As we said yesterday, the Sensex is struggling to hit 20,000 and the Nifty 6,000
Both the Sensex and the Nifty ended in the negative today. The Sensex opened slightly above yesterday's closing at 19,699 and the Nifty opened a touch below its previous close at 5,908. Within an hour of the opening, both the indices hit their intra-day high of 19,811 and 5,944 respectively (also the highest level since 10 January 2011). However, soon the market started losing strength and slipped below yesterday's closing levels. The market hit the intra-day low in the morning session itself. The Sensex dropped to 19,551 and the Nifty to 5,869. But the market recovered from the lows and the Sensex closed down at 19,612, down 75 points, and the Nifty at 5,892, 18 points down.
The indices are set for a positive journey, but with a definite pause. In the days ahead, the market will be determined by Q4 earnings and the guidance from companies.
Despite the comment by Subir Gokarn, deputy governor of the Reserve Bank of India, hinting at the possibility of another rate hike, the rate-sensitive BSE Realty topped among the sectoral indices (up 3.18%). BSE Consumer Durables (up 1.11%), BSE Power (0.73%), BSE PSU (0.56%), BSE Auto (0.26%), BSE Oil & Gas (0.14%)and BSE Healthcare (0.04%).
The major loser was BSE Teck which fell 0.84%. The rupee jumped to a 5-1/2 month high in afternoon trade, on the back of gains by the euro against the dollar and rising dollar inflows into equities. The BSE IT was among the major losers (down 0.69%). Among the other losers were BSE FMCG (0.11%), BSE Capital Goods (0.11%), BSE Metal (0.41%) and BSE Bankex (0.43%). The advance-decline ratio of NSE stocks was 1145:689.
Auto stocks were in demand on reports that auto firms had raised vehicle prices, or are considering doing so, to partly offset a surge in the cost of raw materials such as steel, aluminium and natural rubber. This is the second price increase by auto makers since January 2011 higher cost of raw materials hurts margins. A majority of the auto stocks in the Sensex, like Hero Honda (2.22%), Tata Motors (1.19%) and Bajaj Auto ( up 0.54%) ended positive.
Other among the major gainers were NTPC (1.78%) and Reliance Infrastructure (1.21%). Reliance Infrastructure has made adequate arrangements to meet the requirement of its customers after Tata Power said it had stopped supplying electricity to the company. The two companies have been involved in a dispute about the supply of power in Mumbai city distribution area. ONGC was the fifth major gainer (0.68%).
Among the five major losers in the Sensex were Wipro (down 2.93%), Bharti Airtel (1.86%), Hindalco (1.67%), Maruti (1.40%), TCS (1.25%).
Mahindra Satyam jumped 6.09% on reports that Satyam Computers and its former auditor PricewaterhouseCoopers have agreed to pay a combined $17.5 million to settle US investigations into Satyam's accounting fraud in 2009.
The State Bank of India bought 5.68% for Rs1.8 billion on a preferential allotment basis in Kingfisher Airlines. The Kingfisher stock rose 4.57%.
Sesa Goa has gained 3.71% ever since the Supreme Court lifted a ban on iron ore exports from Karnataka. The company had curbed its iron ore mining in Karnataka post the state government's ban on iron ore exports, as iron ore realizations were significantly lower in the domestic market, compared to the international market. Sesa Goa also received yesterday an approval from market watchdog SEBI for its proposed open offer to the minority shareholders of Cairn India.
Gold rallied to a second successive record high on the back of the slide in the dollar and on ongoing investor demand, while silver hit a fresh 31-year peak.
The focus this week is on Thursday's central bank policy meetings, with the European Central Bank almost guaranteed to raise rates, thereby boosting the euro against the dollar, while the Bank of Japan and the Bank of England are expected to hold their fire.
Record-high food prices and oil prices at 2-1/2 year highs have stoked inflationary pressures around the world, adding to the case for owning gold, which can help mitigate the impact of rising price pressures on an investment portfolio.
Automobile growth should sustain, FMCG and pharma could see higher growth, while pipe manufacturers may be impacted by higher crude prices amid tensions in the Middle East, according to IDFC Securities
Agri-related companies should perform well in the fourth quarter, following a good rabi season, according to IDFC Securities research. It expects revenues for United Phosphorus, one of the prominent companies in the sector, to grow by 8% y-o-y to Rs16.3 billion and EBITDA margins should improve by 200 basis points (bps) on an annual basis in the quarter. However, higher interest expenses will put pressure on net profit. Advanta India's earnings are likely to grow 12% and profit after tax (PAT) by 5%, it says in an earnings preview report published this week.
Jain Irrigation Systems appears upbeat on the fourth quarter, after a subdued performance in the previous two quarters. Revenue growth is expected to be over 30%, spurred by a 35%-plus growth in its micro irrigation systems business and over 20% growth in the pipes division. EBITDA margins are expected at 22%, translating into an expansion of 163 bps y-o-y.
The March quarter is pegged to be the strongest for the alcohol manufacturing industry. United Spirits is expected to post a 16% growth in revenues on the back of a 13%-14% volume growth, price increases and improved product mix. While extra neutral alcohol prices have remained stable in the fourth quarter, gross margins will be pressurised by higher glass prices. EBITDA margins of 15.6% are indicated for the period under review.
