Indian stock market and companies daily report (June 29, 2012, Friday)

The Indian markets are expected to open in green tracking positive cues from SGX Nifty. Asian shares and the euro were under pressure as European leaders argued over how to ease borrowing strains in Italy and Spain and stop the euro zone debt crisis spreading, with investors fearful of US reaction to the deadlock.
US stocks saw significant weakness throughout much of the trading day on Thursday, the markets staged a significant recovery attempt in the final hour of trading. The major averages climbed well off their worst levels of the day but still closed in negative territory. Lingering concerns about the financial situation in Europe contributed to the early weakness on Wall Street along with a negative reaction to the Supreme Court's decision to uphold President Obama's healthcare reform law, including the law's individual insurance mandate.
Continued expectations of government action to revive domestic growth helped Indian shares shrug off weak global cues on Thursday. The rupee also traded firm, bolstered by dollar selling by banks and exporters after PM sought to give a big push to the sagging economy.

Markets Today
The trend deciding level for the day is 16,981 / 5,145 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,043 – 17,096 / 5,164 – 5,178 levels. However, if NIFTY trades below 16,981 / 5,145 levels for the first half-an-hour of trade then it may correct up to 16,928 – 16,866 / 5,130 – 5,111 levels.

Coal India gets NTPC's de-allocated coal mines
Media reports suggest that Coal Ministry has given three de-allocated mines to Coal India (CIL) and has asked CIL to appoint mine developers to begin the production from these blocks at the earliest. The three allocated blocks include Brahmini, Chichro Patsimal and Damogoria blocks. We believe CIL will start developing these blocks, but it is unlikely to commence production from these blocks in the near term. Hence, we await further clarity on this matter. Thus, we maintain our estimates on CIL and recommend a Neutral rating on the stock.

SBI cuts its lending rates for exporters by 50bp
State Bank of India (SBI) has reduced its lending rates for export credit by 50bp w.e.f. June 23, 2012, responding to recent RBI action of enhancing the limit for export credit refinance (ECR) from 15% to 50%. We expect the bank to report NIM of 3.7% and 3.4% for FY2013 and FY2014, respectively. At the CMP, the stock is trading at 1.2x FY2014E ABV (after adjusting for value of subsidiaries). We recommend a Buy rating on the stock with a target price of Rs.2,469.

CG inaugurates new EHV switchgear manufacturing facility in Brazil
CG (Crompton Greaves Ltd) commenced operations of its new Extra High Voltage (EHV) Switchgear manufacturing facility in Brazil. It will manufacture a full range of EHV switchgear targeted at the Brazilian Utility market segment. It intends to differentiate by introducing its latest models and provide Brazilian customers with a 30 per cent reduced lead time. CG expects to reach $50mn during the first year of operations. CG has already received more than USD 6 million worth of orders from Utilities such as CEMIG, CPFL, CEEE, RGE and Toshiba. We maintain our Buy on the stock with a target of Rs.142.

Petrol price cut by Rs.2.46/litre
Oil marketing companies (OMCs) have reduced petrol prices by Rs.2.46/liter. OMCs had already cut petrol prices by Rs.2.02/liter on June 3, 2012. Petrol prices have been lowered due to declining global crude oil prices over the past one month. Brent crude oil price has declined from US$103/bbl on May 31, 2012, to US$93/bbl as on June 28, 2012. Since petrol prices are not included in the calculation of under-recoveries, we do not change our estimates for underrecoveries for FY2013. We maintain our Buy rating on ONGC with a target price of Rs.321 and maintain our Accumulate rating on GAIL with a target price of Rs.389.

