Market OutlookJanuary 21, 2013www.angelbroking.com Market OutlookJanuary 21, 2013 Dealer’s DiaryThe Indian market is expected to open in the green mirroring positive start to the SGX Nifty. The US markets ended Friday's trading mostly higher after showing a lack of direction for much of the session. The markets benefited from the late-day buying partly due to a positive reaction to the latest news about the impending showdown over the U.S. debt limit. The House Republican leaders indicated they will hold a vote to authorize a three month temporary debt limit increase to give lawmakers time to pass a budget that reduces spending. The choppy trading seen earlier in the day reflected a mixed reaction to the latest earnings news, with upbeat results from Morgan Stanley and General Electric offset by disappointing results from Intel. Indian markets fell sharply on Friday, with a correction in rate-sensitives including auto, banking and realty. Going ahead investors would be watchful of the earnings data coupled with economic reports on weekly jobless claims, leading economic indicators, and new and existing home sales. Markets TodayThe trend deciding level for the day is 20,052 / 6,065 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rallyup to 20,114 – 20,188 / 6,082 – 6,100 levels. However, if NIFTY trades below 20,052 / 6,065 levels for the first half-an-hour of trade then it may correct up to 19,978 – 19,916 / 6,047 – 6,030 levels. SENSEX19,916 19,978 20,052 20,114 20,188 NIFTY6,030 6,047 6,065 6,082 6,100 News Analysis Excise duty on diesel SUV’s likely to increase 3QFY2013 Result Review: Reliance Industries, ITC, HDFC Bank, Hindustan Zinc, Ultratech Cement, Bhushan Steel, Blue Star, Force Motors 3QFY2013 Result Preview: HDFC, NTPC, Cairn India, Asian Paints, Shree Cements, DB Corp, Alembic Pharmaceuticals Refer detailed news analysis on the following pageNet Inflows (January 17, 2013) FII 3,601 2,980 621 12,529 12,529 MFs 688 703 (16) (1,949) (1,949) FII Derivatives (January 18, 2013) Index Futures 996 780 216 7,515 Stock Futures 2,111 2,098 13 33,751 Gainers / Losers Indian Oil Corp 349 10.5 Exide Industries 126 (9.4) BPCL 434 9.6 Wipro 397 (7.9) Oil India 561 9.0 United Breweries 684 (6.5) ONGC 338 7.3 Cummins India 492 (2.9) Indraprastha Gas 275 5.6 Crompton Greaves 114 (2.9) BSE Sensex 0.4 75.0 20,039 Nifty0.4 25.2 6,064 MID CAP (0.2) (16.8) 7,165 SMALL CAP (0.5) (38.8) 7,370 BSE HC (0.5) (41.9) 8,067 BSE PSU 2.8 211.6 7,862 BANKEX0.1 20.0 14,551 AUTO (0.7) (83.3) 11,298 METAL (0.6) (65.7) 10,780 OIL & GAS 3.1 287.2 9,571 BSE IT (1.1) (73.4) 6,406 Dow Jones 0.4 53.7 13,650 NASDAQ (0.0) (1.3) 3,135 FTSE 0.4 22.1 6,154 Nikkei 2.9 303.7 10,913 Hang Seng 1.1 262.0 23,602 Straits Times 0.5 16.1 3,211 Shanghai Com 1.4 32.2 2,317 INFY 0.2 0.1 $52.2 WIT (7.2) (0.7) $9.2 IBN 0.5 0.2 $44.2 HDB 0.2 0.1 $39.6 Advances 971 592 Declines 1,331 922 Unchanged 769 78 BSE 2,591 NSE 14,759
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According to media reports, the government might impose a higher excise duty or
a surcharge on diesel sports utility vehicles (SUV’s) during the Budget 2013-14.
