EQUITY UPDATE – 30 JUNE 2012

INDIA

Indian foreign exchange reserves fell by USD 768m in the week ended 22 June versus increase of USD 2.01b in the previous week.  As of 22 June Indian’s foreign exchange reserves stood at USD 289.39b. (The Hindu Business Line)

According to Reserve Bank of India, Indian external debt increased by USD 39.9b to stand at USD 345.8b in 2011-12 (USD 305.9b in 2010-11). Increase in external debt was due to considerable increase in commercial borrowing, short-term trade credits and rupee denominated non-resident Indian deposits. External debt-to-GDP ratio at end of March 2012 increased to 20 per cent against 17.3 per cent in March end 2011. (The Hindu Business Line)

Indian infrastructure sector output growth at 3.8 per cent in May from a year earlier vs. prev. revised 3.1 per cent in the previous month vs. 5.0 per cent in the same period a year ago. (Reuters)

FII made gross purchases of INR 4,747.12cr (prev. 4,033.60cr) and gross sales of totaling INR 1,700.36cr (prev. INR 4,728.50cr). On the other hand, DII’s made gross purchases of INR 1,532.57cr and gross sales of INR 1783.28cr. (Business Standard)

HDFC Bank – Co. reduced its lending rate by 20 basis points; new benchmark prime lending rate will stand at 18.3 per cent and new base rate will be 9.8 per cent. (The Hindu Business Line)

Crompton Greaves – Co. proposed reduction in employee strength at its Belgium operations by about 260 of the total 730 employees. (The Hindu Business Line)

Maruti Suzuki – Jefferies upgraded co. to buy from hold and raised price target to INR 1446 from INR 1398. In related news BOFA-ML preferred co. as the best proxy on cyclical recovery in the sector. (Business Standard)

Tata Motors – Jefferies and BOFA-ML downgraded co. to hold from neutral. Jefferies cited adverse risk to demand and weakening product mix. While BOFA-ML cites reduced visibility in commercial vehicle segment. (Business Standard)

Larsen & Toubro – Co. construction arms won a project worth INR 3042cr for upgrading the Delhi-Agra highway. (Economic Times)

Power Grid – Co. to spend INR 6000cr for expansion of its transmission lines in the southern region, according to a senior official. (Business Standard)

Tata Global Beverages – Life Insurance Corporation of India sold 2.03 per cent of co.’s stake between 22 February and 27 June.  Lic’s current holding in the co. stands at 11.79 per cent. (Business Standard)

Gati Ltd – Co. to pay a 30 per cent special dividend for the financial year 2011-2012. (The Hindu Business Line)

Alembic Pharma – Pfizer filed a lawsuit against co. marketing of the generic version of Pfizer’s Pristiq depression tablet. (Business Standard/PTI)

EUROPE

According to Spanish PM Mariano Rajoy, the Spanish government does not plan to use European rescue funds to intervene in the bond markets to bring down borrowing costs. (Economic Times)

EU’s consumer price index Y/Y for June stood at 2.4 per cent vs. est. 2.4 per cent vs. prev. 1.9 per cent. According to Chistoph Weil of Commerzbank, the flat inflation number would present no obstacle for ECB to cut rates. (Economic Times/AFP)

NORTH AMERICA

According to Fed’s William Dudley, the employment growth had slowed down considerably due to the lack luster growth in US economy. In other news Fed’s Bullard, a third round of quantitative was possible only is economic activity dropped significantly or on a threat of deflation. Bullard anticipates a sluggish job growth in the coming months. (Reuters)

Ford Motors – Co.’s stock price dropped 4 per cent to USD 9.7, due to co.’s warning on wider losses in its overseas operations in the second quarter. (Fox Business/MarketWatch Pulse)

Research in Motion – Co. reported 1Q12-13 loss excluding items at 37 cents per share vs. est.  loss of 3 cents per share vs.  previous 1Q11-12 at USD 1.33 per share. Adj. net loss at USD 192m vs. prev.  net income of USD 695m. Revenue at USD 2.8b vs. est. USD 3.10b vs. prev. USD 4.91b. In related news co. will cut 5000 jobs and also delayed the launch of its new operating system to 2013. (CNBC/Reuters)

