Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Clarification on P-Notes comes to the rescue
Markets snapped their winning streak to close in the red for March. Mixed sentiment prevailed in the run up to the budget,
however, with little coming by way of reforms the markets were left stranded. However, positive cues from global markets and
buying interest by FIIs augured well for rally at the fag end. The finance minister’s statement that P-note holders would be
kept out of the ambit of GAAR was a catalyst. The BSE Sensex closed lower by 2.0% while S&P CNX Nifty closed with a
gain of 186 points at 5,385. Midcap stocks continued to outperform their large cap peers with the BSE Midcap closing lower
by 0.6%. The BSE Smallcap index, which had been on a roll since December, cut short the rally to close with a loss of 3.4%.
Consumer oriented stocks hog the limelight
The sector-oriented indices on the BSE were a mixed bag; the BSE Realty and BSE Power (among the top gainers in the last
couple of months) declined by 9.1% and 8.3% respectively. Consumer oriented indices – BSE FMCG and BSE Healthcare
closed on a positive note. Keeping with the bellwether indices the S&P CNX 500 declined 1.3%. With the January effect on
the wane, the advances-declines ratio was skewed in favour of the losers at 2:3. This was particularly strong in telecom and
utilities. Driven by concerns on fuel subsidies, elevated oil prices and excise duty on crude oil; the energy pack closed on a
weak note. Stocks in the finance and IT spaces closed on a weak note.
Industrial metals slide on weak PMI from China
Major stock indices across the globe closed in the green; developed markets were amongst the top gainers. Coming on the
back of a sharp rally in the first couple of months Asian markets closed on a mixed note. The Hang Seng was amongst the
top losers declining by 5.2%. In the commodity space bullion prices lost steam and closed on a weak note; energy prices also
moved southwards. Driven by weak PMI numbers from China the non-ferrous metals pack ended on a weak note. European
debt markets closed on a mixed note with yields rising on most government bonds.
Downtick in core inflation; upside risks in fuel
Output figures of the eight core industries for the month of February were up; largely driven by higher coal and electricity
production. IIP for the month of January was up at 6.8% led by a surge in the consumer non-durables segment. An uptick
was noted in inflation after four months of downticks; much of it, however, is attributed to a swing in fruits & vegetables. Core
inflation, however, slipped below the 6% mark for the first time in 15 months. Upside risks to inflation persists in the form of
higher crude oil prices and a hike in petrol and diesel prices. Hike in excise duty and service tax, that has been proposed in
the budget is also expected to contribute to inflationary pressure.
Another CRR cut looks imminent
In the light of tight liquidity conditions the RBI cut the cash reserve ratio by 75 basis points, however, liquidity continues to
remain tight with the net reverse repo under LAF way beyond the RBI’s comfort zone. The RBI has also been infusing
liquidity by resorting to open market operations (~Rs 1.3tn). The issuance calendar pegs dated securities borrowing at Rs
3.7tn, indicating a market borrowing of more than 65% in the first half. This is expected to cause further strain on liquidity;
reflecting the concern bond yields inched up in the recent week. Although interest rates appear to be at the peak a rate cut is
unlikely in the upcoming RBI’s policy meet. With the union budgets inflationary pitch and persistence of upside risks to
inflation; the RBI is likely to tail inflation. However, a cut in the cash reserve ratio appears imminent.
Markets reasonably valued but face headwinds
With the Sensex trading at 13X times FY 13 earnings, markets from a valuation standpoint remain reasonable. Given a mix
of reasonable valuations, slowdown in industrial growth and uncertainty of the timing of a rate cut; we recommend investors
to stick to companies with low financial leverage, consumption driven growth and moderate valuations. The recent hikes in
electricity rates are expected to tone down concerns on asset quality of PFC and REC. Investors may consider investments
in PSU stocks with high dividend yield, cash rich position and high government stake. The headwinds that the markets face
include higher crude oil prices, hike in diesel prices and its impact on inflation combined with a slowdown in global industrial
growth. For now road infrastructure needs to be given a go-by.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Clarification on P-Notes comes to the rescue
Markets snapped their winning streak to close in the red for March. Mixed sentiment prevailed in the run up to the budget,
however, with little coming by way of reforms the markets were left stranded. However, positive cues from global markets and
buying interest by FIIs augured well for rally at the fag end. The finance minister’s statement that P-note holders would be
kept out of the ambit of GAAR was a catalyst. The BSE Sensex closed lower by 2.0% while S&P CNX Nifty closed with a
gain of 186 points at 5,385. Midcap stocks continued to outperform their large cap peers with the BSE Midcap closing lower
by 0.6%. The BSE Smallcap index, which had been on a roll since December, cut short the rally to close with a loss of 3.4%.