This move by the government according to the reports is mainly aimed at reducing
subsidies on the fuel bill. The report further states that the finance ministry hasbeen exploring the idea of a higher excise duty on diesel cars; however, it could
not be implemented earlier due to opposition from automobile companies. The
clamor for imposing higher taxes on diesel vehicles have been doing the rounds
since 2010, after the Kirit Parikh committee on pricing of petroleum products had
proposed an additional duty of ` 80,000 on diesel SUVs and an annual road tax of
up to ` 50,000 a year on diesel cars. While, until now the government has resisted
from adopting such a move, we cannot rule out the imposition of higher taxes on
diesel vehicles completely. The utility vehicle segment which is mainly dominated
by diesel models continues to defy the current slowdown in the automotive industry
and has grown at a rate of 59.1% YTD in FY2013. We believe that increase in
excise duty on diesel SUV’s will have a negative impact on the utility vehicle
segment and would hamper the growth of the overall passenger vehicle industry.
We feel that Mahindra and Mahindra would be the major loser of such a move by
the government as utility vehicles account for ~30% of company’s total volumes.
Reliance Industries’ (RIL) 3QFY2013 profitability was above our estimates onaccount of higher than expected profitability from the refining segment. Gross
refining margins (GRMs) surprised us positively and came in at US$9.6/barrel
(US6.5/barrel in 3QFY2012 and US$9.5/barrel in 2QFY2013) vs our expectations
of US$8.5/barrel. During 3QFY2013, RIL’s net sales increased by 10.3% yoy to
` 93,886cr, above our estimate of ` 89,981cr. Net sales growth was mainly driven
by the petrochemicals segment (+11.5% yoy to ` 22,053cr) and the refining
segment (+12.9% yoy to ` 86,641cr). RIL’s EBITDA increased by 14.9% yoy to
` 8,373cr on account of higher profits from refining and marketing segments. The
refining segment’s EBIT grew by 114.5% yoy to ` 3,615cr due to higher GRMs.
However, the petrochemical segment’s EBIT decreased 10.2% yoy to ` 1,937cr,
while the oil and gas segment’s EBIT decreased by 54.4% yoy to ` 590cr due to
decline in KG D6 production (-41.4% yoy to 78bcf). Other income increased 1.3%
yoy to ` 1,740cr. The company had a lower tax rate in this quarter of 17.9%
(22.6% in 3QFY2012) and hence, the net profit grew by 23.9% yoy to ` 5,502cr
HDFC Bank delivered another quarter of consistent performance on the
bottom-line front, with a growth of 30% yoy, in-line with our as well as the street’s
estimates. In spite of an operating income growth of 23% yoy, the bank’s other
income growth, boosted by treasury gains and overall steady provisioning, aided it
to clock 30% yoy growth at the bottom-line level.
The bank
registered a robust growth in its balance sheet, with net advances and deposits
growing at 24.3% and 22.2% yoy, thereby outpacing industry average growth. On
the CASA front, the current account (adjusted for one-offs) and saving account
accretion was healthy, growing at 15.9% and 16.5% yoy, respectively. CASA ratio
dipped by 50bp qoq to 45.4%. The share of retail advances to overall loan book,
increased from 53.2% in 2QFY2013 to 53.8%, on back of lower wholesale
lending (2.8% qoq compared to 5.5% qoq in retail loans). In spite of higher retail
lending, the bank’s margins declined by10bp qoq to 4.1%, primarily due to
absence of dividend income during the quarter, which had aided the margins in
2QFY2013 and also due to increased delinquencies and 50bp sequential fall inCASA ratio. Overall, the non-interest income grew by 26.7% yoy, aided by treasury
gains and robust growth on the fee income front. Excluding treasury gains, the non-
interest income grew at a moderate pace of 10.7% yoy. The bank faced modest
pressures on the asset quality front this time around, as its Gross and Net NPA
levels increased sequentially by 14% and 28%, on an absolute basis. As we
understand from the management, around 40% of the total increase in Gross NPA
levels during the quarter came in from CVCE loan book, within the retail portfolio.
Overall, Gross and net NPA ratios for the bank remain amongst the best in the
industry at 1.0% and 0.2%, respectively. Restructured loan book as a proportion of
overall advances, remained stable at 0.3%. The bank made floating provision of
` 30cr during the quarter, which took its outstanding floating provisions to around
` 1,700cr. NPA provision coverage ratio (without considering the floating
provisions) came off sequentially by 235bp to 79.6%.