Nomura expects the tone of the central bank’s forward guidance to shift from hawkish to neutral. RBI is likely to signal that there is some scope for further rate cuts, but only contingent on signs of a sustainable moderation in CPI inflation and the current account deficit
The Reserve Bank of India (RBI) will announce its monetary policy for the fiscal 2013-14 on 3 May 2013. Here is what brokerage firm Nomura expects from the upcoming policy:
A 25 basis points repo rate cut: The brokerage expects RBI to cut its repo rate by 25 basis points (bps) to 7.25%, in line with consensus expectations. The RBI had stated in March that “headroom for further monetary easing remains quite limited.” However, lower WPI inflation (80bp below the RBI’s projection in March), continued weak growth and a narrower trade deficit should have collectively created space for further easing. Additionally, while a cut in the cash reserve ratio (CRR)—to allow for better policy transmission—is possible, Nomura does not consider this part of its base case scenario (Consensus and Nomura: 4%).
Economic projections: Nomura expects the RBI to project GDP growth at around 6% y-o-y in FY14 (year ending March 2014, up from 5% in FY13. Its forecast is for a lower 5.6%. The brokerage expects the RBI to project WPI inflation at between 5.5% and 6% y-o-y by March 2014 (6% in March 2013) on lower global commodity prices, a lagged impact of weaker demand and the forecast of a normal monsoon.
Developmental and regulatory policies: The brokerage expects the RBI to announce a phased reduction in the hold-to-maturity (HTM) limit for banks from the current 25% to 23% (same as the statutory liquidity ratio). It could also tighten asset-quality norms for non-banking finance companies and on gold loans.
Forward guidance: Nomura expects the tone of forward guidance to shift from hawkish to neutral. It expects the RBI to signal that there is some scope for further rate cuts, but only contingent on signs of a sustainable moderation in CPI inflation and the current account deficit.
According to Nomura, the global commodity price outlook is the key to the trajectory of WPI inflation. A steady fall in global commodity prices, if sustained, would help ease input cost pressures and thus aid a further fall in WPI inflation in the coming months, providing the RBI even more headroom to cut rates.
Hexaware Technologies has also given its guidance for the next quarter and it doesn’t look too impressive as they add clients and contracts
Hexaware Technologies reported a slow and disappointing March quarter, with net sales increasing 9% year-on-year to Rs231 crore while net profit dipped 14% y-o-y to Rs70.93 crore, for the quarter ended March 2013. The company has given guidance for the June 2013 quarter, with revenue likely to be in the range of $94 million-$ 96 million (exchange rates taken at 1 pound = 1.55 dollar, 1 euro = 1.30 dollar and 1 dollar = Rs54.38); a quarter-on-quarter sequential revenue growth in dollar terms of 0%-2%, which isn’t that impressive. The global slowdown is apparent and it is affecting the company, even as the average bill rate per hour for the March 2013 quarter remained stable at $73.64 for onsite services and to $23.37 for offshore locations.
During the reporting quarter, the company added 11 new clients across all its key focus areas. Of these, one client each was added in the Banking and Financial Services (BFS) domain and in the Travel & Transportation vertical and two clients were added in the Healthcare & Insurance (H&I) space. From a horizontal service line perspective, six clients were won in Enterprise Solutions space, one client in Quality Assurance & Testing Services (QATS) and twoclients in Business Process Outsourcing (BPO) space.
During the quarter, Hexaware has signed a large deal with revenue estimated at $30 million, with an existing Fortune 500 client, headquartered in the United States.
Through this contract, Hexaware will have an estimated $5 million worth incremental business over the course of the deal.
The company has forward contracts worth $240 million at an average rate of Rs53.6 and hedges worth 14 million euros at an average exchange rate of Rs71.2 maturing over the course of the next eight quarters (from April 2013 till April 2015).
At the end of March 2013, Hexaware’s global headcount stood at 8,670. For the IT business, technical personnel comprised 91.7% of the total work force. Attrition for Q1 2013 reduced to 9.9% as compared to 11% for March 2012.
“With a strong operating performance, we are enhancing the depth and spread of the client facing teams globally. We are further enriching our capabilities in emerging technologies such as Cloud-based ERP to augment existing competencies in Enterprise Solutions & Business Analytics. With an increased focus on the account management of the Top 50 clients, these initiatives would position us favorably to add value to our clients through multiple service lines”, stated PR Chandrasekar, CEO and vice-chairman, Hexaware Technologies.
A close below 5,860 may start a short downtrend on the Nifty
The market closed in the positive, but off the day’s high, on support from consumer durables and fast moving consumer goods after FMCG leader Hindustan Unilever’s results beat market expectations. A close below 5,860 may start a short downtrend on the Nifty. The National Stock Exchange (NSE) reported a volume of 52.39 crore shares and advance-decline of 747:564.
The Indian market opened with gains as investors were lured into buying banking, realty and metal stocks after the sectors were down last week. However, cautiousness prevailed ahead of the Reserve Bank of India’s (RBI) annual policy announcement later this week. Meanwhile, the Asian markets were higher in morning trade on hopes that central banks across the region will provide fresh stimulus to boost growth.