United Breweries is another outperformer with a 35% revenue growth and underlying volume growth of above 20%. Radico Khaitan is expected to see a volume growth of 13% leading to a revenue growth of 18%. EBITDA margins are expected to remain flat while lower interest cost is likely to support an 84% plus net profit growth in the three-month period ending March 2011.
The buoyancy in demand in the automobile sector is expected to remain bullish in Q4FY11. Passenger car and two-wheeler manufacturers are expected to sustain the 20% growth momentum, but the commercial vehicles segment may see a marginal slowdown on account of the high base effect.
Higher commodity costs are likely to cut margins of companies like Bajaj Auto, Tata Motors and Mahindra & Mahindra. Truck maker Ashok Leyland could gain the most on the back of its operating leverage, with a 61% q-o-q growth in volumes.
The domestic business of Tata Motors will face some pressure on margins while that of its niche segment-JLR-is expected to remain strong at over 16%. M&M is expected to witness a sequential decline in margins on account of higher contribution from the auto business and inclusion of Logan in standalone from January 2011.
Margins for auto ancillary units will remain steady as higher commodity prices offset operating leverage benefits. Bharat Forge and Bosch are expected to see strong revenue growth led by higher growth in the commercial vehicles segment and a bounce back in export volumes. Among tyre companies, Apollo Tyres will witness a 5% q-o-q growth in revenues on a higher domestic market share and price increases. Balkrishna Tyres will see a margin improvement on 4% sequential increase in volumes and price increases of 6% q-o-q.
The fast moving consumer goods (FMCG) industry is expected to witness a 19.5% growth in the fourth quarter of the just-concluded fiscal. While companies across the industry have resorted to price hikes to manage raw material costs, the price increases would not necessarily improve gross margins, according to IDFC Securities.
It rates Hindustan Unilever as an outperformer, with the company expected to post double-digit growth in volumes for a fifth consecutive quarter. But EBITDA margins could be at the lowest at 10.3%.
Cigarettes are expected to boost the growth of ITC since there has been no increase in excise duty in the recent Union Budget. Revenues are seen growing at 15% in the quarter. The ongoing conflict in the Middle East and North Africa is expected to have a marginal impact on revenue growth of Dabur and Marico. They are expected to report a revenue growth of 30% and 22%, respectively.
Most pharmaceutical companies are expected to see a growth of 12%-20% in the quarter under review. Recovery in domestic sales and formulations exports will benefit Cipla with a 14% y-o-y growth in revenues. Dr Reddy's revenues are expected to grow by 15% y-o-y on the back of Allegra d-24, Omeprazole and Tacrolimus sales and incremental contribution from Lansoprazole. Lupin's revenues are expected to grow 15% y-o-y on growth across all geographies and profit growth is estimated at 8%. Sun Pharma is expected to report 45% revenue growth on the back of sales contribution from Taro.
Glenmark will be boosted by contribution from new launches and growth in the US. Biocon's revenues are expected to grow 6% y-o-y on expansion of the biopharma segment and higher licencing income. Ranbaxy is expected to see a 15% decline in revenues on the back of a high base (exclusivity sales of Valacyclovir, even as Aricept sales for the quarter have been factored in). EBITDA margins of Ranbaxy are pegged at 14.1% for the quarter.
Rising crude prices and increasing rig count indicate that higher exploration and development capital expenditure could impact future revenue prospects of pipe manufacturers. EBITDA margins are expected to remain flat, but volume growth could rise marginally on a sequential basis. Also, the order book position of companies in this segment continues to rise sequentially, which is expected to see earnings grow in the next few quarters.
IDFC rates power equipment major Crompton Greaves as an outperformer, BHEL at neutral and ABB as an underperformer. Power equipment companies (except BHEL) are likely to report a 9% growth in revenues while operating margins are likely to fall by 100 bps. Earnings growth is expected to fall by 13%, y-o-y. BHEL's provisional performance is pegged at 32% to Rs25.2 billion-below expectations. EMCO is likely to witness a subdued performance on sluggish off-take by clients, while ABB's earnings will be pressurised by lower margins.
Power transmission companies are expected to post a 15% y-o-y growth in revenues on execution of order backlogs. However, higher interest costs will dent earnings growth to 10%.
Stake sale part of debt restructuring plan approved in November, to reduce interest burden, stem losses
Mumbai: Vijay Mallya's Kingfisher Airlines today announced that it has allotted 5.68% shares, valued at about Rs180 crore, to the State Bank of India (SBI) on a preferential basis under a debt recast plan.
"Yes, it is true, we have issued 5.68% new equity shares to SBI, which is our largest lender, under the master debt recast plan which we accepted late last year," the airlines' chief financial officer Ravi Nedungadi told PTI.
SBI chief financial offer Hemant Contractor could not be reached for comments.
On 25th November last year, the Kingfisher board had approved a debt recast plan under which the airline operator would convert some of its debt into equity in its efforts to reduce the interest burden and stem losses. Kingfisher Airlines, controlled by United Breweries Holdings, had agreed to convert Rs1,355 crore worth loans into shares.
In addition, it was to convert the founders' debt of up to Rs648 crore into share capital. The airline had mandated SBI Caps for the debt restructuring.
Following the ripple effect of the September 2008 financial meltdown, the domestic aviation industry which was flying high hit an air-pocket, as domestic economic growth slowed down and crude prices went sky high. The Reserve Bank of India had cleared a debt restructuring proposal for the sector in September 2010.
The company's shares settled at Rs48.05 a piece, up 4.57% from its previous close on the Bombay Stock Exchange.