Markets may open sideways ahead of TCS December quarter results

Morning Update 17thJan 2012

Opening Bias

The Indian markets are likely to open sideways ahead of the TCS Q3 earnings’ announcement. The SGX Nifty is trading marginally up by two points at 4,899, indicating a flattish gap up opening to the markets today.

The markets will keenly watch out for the December earnings of TCS and HCL. After being somewhat disappointed with results of Infosys, investors on Dalal Street would expect some positive respite from the TCS’ results. We advise our readers to keenly listen to the management commentary at the time of the announcement to get an insight to any further guidance. 

In other developments, the December 2011 inflation figure has eased off considerably to come in at 7.47 per cent as against 9.11 per cent recorded in November 2011. While the primary articles’ inflation retreated sharply, fuel and power and manufactured articles also saw an easing trend compared to the November prices. 

After hovering stubbornly above the RBI’s comfort zone at levels of around 9 per cent for the past 12 sequential months, inflation has finally eased off. This has created some headroom for the central bank to consider a reversal in its interest rate cycle and to take measures to infuse growth and revival in the economy.

On the global front, the US markets were closed yesterday but in the week ahead reports on inflation, housing and manufacturing are likely to show that the US remained on a modest upward track at the end of 2011. In a nutshell, the December data would show the economy on more solid ground. Out in Europe, the stocks advanced, snapping three days of losses, as France auctioned debt at a lower borrowing cost even after Standard & Poor’s stripped the country of its top credit rating. The Asian markets are trading strong in the early hours, following a successful French bond auction and the expectation of a good Chinese economic report on GDP and industrial production due for release later in the trading day.

In conclusion, we expect the markets to remain volatile. A positive guidance from the TCS management will do wonders to lift the market sentiment latter in the day. We advise our readers to stay cautious and stick to cheaply available large-cap bets as they are more likely to see some positive movements.

Stocks in Action

Aviation stocks like Jet Airways, KFA and Spice Jet could witness some action in the early market hours as, according to a news report in Economic Times, a group of ministers are slated to consider a proposal to allow FDI in the sector. There is still no clarity on the percentage of the investment limit, but one can expect it to be somewhere between 26-49 per cent. This development, if pulled through, will help the cash-strapped Indian aviation sector to revive itself.

According to Economic Times, the government plans to cap the price of crude oil sold by ONGC and Oil India to state refiners at USD 54 per barrel this financial year despite an average market price of USD 110 per barrel to help them sell diesel, kerosene and cooking gas below the market rates. The move, which is under inter-ministerial consultation, will severely hurt the finances of ONGC but ease the government’s subsidy burden and help it in containing the fiscal deficit. Expect negative action in the scrips of ONGC and Oil India today.

According to street estimates, HCL Technologies is expected to report a net profit of Rs 523 crore in the December quarter of FY12 - a growth of 5.3 per cent as compared to Rs 496.7 crore in the previous quarter. The revenues are likely to go up by 12.8 per cent to Rs 5,245 crore from Rs 4,651.3 crore during the same period. The EBITDA is seen going up at Rs 950 crore in the quarter ended December 2011 versus Rs 794.9 crore in the previous quarter. We expect some heavy action in the scrip today.

Expect some action in the scrip of SBI as, according to an article from Reuters, the state-run lender has received the finance ministry’s approval for capital infusion of Rs 6,000-8,000 crore. It was also reported that the infusion would be made by March 31, 2012.

According to a press release from the BSE, South Indian Bank has registered 32 per cent jump in net profit at Rs 280 crore for O3FY12 and has declared plans to raise Rs 1,000 crore through QIP. The bank’s total business increased by 27.49 per cent to Rs 58,883 crore in Q3FY12 as against the same period last fiscal. The deposits have gone up from Rs 26,998 crore to Rs 33,834 crore. The advances increased by 30.55 per cent at Rs 25,050 crore in Q3FY12. The bank’s CASA increased from Rs 6,045 crore in Q3 last fiscal to Rs 7,280 crore, up by 20.43 per cent. The CAR of the bank stood at 12.03 per cent (under BASEL II standards) against the regulatory requirement of 9 per cent. The robust growth in business, coupled with the low NPAs enabled the bank to attain the present level of performance. Its gross NPA ratio improved from 1.33 per cent to 0.94 per cent sequentially, while the net NPA ratio changed little at 0.24 per cent during the three months’ period. The bank is looking at 25 per cent growth in FY12 and plans to increase the number of branches to 700 and its ATMs to 625 by the fiscal-end.

According to a press release filed with the BSE, software service provider Tata Elxsi reported an 84 per cent jump in net profit to Rs 10.25 crore for Q3FY12 as against Rs 5.57 crore in Q3FY11. However, sequentially the company has reported 6 per cent decline in profits. The company’s total income increased to Rs 138.74 crore during the period under review from Rs 101.28 crore in the year-ago period - an increase of 36.9 per cent. Systems integration and support services contributed Rs 16.04 crore to revenues while software development and services’ revenue stood at Rs 121.83 crore. Tata Elxsi is a technology design company that is part of the Tata Group. It provides a wide range of services, including software development and industrial software services.

Tata Motors’ global vehicle sales rose by an annual 27 per cent in December 2011, driven by strong sales of its passenger cars and the luxury Jaguar Land Rover vehicles. The sales of its Jaguar Land Rover brand, which Tata purchased for USD 2.3 billion in 2008, stood at 30,981 in the month, a rise of 45 per cent from a year ago.

According to a press release from the BSE, ING Vysya Bank reported a 43.3 per cent increase in its net profit at Rs 119 cr for Q3FY12 as against Rs 83 crore in the year-ago period. The NII of the bank increased by 28 per cent to Rs 321 crore from Rs 251 crore in December 2010 and the gross NPAs reduced to 2.01 per cent as compared to 2.66 per cent in December 2010.

According to a press release filed with the BSE, financial services company Motilal Oswal posted net profit for Q3FY12 at Rs 26 crore, down by 26 per cent from the net profit posted in the previous quarter at Rs 35 crore. However, the shares of the company closed with a rise of 9.84 per cent at Rs 101 a piece on the BSE. We expect some negative action in the counter today.

Coporate Action