The Nifty opened seven points higher at 5,878 and the Sensex started the week at 19,307, a gain of 20 points over its previous close. Gains in power, PSU, realty, metals and capital goods sectors led the market higher in early trade.
But profit booking at the highs soon saw the benchmarks paring their early gains and edging lower as trade progressed. Meanwhile, the ruling UPA government managed to persuade the opposition to allow the passage of Finance Bill, which is expected to take place on Tuesday. However, the Parliament, which began the second half of the Budget Session on 22nd April, did not see a full session so far.
The benchmarks fell to their lows in noon trade as selling intensified. At the lows, the Nifty was down to 5,869 and the Sensex slipped to 19,284. A positive opening of the key European markets boosted sentiments among domestic investors, which helped the market to recover from their lows.
Gains in the BSE Fast Moving Consumer Goods index, after Hindustan Unilever delivered better-than-expected quarterly results, led the market to its intraday high in late trade. Other sectoral gainers were consumer durables, realty and power. The Nifty touched 5.919 and the Sensex climbed to 19,429 at their highs.
The market retreat from its highs but closed in the positive. The Nifty settled 33 points (0.56%) higher at 5,904 and the Sensex finished the session at 19,388, a gain of 101 points (0.52%) over its previous close.
Among the broader indices, the BSE Mid-cap index gained 0.68% and the BSE Small-cap index rose 0.27%.
With the exception of BSE Metal (down 0.79%) and BSE Healthcare (down 0.08%), all other sectoral gauges settled higher. They were led by BSE Consumer Durables (up 2.43%); BSE FMCG (up 2.30%); BSE Realty (up 1.53%); BSE Power (up 1.44%) and BSE TECk (up 1.04%).
Nineteen of the 30 stocks on the Sensex closed in the positive. The chief gainers were Hindustan Unilever (up 6.98%); Wipro (up 3.57%); Hero MotoCorp (up 3.24%); Sterlite Industries (up 2.29%) and ITC (up 1.69%). The top losers were Jindal Steel & Power (down 4.24%); Coal India (down 1.74%); Sun Pharmaceutical Industries (down 1.50%); HDFC (down 0.99%) and Tata Steel (down 0.80%).
The top two A Group gainers on the BSE were—Coromandel International (up 8.30%) and Reliance Communications (up 7.79%).
The top two A Group losers on the BSE were—Indian Overseas Bank (down 5.07%) and JSPL (down 4.24%).
The top two B Group gainers on the BSE were—Waterbase (up 20%) and Winsome Yarns (up 19.43%).
The top two B Group losers on the BSE were—Kanishk Steel Industries (down 19.98%) and Riga Sugar Company (down 19.95%).
Of the 50 stocks on the Nifty, 29 ended in the green. The key gainers were HUL (up 7.11%); Reliance Infrastructure (up 4.35%); IndusInd Bank (up 3.68%); Jaiprakash Associates (up 3%) and Hero MotoCorp (up 2.70%). The main losers were JSPL (down 3.95%); NMDC (down 2.33%); Coal India (down 1.93%); Sun Pharma (down 1.63%) and State Bank of India (down 1.04%).
Markets in Asia closed mostly higher on hopes that central banks will initiate fresh measures to boost growth. The US Federal Reserve is holding its two-day meeting starting tomorrow, the ECB will is holding a meeting on 2nd May and India’s RBI will unveil its annual monetary policy on 3rd May. However, trading was thin as the Chinese and Japanese markets are closed for local holidays.
The Hang Seng rose 0.15%; the Jakarta Composite gained 0.43%; the Straits Times advanced 0.395and the Taiwan Weighted added 0.10%. On the other hand, the KLSE Composite fell 0.19% and the Seoul Composite settled 0.20% lower.
At the time of writing, the CAC 40 of France was 0.71% higher, DAX of Germany gained 0.38% and UK’s FTSE 100 was flat with a positive bias. At the same time, the US stock futures were trading with minor gains.
Back home, foreign institutional investors were net buyers of stocks totalling Rs224.75 crore on Friday while domestic institutional investors were net sellers of equities aggregating Rs377.78 crore.
Non-banking financial company Bajaj Finserv Lending will now offer loan against securities on its online platform. According to the company, an applicant with a current securities portfolio of minimum Rs45 lakh will be eligible to apply and depending on the quality of portfolio, the eligibility will be processed. The stock declined 0.73% to Rs756 on the NSE.
GMR Infrastructure has said that GMR Bajoli Holi Hydropower Pvt Ltd, a step-down subsidiary of the company, has achieved financial tie-up with IDBI Bank, L&T Infrastructure Finance Company and L&T Finance. The company informed the exchanges that GMR Bajoli is developing a 180-MW run-of-river hydro electric power project on river Ravi at Chamba district in Himachal Pradesh. GMR Infra was down 0.94% to Rs21.10 on the NSE.