Indian Markets May Open Sideways Ahead Of TCS March Quarter Earnings Announcement

Indian equity markets may open sideways as investors and traders look forward to TCS for vital cues. The SGX Nifty is trading down by 1 point at 5310 indicating a gap down opening to markets today.

Last week the markets were driven higher thanks to the RBI governor’s surprising move to slash key interest rates by 50 basis points in a bid to spur economic growth in the country. The week also had some of the major companies like HDFC Bank, HCL Tech, ACC, Ambuja Cement, etc reporting their March quarter results, thus leading to sharp movements in some of the counters. The results of HDFC Bank were in line with the street expectations with the bank posting a robust performance.

After the disappointment that crept in from the results of Infosys, its peer HCL Tech brought about some cheer with a good performance, thus driving home the point that Infosys’ issues may not be applicable to the industry at large. In dollar terms HCL Tech’s bottomline posted growth of 8.6 per cent to USD 121.1 million on a sequential basis. 

Going forward, all eyes would be glued towards IT bellwether Tata Consultancy results announcement expected today. Let’s note that TCS doesn't give any specific guidance and hence its fourth quarter performance will be keenly watched by investors and traders who will look for any commentary related to overall business environment and deal pipeline or things that could give some inkling of the current fiscal year. 

The street expects TCS' rupee revenue is likely to grow around 30% year-on-year, but flat to marginally down sequentially. Its profit after tax is seen up 18-22% from a year ago, but down around 0.5-3% quarter on quarter. TCS' US dollar revenue will grow 17-18% year-on-year and around 1-2% sequentially in the fourth quarter. 

The shocking performance of Infosys over the recent past has raised questions over the health of the Indian IT services industry in general, but we believe a final call on the sector must be taken post results of TCS and Wipro. Here’s what you should watch out for in its earnings announcement on Monday – any commentary on demand outlook for the coming June quarter and FY13, pricing trends especially in the banking and financial services sector, hiring outlook for the fiscal, cash generation and finally annual salary increments.

In conclusion, for today we see markets to remain volatile. We reiterate our stance that with the March quarter results season ongoing it is better to stick to individual stocks rather than go bullish on any particulars sector.

According to press release on the BSE, as expected Reliance Industries reported a 21 per cent fall in its net profit to Rs 4,236 crore in the quarter ending March 2012, as compared to Rs 5,376 crore in the same quarter a year earlier, even as it sprung a surprise with higher than expected gross refining margins (GRM). The diversified conglomerate reported a GRM of USD 7.6 per barrel as against street estimates of USD 6.8 per barrel. Total income went up 17 per cent to Rs 85,182 crore as compared to Rs 72,674 crore in the fourth quarter last year. For the 2011-12 financial year, net profit rose 2.2 per cent to Rs 19,724 crore and turnover increased 35 per cent to Rs 358,501 crore. Due to the below par performance across all its business segments, we expect some profits taking in the shares today at the opening bell.

According to Business Standard, Naveen Jindal-led JSPL will invest over Rs 10,000 crore in 2012-13 to part-fund its Rs 2 lakh crore capex plan that aims to ramp up its steel-making capacity to 18 MT in five years. JSPL produces around 4.5 MTPA at its Raigarh plant in Chhattisgarh. It is now setting up three steel facilities at Angul in Odisha, Patratu in Jharkhand and Raigarh to raise capacity to 18 MTPA. Besides, it is setting up 4,200 MW captive power plants in Chhattisgarh and Jharkhand. The company is also investing Rs 45,000 crore in a Coal to Liquid project in Odisha.

According to sources, three Indian carriers, which have been permitted to directly buy jet fuel from foreign sources, would together import almost 13 lakh kilo litres (kl) of the fuel at a cost of about Rs 5,780 crore for the present. The carriers which have recently received permission from the Directorate General of Foreign Trade (DGFT) under the Commerce Ministry, to import aviation turbine fuel (ATF) are Kingfisher Airlines, SpiceJet and IndiGo. While InterGlobe, owner of no-frill airline IndiGo, got approval to import 7.15 lakh kl worth Rs 3,200 crore of jet fuel, cash-strapped Kingfisher has been allowed to buy five lakh kl worth Rs 2,233 crore. SpiceJet would import only 50,000 kl worth Rs 235 crore. 

According to press release on the BSE, IDBI Bank has posted a 33% rise in net profit of Rs 771 crore for the quarter ended March 31, 2012 compared to Rs 516 crore for the corresponding quarter of the previous fiscal. The total Income is Rs 6,856 crore for the quarter under review, up 16.84% from Rs 5,701 crore last year. On a yearly basis, IDBI Bank's net surged 18.79 per cent to Rs 2,032 crore in FY12 from Rs 1,650 in FY11. The Total income went up to Rs 25,489 crore from Rs 20, 684 y-o-y.

According to press release on the BSE, Cairn India reported an 11% dip in net profit at Rs 2,186 crore for the quarter ended March 31, 2012 as against Rs 2,458 crore in the same quarter a year ago. However, total income increased marginally to Rs 3,743.6 crore from Rs 3,692.8 crore in March 2011. The net profit decrease may be partly attributed to the forex loss of Rs 217 crore incurred during the quarter. It was Rs 38 crore in the same period a year ago. The oil major produced better numbers in FY12. Net profit for the financial year ended March 2012 increased 25% to Rs 7,937.7 crore from Rs 6,334.4 crore in the financial year ended March 2011. Total income also increased 23% to Rs 12,798.6 crore as against Rs 10,406.7 crore in March 2011.

According to The Economic Times, Analjit Singh-promoted Company Max India has decided to divest its 25-year-old polypropylene business in a two-stage transaction for an enterprise value of about Rs 800 crore, a move that will help it exit its non-core business. The Delhi-based company is said to be in advanced negotiations with at least two overseas firms in Europe and the US for its bi-axially oriented polypropylene film division.  The two-stage deal under consideration involves divestment of majority stake in the first phase, followed by sale of the residual stake later at a pre-determined price. The BOPP film is used for flexible packaging applications. For the year ended March 2012, the division as per market estimates is expected to generate an operating profit of Rs 75 crore on revenues of about Rs 700 crore.