the envisaged production from D1, D3 discoveries of Block KG-DWN-98-3. One must note that the matter is still under arbitration. The difference between the new prices and US$ 4.2 per mBtu would be credited to the gas pool account and outcome of arbitration will decide whether or not it will be paid to RIL. The new gas price will be effective from November 1 until March 2015, but the next revision would be valid for six months.

Movers and shakers during the week
Company14-Oct-1422-Oct-14Change52-wk High/Low
Top gainers during the week (BSE-A Group)
Emami Ltd. 675 784 16.1% 775/421
DLF Ltd. 105 120 14.6% 243/100
Oberoi Realty 211 240 13.6% 284/171
Engineers India 235 264 12.1% 331/142
Guj. State Petronet 88 98 10.8% 104/54
Top losers during the week (BSE-A Group)
Financial Technologies 221 180 -18.5% 404/147
Strides Arcolab 795 650 -18.3% 1,050/344
HCL Tech. 1,724 1,516 -12.0% 1,775/1,034
Suzlon Energy 13 11 -11.0% 37/8
TCS 2,670 2,452 -8.1% 2,834/1,960
Source: Equitymaster

Now let us move on to some corporate developments in India Inc.

Tata Motors owned Jaguar Land Rover (JLR) expects its volume growth in China to halve to 20% this year. The company management said that sales in the second half were a bit slower than the first half. It expects sales next year to decelerate further on account of high base and slowdown in the auto market in the country. It may be noted that China is the biggest and fastest growing market for JLR. It had recently set up its first overseas factory in China to overcome huge import duties and price its car competitively in the market.

India's largest two wheeler manufacturer, Hero MotoCorp has outlined plans to invest in excess of Rs 50 bn that includes manufacturing plants in Columbia and Bangladesh as well as new plants being set up in Gujarat and Andhra Pradesh and a Hero Global Centre for Research and Design in Rajasthan. The company has invested Rs 10.5 bn at the Neemrana facility having an annual capacity of 0.75 m units. Post the setting up of this unit, the company's overall annual capacity has increased to 7.65 m units. Hero MotoCorp will commence work on the Halol plant in Gujarat in November followed by the Andhra Pradesh plant with each of them having annual capacities of 1.8 m units. Each of the Columbia and Bangladesh plants will have annual capacities of 0.15 m units. The company has targeted to set up 20 manufacturing and assembly facilities across the world to scale up its capacity to 12 m units per annum over the next five years.

Moody's Investor Service has stated that the recent plans of Tata Steel will prove credit positive. Tata Steel has decided to sell its long product business in the UK and its bank debt refinance plan and this would prove credit positive. That's because this sale would dispose off loss-making assets, alleviating funding pressures for the next six years. Moreover, now the company can focus on growing the profitable Indian business. The Moody's Investor Service expects the company to maintain its volume growth and strong profitability with EBITDA per tonne of around US$ 260. Moreover, Tata Steel is slated to launch the first phase of the Odisha project early next year which will add 3 million tonnes of crude steel capacity. This will bring the capacity of the Indian business to 10 m metric tonnes, or 50% of Tata Steel's total capacity. When Tata Steel India acquired Corus in 2007, this proportion was 15%.

Let's move to few corporate results declared during the week:

India's leading telecom operator Idea Cellular has reported results for the quarter ending September 2014 (2QFY15). http://www.equitymaster.com/research-it/company-info/latest-company-results.asp The Company has reported a marginal increase in the consolidated revenues on a quarter-on-quarter (QoQ) basis. It has thus reversed the last 2 years trend of sequential revenue decline during the seasonally weak quarter (ending September) due to contraction in voice minutes of use. The operating profit slipped 0.5% QoQ and margin declined 20 basis points to 32.9%. The net profit for the quarter grew 3.8% QoQ on account of low finance cost due to the reduced debt. The average revenue per minute (ARPM) grew by 1.8 % to 45.9 paise from 45.1 paise on sequential basis. While the voice rate realization was under pressure, the company witnessed 22.5% QoQ jump in mobile data revenue.