Constellation Brands – Co. reported 1Q12-13 profit of USD 72m vs. prev. 1Q11-12 profit at INR 74.5m. EPS at 38 cents vs. est. 39 cents vs.  prev. 35 cents. Net sales excluding excises taxes at USD 634.8m vs. est. USD 647m vs. prev. USD 635.3m. (Fox Business/Newswires)

Coty Inc – Co. to raise USD 700m via an initial public offering. (WSJ)

COMMODITIES

According to a Reuter’s survey, OPEC output slipped marginally in June averaging at 31.63m bpd versus a revised 31.70m bpd in May. Output slipped due to decline in Iranian crude supply, as result of current embargo situation.   The survey showed that Iran’s crude oil supply slipped by 180,000 bpd to 2.95 m bpd, which was the lowest output since 1989 (2.81m bpd). (Economic Times/Reuters)

DAILY MARKET REPORT – 29 JUNE 2012

The markets ended the week higher on positive news from the EU Summit regarding the bailout for Spain, global cues and government’s clarification on GAAR policies. The Sensex closed 439.22 points higher at 17429.98 (2.59%) while the Nifty closed 129.75 points higher at 5278.9 (2.52%).

The Sensex touched an intraday high of 17448.48 and a low of 17134.61 points in trade today. The Nifty touched an intraday high of 5286.25 and a low of 5189.00 as well.

Sentinment in the global markets was buoyed by the decision undertaken by the leaders at the EU Summit in Brussels. Elsewhere, Asian indices also closed higher on an average of 1.5 – 2.2 percent higher on the same news. Similar highs ranging from 1.5 – 2.8 percent was seen on European indices as well. US Stock futures too are expected to open higher, taking cues from the global indices and from the news at the summit. It remains to be seen as to how the financing of bailouts take place in the near future as more and more nations in the eurozone would look to avail such facilities. But it is expected that the week would end on a higher note even for the European and US markets.

On the currency front, Rupee appreciated by 0.82 points to touch 55.975 to the dollar in trade, a clear sign of the bullish global cues in trade.

On the stock front, majority of the shares were gainers with Cairn declining 6 percent on a stake sale by the parent co. Oil marketing firm BPCL declined as well on the cut in petrol prices. Morgan Stanley’s brokerage unit upgraded Indian equities as well, a reason to add to the sentiment in the wake of many downgrades in the recent period. ITC touched a 52 week high of INR 260 today. Reliance Industries purchased 3 cr shares in open market transactions as it gained 2.3 percent to INR 736. L&T also rose 4 percent to INR 1394 on receiving new orders worth INR 1000 cr in June.

Commodities rallied on upbeat global sentiments with WTI at USD 80.21 up 3.24% and Brent trading at USD 94.30 up 3.22%. On the weather front, severe thunderstorms are expected in parts of South Dakota to northern Missouri.

For the week ahead, investors should also keep a watch on the outcome of the summit which ends today.

Kindly check the Market Summary tab for further information on stock-related data.

(Business Standard, Economic Times and Moneycontrol)

EU SUMMIT: LEADERS EASE RULES ON SPAIN; MERKEL GIVES IN

EU Summit saw leaders come to a common agreement on the debt repayment rules to Spanish banks and on Italy also being a potential candidate for a bailout package. German Chancellor Angela Merkel who initially relented to the plans, finally agreed on undertaking further steps to halt the crisis. The Italian and Spanish leaders were satisfied with the agreements on steps to mitigate the crisis. (Bloomberg)

 

GAAR EFFECTIVE 1 APRIL 2013

The General anti-avoidance rule (GAAR) will be implemented from 1 April 2013 as per the draft released early today.  The guidelines formulated are mentioned below:

–          Non-resident FII investors are exempt from the application of the guidelines. Only co.’s opting for tax benefits will come under the purview of GAAR.

–          GAAR would deny tax benefits to co’s or FII’s who enter into India only for the sole purpose of avoiding tax payments, mainly routed through Mauritius with which India has a tax avoidance treaty.

–          GAAR will not be imposed on participatory notes (p-notes) which are commonly used to invest in India to calm investors.

–          The tax rule will only be imposed on transactions beyond a certain limit which will be decided in the coming month or two by the Finance Ministry and India’s Prime Minister.

(Economic Times, MoneyControl and NDTV Profit)