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7 January 2011
Namaste India
India IT: Strong Dec-Q; HDIL sells another land parcel
HDIL: Continues derisking strategy by selling another land parcel [Abhay
Shanbhag]
Sells another Mumbai land parcel for INR 8bn – cash mobilization of INR 25bn
since Sept’10: In Oct’10, HDIL signed an MOU to sell FSI at 3 locations (Virar,
Goregaon) for INR 6.5bn and received INR 0.9bn with the balance expected to be
received in current 2H. It has now signed an MOU for another ~0.8msf land parcel
at Andheri (E) for INR 8bn against which it has received INR 0.5bn. Including its
QIP (USD 268m, ie ~INR 11bn), HDIL has tied-up ~INR 25bn since Sept’10.
Indian IT services: Strong Dec-Q and robust CY11 demand outlook
[Aniruddha Bhosale]
We expect the Dec-Q performance of most Indian IT services companies to be an
encore of the strong Sep-Q. However, the immediate catalyst for stocks is likely to
be management teams’ commentaries on the CY11/FY12 IT budgets of clients.
Our channel checks suggest that the demand environment across geographies for
offshore IT service vendors should continue to be robust in CY11 with clients
displaying an increasing preference for offshore. We reiterate our overweight
stance on the sector with Infosys and TCS being our top picks.
FITT Research: India Power Sector Finance: A step-up transformer [Dipankar
Choudhury]
Deutsche Bank Company Research's Investment Policy Committee has deemed
this work F.I.T.T for investors seeking differentiated ideas. The specialized power
lenders Power Finance Corp (PFC) and Rural Electrification Corp (REC) are
benefiting from the increasingly harder-to-finance, capital-constrained power
sector, armed with low operating costs and benign regulatory disposition. We
initiate coverage on PFC and REC with Buy recommendations and higher-thanconsensus earnings estimates.
Asia Economics Daily: Food inflation becomes a major issue in India, again
[Taimur Baig]
There appears to be no respite from inflation pressures in India. The conventional
expectation, seen through RBI’s statements and private sector forecasts, in recent
months has been that a favorable monsoon and strong base effect would push
WPI inflation down to around or below 6% by March 2011. Indeed, the RBI felt
that monetary conditions were consistent with leaving policy interest rates
unchanged in its December policy review, having telegraphed its intentions clearly
in the preceding weeks. We saw the pause as temporary and called for rate hikes
to resume in January. Recent developments have given further credence to our
forecast.
US Daily Economic Notes: What should we look for in the employment
report? [Joseph LaVorgna]
The weak November employment report—payrolls gained only 39k and the
unemployment rate rose 0.2% to 9.8%—appears to have been an aberration in
the sense that Q4 GDP estimates have moved meaningfully higher since then.
We are currently at +3.5% from +2.7% previously, and there are upside risks to
this number, particularly from improving consumption. The level of November real
PCE is up 4.4% relative to Q3 (+2.4%), and indications are that December retail
sales were robust; we are forecasting a 1.0% headline gain—the data are due next
Friday. Thus, we believe there is a good chance that November payrolls are
revised higher, perhaps by 50k, as that has been the trend
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