The domestic markets are expected to open sideways following flat opening across most of the Asian markets. The domestic bourses surpassed the psychological 18,000 mark yesterday, reaching the highest level in more than six months. The surge followed the strong rally across Asian markets driven by China’s pledge to invest in the euro zone bailout. Data showing sustained buying of Indian stocks by FIIs also boosted sentiments.
Global cues remained mixed. European markets edged up slightly as China signaled help amidst data that showed contraction of the Germany economy in the fourth quarter. Along with the positive remarks from Chinese officials, US traders also digested the news that the second bailout to Greece could be delayed and the US bourses displayed volatility ending slightly negative.
On the domestic front, optimism has gradually crept in. Soothing of inflationary pressures and hopefulness of monetary easing has led to broad based FII inflows. On the global front, China’s support to the eurozone is likely to renew the optimism of fixing the eurozone debt crises. Currently holding strong breadth, the markets will trace new catalysts for the rally to sustain.
Markets Today
The trend deciding level for the day is 18,145 / 5,512 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 18,289 – 18,376 / 5,563 – 5,593 levels. However, if NIFTY trades below 18,145 / 5,512 levels for the first half-an-hour of trade then it may correct up to 18,058 – 17,914 / 5,481 – 5,430 levels.
PM initiates action to address issues of coal supply for power projects
The Prime Minister has approved suggestions made by the Secretary level Committee for solving the issue of coal deficit faced by Power sector. As per the approved suggestions, Coal India Limited (CIL) will sign FSAs with power plants that have entered into long-term PPAs with power distribution companies and have been commissioned/would get commissioned on or before 31st March 2015. For power plants that have been commissioned up to 31st December 2011, FSAs will be signed before 31st March 2012. The FSAs will be signed for full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years with trigger level of 80% for levy of disincentive and 90% for levy of incentive. In case of any shortfall in fulfilling its commitment under the FSAs from its own production, Coal India Limited will arrange for supply of coal through imports or through arrangement with State/Central PSUs who have been allotted coal blocks.
In our view this news is positive for the power sector considering that the fuel shortage is the key issue currently faced by the sector. CIL had not signed any FSA’s with private power generators after March 2009. The main contention between CIL and Power companies was with regard to formers’ stance of having a trigger level of 50% beyond which it would not get penalized. However, we have concerns with regard to ability of Coal India to ramp up production. The company’s ability to ramp up production depends on quicker and easier approvals from environment ministry with regard to forest and environment clearance. We await more clarity on this development.
Result Review
INEOS ABS Ltd. - 4QCY2011
INEOS reported its 4QCY11 numbers. Top line for the quarter was flat at Rs.211cr yoy. Annual sales stood at Rs.826cr, 7.7% lower than our estimates of Rs.896cr. Operating margin for the quarter fell by 980 bps yoy from 16.4% to 6.4% mainly due to substantial increase in the raw material cost as percent of sales. Net profit stood at Rs.9.5cr, 56% lower yoy. Annual net profit came in at Rs.54cr, 22% lower than our estimates of Rs.69cr. As we roll over to CY2013E, we continue to maintain our Buy recommendation on the stock with the revised target price of Rs.733, based on PE of 15x for CY2013E.
Result Preview
GSK Pharma - 4QCY2011
Glaxo Pharma is slated to announce its 4QCY2011 numbers. For the quarter, we expect the company to post healthy top-line growth of 17.5% yoy to Rs.577cr. The company’s bottom line is expected to register a decline of 20.5% yoy to Rs.116cr, aided by margin contraction of 350bp yoy to 30.6%. We maintain our Neutral view on the stock.
Economic and Political News
- India set to harvest record 250mn tonnes of Food grains
- Finance Minister asks states to promote investment in farm supply chain
- CII asks for continuation of 10% standard rate of excise duty in its pre-budget memo
Corporate News
- Future licences won't be linked to spectrum allocation: Sibal
- Government mulls options to allocate NTPC’s stake in ICVL
- Volvo rolls out three new variants at lower price points
- Akzo Nobel India board agrees to partial rollback of royalty rate to parent
- Sterlite Industries to pay US-based Asarco US $82.8mn in damages
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