Consumer oriented stocks hog the limelight
The sector-oriented indices on the BSE were a mixed bag; the BSE Realty and BSE Power (among the top gainers in the last
couple of months) declined by 9.1% and 8.3% respectively. Consumer oriented indices – BSE FMCG and BSE Healthcare
closed on a positive note. Keeping with the bellwether indices the S&P CNX 500 declined 1.3%. With the January effect on
the wane, the advances-declines ratio was skewed in favour of the losers at 2:3. This was particularly strong in telecom and
utilities. Driven by concerns on fuel subsidies, elevated oil prices and excise duty on crude oil; the energy pack closed on a
weak note. Stocks in the finance and IT spaces closed on a weak note.
Industrial metals slide on weak PMI from China
Major stock indices across the globe closed in the green; developed markets were amongst the top gainers. Coming on the
back of a sharp rally in the first couple of months Asian markets closed on a mixed note. The Hang Seng was amongst the
top losers declining by 5.2%. In the commodity space bullion prices lost steam and closed on a weak note; energy prices also
moved southwards. Driven by weak PMI numbers from China the non-ferrous metals pack ended on a weak note. European
debt markets closed on a mixed note with yields rising on most government bonds.
Downtick in core inflation; upside risks in fuel
Output figures of the eight core industries for the month of February were up; largely driven by higher coal and electricity
production. IIP for the month of January was up at 6.8% led by a surge in the consumer non-durables segment. An uptick
was noted in inflation after four months of downticks; much of it, however, is attributed to a swing in fruits & vegetables. Core
inflation, however, slipped below the 6% mark for the first time in 15 months. Upside risks to inflation persists in the form of
higher crude oil prices and a hike in petrol and diesel prices. Hike in excise duty and service tax, that has been proposed in
the budget is also expected to contribute to inflationary pressure.
Another CRR cut looks imminent
In the light of tight liquidity conditions the RBI cut the cash reserve ratio by 75 basis points, however, liquidity continues to
remain tight with the net reverse repo under LAF way beyond the RBI’s comfort zone. The RBI has also been infusing
liquidity by resorting to open market operations (~Rs 1.3tn). The issuance calendar pegs dated securities borrowing at Rs
3.7tn, indicating a market borrowing of more than 65% in the first half. This is expected to cause further strain on liquidity;
reflecting the concern bond yields inched up in the recent week. Although interest rates appear to be at the peak a rate cut is
unlikely in the upcoming RBI’s policy meet. With the union budgets inflationary pitch and persistence of upside risks to
inflation; the RBI is likely to tail inflation. However, a cut in the cash reserve ratio appears imminent.
Markets reasonably valued but face headwinds
With the Sensex trading at 13X times FY 13 earnings, markets from a valuation standpoint remain reasonable. Given a mix
of reasonable valuations, slowdown in industrial growth and uncertainty of the timing of a rate cut; we recommend investors
to stick to companies with low financial leverage, consumption driven growth and moderate valuations. The recent hikes in
electricity rates are expected to tone down concerns on asset quality of PFC and REC. Investors may consider investments
in PSU stocks with high dividend yield, cash rich position and high government stake. The headwinds that the markets face
include higher crude oil prices, hike in diesel prices and its impact on inflation combined with a slowdown in global industrial
growth. For now road infrastructure needs to be given a go-by.
No comments:
Post a Comment