UltraTech Cement Ltd has announced results for the quarter ending September 2014 (2QFY14). The company has reported net sales growth of around 20% on a year on year (YoY) basis helped by the growth in the cement volumes. The volumes for the quarter grew 11% YoY on the back of higher demand and additional volume from the acquired units in Gujarat. Operating profit of the cement company spiked 29.2 % YoY. The net profits for the quarter grew by 55% YoY on standalone basis. On a consolidated basis, the bottomline was up 47% YoY while revenue growth came in at 18% YoY. The management has stated that the cement demand is likely to grow at 8%, driven by renewed government focus on housing and infrastructure spending. The company plans to increase its cement capacity by bidding for assets of Lafarge and Holcim and aims to add 20 million tonnes per annum to its capacity over the next three years.

HDFC Bank announced its results for the quarter ended September 2014 today. The bank reported a 20% YoY rise in profits during the quarter, while its net interest income grew by 23% YoY. The bank's net interest margins stood at 4.5%, as compared to 4.3% during same quarter last year. Further, advance growth stood at 22% YoY. As per the bank, the growth was led by both, domestic retail loans as well as wholesale loan segments. Gross non-performing assets stood at stood at 1.02% as compared to 1.09% in same quarter last year and 1.07% in preceding quarter i.e. for the quarter ended June 2014. Net NPAs remain stable at 0.28%. The stock of HDFC Bank ended with marginal gains today and is currently trading close to its 52-week high price.

Piramal Enterprises, the flagship company of the Piramal Group, has announced its financial results for the quarter ended September 2014. During the quarter, the company's consolidated net sales increased by 9.4% YoY to Rs 12.2 bn. Operating profit grew by 38.7% YoY to Rs 2.1 bn. Other income plunged by 81.6% YoY to Rs 178 m. The company reported an exceptional loss of Rs 3.7 bn during the quarter as against an exceptional gain of Rs 158.3 m in 2QFY14. Tax expenses shot up by 329.9% YoY to Rs 674.9 m. At the bottomline level, the company reported a consolidated net loss of Rs 3.9 bn as against net loss of Rs 322.6 m in 2QFY14.

Going forward, the Indian markets will continue to look for more reforms from the government as well as the corporate results. However, investors will do well to follow a bottom up approach to investing. Investing in fundamentally sound companies for the long term will yield good returns.

This article (Markets cheer reforms & BJP victory) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Wed, 22 Oct 2014 RoundUp http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Markets-cheer-reforms--BJP-victory
Mid, smallcap outperform their larger peers http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Mid-smallcap-outperform-their-larger-peers
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As was the trend throughout the day, the Indian stock markets ended the day on a firm note with the BSE-Sensex closing higher by about 212 points or 0.8%, while the NSE-Nifty ended higher by about 0.9% or 70 points. Stocks from across the board were in favour today, with those from the automobiles and capital goods spaces being the most in demand. Midcaps and smallcaps however outperformed their larger peers as the BSE Mid Cap and BSE Small Cap indices ended higher by about 1.2% each.

Stock markets in other parts of Asia ended the day on a firm note with Hong Kong and Japan up by about 1.4% and 2.6% respectively. European stocks were trading mixed at the time of writing. The rupee was trading at Rs 61.24 to the dollar at the time of writing.

Stocks of housing finance companies ended the day on a firm note led by LIC Housing Finance, Gruh Finance and HDFC Limited. India's largest mortgage finance company HDFC Limited announced its numbers for the quarter ended September 2014. The company's net profits came in higher by 7% YoY during the quarter. On a consolidated basis, profits were up by about 9% YoY. As per report, the company's loan book rose to Rs 2.1 trillion during the quarter, up by 15% YoY from a year ago. As per the company, the gross non-performing loans as of September 30, 2014 stood at Rs 14.7 bn, which is equivalent to 0.69% of the loan portfolio (0.79% as of last year). Further, the non-performing loans of the individual portfolio stood at 0.53% while that of the non-individual portfolio stood at 1.02%.

Banking stocks ended the day on a mixed note with Kotak Mahindra Bank, and IDBI Bank leading the pack of gainers, while Canara Bank and Yes Bank were amongst the top underperformers. Private sector banking major Kotak Mahindra Bank announced its results for the quarter ended September 2014 recently. The bank reported a sharp 26% YoY jump in profits led by higher other income and lower provisions. Net interest income of its standalone operations rose by 12.4% YoY, while other income rose by a higher pace of 57% YoY. Further the banks net interest margin (NIM) climbed rose to 5%, up by 0.1% YoY on sequential basis. The bank's gross non-performing assets remained stable at about 1.9% as compared to about 2% a year ago. The bank's advances came in higher by 20% YoY which is a strong growth figure for the bank. Closing higher by about 5% today, the stock of Kotak Mahindra Bank was the top performer amongst banking stocks. It may be noted that during the previous quarter, the bank's revenues and profits grew at a relatively slower pace of 5% YoY and 11% YoY respectively.

This article (Mid, smallcap outperform their larger peers) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Wed, 22 Oct 2014 10:30:00 GMT http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Mid-smallcap-outperform-their-larger-peers
Broad based buying continues http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Broad-based-buying-continues
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The buoyancy in the Indian stock markets continued in the post-noon trading session. Broad based buying is witnessed across market segments before Diwali festive season. The small cap stocks are leading the gainers. Among the sectoral indices, barring stocks from realty and metals, all are trading in the green today. Gainers are being led by stocks from auto and capital goods sectors.

The BSE-Sensex is trading up 180 points and the NSE-Nifty is trading up by 58 points. The BSE Mid Cap index is trading up 0.9% and the BSE Small Cap index is trading up 1% today. The rupee is trading at 61.23to the US dollar.

Barring TVS Motors and Ashok Leyland, almost all automobiles stocks are trading on a firm note today. Gainers are being led by Hero MotoCorp and Maharashtra Scooters. As per a leading business daily, Tata Motors owned Jaguar Land Rover (JLR) expects its volume growth in China to halve to 20% this year. The company management said that sales in the second half were a bit slower than the first half. It expects sales next year to decelerate further on account of high base and slowdown in the auto market in the country. It may be noted that China is the biggest and fastest growing market for JLR. It had recently set up its first overseas factory in China to overcome huge import duties and price its car competitively in the market. Tata Motors is trading higher by 3% at the time of writing.

Majority of the energy stocks are trading in the green led by Gujarat State Petronet and Reliance Industries. As per a leading financial daily, the government is keeping a buffer of 56 paise per litre on diesel price that has been deregulated. The fuel price of diesel was reduced by RS 3 per litre at a time when oil marketing companies were earning a surplus of Rs 3.56 per litre. The government wants to keep the margin of 56 paise per litre to counter contingencies arising on account of crude price firming up once again. Reportedly the government is also having an understanding with state owned oil marketing firms such as <>Indian Oil Corporation(IOC), Bharat Petroleum Corporation Ltd (BPCL)and Hindustan Petroleum Corporation Ltd (HPCL) to offer immunity to Indian consumers in the event of surge in international diesel prices in the near future. As per reports, these state owned oil firms consult the government before raising price of petrol which was deregulated in 2010.

This article (Broad based buying continues) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Wed, 22 Oct 2014 08:00:00 GMT http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Broad-based-buying-continues
Indian markets in a buoyant mood http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Indian-markets-in-a-buoyant-mood
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After opening positive, the Indian Indices have continued to gain momentum during the morning trading session. Broad based buying is being seen on the bourses. Auto, pharma and capital goods stocks are leading the gainers.

The BSE-Sensex is trading up 191 points. The NSE-Nifty is trading up 61 points. The BSE Mid Cap index is trading up 1% and the BSE Small Cap index is trading up 0.9%. The rupee is trading at 61.23 to the US dollar.

Majority of the pharma stocks are trading firm with Natco pharma and Aurobindo pharma being the leading gainers in the pack. Biocon Ltd reported results for second quarter ending September 2014 (2QFY15). The company has reported growth of 3% YoY on the topline. The muted performance was due to decline in sales of its biopharmaceutical division and modest growth in its contract manufacturing segment. On the back of this, the growth in operating profits was flat for the quarter. The operating margins too declined by 30 bps for the quarter. The net profits growth was also flat for the quarter. Biocon was trading down by 1.4% at the time of writing.

Most of the telecom stocks are trading in the green today. Tata Communications and Tata Tele Services are leading the gainers. The telecom regulator TRAI has told the government that it will not be in a position start the process of conducting the spectrum auction in February 2015 without receiving additional information. The regulator has asked the Department of Telecom (DoT) to clarify its position regarding the availability of spectrum. The government wants to auction spectrum for 3G services early next year in the 900 1,800, 2,100, 2,300 and 2,500 MHz bands. While the regulator has fixed the base price for the 900 and 1,800 MHz bands; it has asked the government to quickly make up its mind about exactly how much spectrum and in which service areas it wants to put up for auction. TRAI has also made a recommendation that all vacant 3G slots should also be put up for auction.

This article (Indian markets in a buoyant mood) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Wed, 22 Oct 2014 06:00:00 GMT http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Indian-markets-in-a-buoyant-mood
Indian share markets open firm http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Indian-share-markets-open-firm
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Asian stock markets have opened the day on a firm note with the markets in Japan (up 1.7%), Taiwan (up 1.3%) and Hong Kong (up 1.2%) leading the gains. The Indian share markets have also opened the day on a firm note. The sectoral indices are trading firm with auto and capital goods indices leading the gains.

The Sensex today is up by around 352 points (1.3%), while the NSE-Nifty is up by about 57 points (0.7%). The mid and small cap stocks are trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 1.7% and 0.8% respectively. The rupee is currently trading at Rs 61.30 to the US dollar.

Oil and gas sector stocks have opened the day mainly in the green with Petronet LNG and Gujarat State Petronet leading the gains. Private oil and gas explorer Cairn India has announced its financial results for the quarter ended September 2014 (2QFY15). During the quarter, the company's consolidated net sales declined by 14.4% year-on-year (YoY) to Rs 39.8 bn. Operating profit declined by 23.7% YoY to Rs 26.6 bn. Tax expenses shot up by 225.6% YoY to Rs 2.6 bn. At the bottomline level, consolidated net profit declined by 32.7% YoY to Rs 22.8 bn. The stock of Cairn India has opened marginally in the red.

Indian pharma stocks have opened the day mainly on a firm note with Orchid Chemicals and Torrent Pharma leading the gains. Piramal Enterprises, the flagship company of the Piramal Group, has announced its financial results for the quarter ended September 2014. During the quarter, the company's consolidated net sales increased by 9.4% YoY to Rs 12.2 bn. Operating profit grew by 38.7% YoY to Rs 2.1 bn. Other income plunged by 81.6% YoY to Rs 178 m. The company reported an exceptional loss of Rs 3.7 bn during the quarter as against an exceptional gain of Rs 158.3 m in 2QFY14. Tax expenses shot up by 329.9% YoY to Rs 674.9 m. At the bottomline level, the company reported a consolidated net loss of Rs 3.9 bn as against net loss of Rs 322.6 m in 2QFY14. The stock of Piramal Enterprises has opened in the red.

This article (Indian share markets open firm) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Wed, 22 Oct 2014 04:00:00 GMT http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Indian-share-markets-open-firm
Coal block ordinance - a half hearted reform measure? http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Coal-block-ordinance---a-half-hearted-reform-measure
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The week has opened with big ticket reform announcements from the Modi Government. First, it was the energy sector where diesel was deregulated and gas prices were hiked after months of dilly dallying. And now, it is the coal sector where rules are being rewritten.

Some time back, the mining sector had received a huge blow as Supreme Court nullified the allocation of coal blocks. The entire sector has been in a state of limbo since then. The recent ordinance to facilitate e-auction of the blocks for private companies for captive use and allot mines directly to state and central PSUs will bring some relief. However, as an article in Firstpost suggests, this can best be called as the half hearted measure, unlikely to make much difference as far as coal demand supply gap is concerned.

This is because the new ordinance does nothing to break the monopoly of Coal India to ensure more participation from the private sector. It is only with the latter that one can expect an efficient utilization of coal resources in the country. The Government has suggested that the sector may be deregulated later and that the full commercial mining will be allowed. However, when that will happen is anybody's guess. Until then, the associated sectors, mainly power, are likely to suffer. The decision serves Government's short term interests well, Coal India being one of the candidates for divestment. However, it can hardly be called a reform in the true sense.

Even the much cheered diesel deregulation reform needs to pass the test when crude prices go up. Since the pricing system for end user industries of diesel and gas is not market based. In short, we have still a long way to go in becoming a free market that allows efficient uses of resources and win- win situation for all. And the sooner the Government covers this distance, the better it will be for the Indian economy.

This article (Coal block ordinance - a half hearted reform measure?) is authored by Equitymaster.

Equitymaster is a leading 'independent' equity research initiative focused on providing well-researched and unbiased opinions on stocks listed on the Bombay Stock Exchange.]]>
Wed, 22 Oct 2014 03:00:00 GMT http://www.equitymaster.com/tm/tm.asp?date=10/22/2014&title=Coal-block-ordinance---a-half-hearted-reform-measure