DoT to slap penalties Rs.1,594cr on five mobile phone firms this week
The telecoms department (DoT) will this week formally slap penalties totaling Rs.1,594crore on five mobile phone firms, after it rejected their defence against charges that accused them of understating revenues and paying less levies. The DoT plans to send demand notices to Bharti Airtel, Idea Cellular, Vodafone, Tata Teleservices, Tata Communications and RCom by the month-end. Earlier this year, these companies were slapped with showcause notices after a DoT appointed panel endorsed the findings of external auditors, which said these operators had understated revenues by Rs.10,268cr during 2006-07 and 2007-08. Since telcos pay 6-10% of their annual revenue as license fee and 2-6% as spectrum usage charges, reporting lower revenue brings down the component they have to share with the government. The DoT had also obtained the law ministry's approval prior to sending out showcause notices. But all telcos had denied any wrongdoing and slammed the DoT panel's findings.
The department has estimated that Bharti Airtel will have to pay penalties to the tune of Rs.292cr while for Vodafone it will be Rs.254cr. The penalty for Idea works to Rs.113cr, Tata Teleservices at Rs.273cr and Tata Communications at about Rs.120cr while RCom will have to pay about Rs.551crore. This includes interest and other related fines for the alleged violations. We continue to maintain our Neutral view on the overall telecom sector owing to regularity uncertainties as well as increase in interest payments of various companies (Bharti Airtel, RCom) which has got forex debt in their books due to sharp INR depreciation.

PM moves to soften GAAR
As per media reports, Prime Minister Manmohan Singh has kicked off a review of the controversial changes that scared away foreign investors. PM has asked finance ministry officials to examine the whole gamut of tax issues concerning portfolio investors which include the General Anti-avoidance Rules (GAAR) intended to check tax evasion by creating structures sans commercial substance. With regard to the new provision to tax overseas transactions involving Indian assets for capital gains, the sources did not even rule out a clarification that no past deals would be taken up in such cases even if the assessment process was not complete. The PMO has sought clarifications on all tax issues (pertaining to investors) and expects clarifications on indirect transfers pertaining to FIIs will be issued in a few weeks.

EU summit works on short-term support for Spain, Italy
Italy and Spain, battling searing market pressure in the euro zone's widening debt crisis, blocked agreement on measures to promote growth at a European Union summit on Thursday to demand urgent action to bring down their borrowing costs. As per three EU sources, work was focused on using the euro zone's temporary EFSF rescue fund and a future permanent ESM bailout fund to buy new Spanish and Italian bonds as they were issued to underpin their bond auctions. The funds will have a maximum firepower of €500bn once the ESM is fully stocked in 2013, minus €100bn already earmarked to aid Spanish banks. It is expected that an agreement could be clinched at a meeting of the 17 euro zone leaders today after the regular 27-nation EU summit ends.
In draft summit conclusions, subject to amendment today, the leaders were set to ask the EU's top four officials to produce a detailed, time-bound roadmap in December leading to a genuine economic and monetary union. European Council President and European Commission President have set long-term goals of creating a euro zone treasury to issue joint bonds in the medium-term, and establishing a banking union with central supervision, a joint deposit guarantee and a resolution fund.

Economic and Political News
- Private airlines may get subsidy for flying to northeast
- Petrol price cut by Rs 2.46/litre, scope for more reduction
- Indian economic confidence slips in May on weak rupee, inflation
- Land deals in India to drop by 20% this yr to Rs 15k cr: C&W

Corporate News
- SAIL consortium may sigh pact with Afghanistan next month
- Bajaj Auto may hike prices as rupee fall raises input costs
- Gati forms JV with Japanese firm to reduce debt, interest cost
- Lanco commissions Bangalore-Mangalore toll road

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Indian stock market and companies daily report (June 28, 2012, Thursday)

The Indian markets are expected to open in green tracking positive cues from Asian markets. Indian shares rose modestly yesterday on expectations the government will look at fresh reform initiatives after PM took charge of the finance ministry following the resignation of Pranab Mukherjee.
US markets saw some strength on Wednesday as traders reacted positively to a batch of relatively upbeat US economic data. A report from the National Association of Realtors (NAR) showed much stronger than expected growth in home sales index from 5.9% to 101.1 in May 2012 after falling 5.5% to 95.5 in April 2012 (expectation of 1.2% increase). European stock markets rallied in afternoon trade on Wednesday, after upbeat housing data from the US fueled investors' buying appetite.
Global cues also offered some support, with stocks rising modestly across Asia and Europe on Wednesday, although the undertone remained weak ahead of a critical European summit starting today. Markets would await direction on Eurozone crisis from the Europe summit today.

Markets Today
The trend deciding level for the day is 16,923 / 5,127 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,976 – 17,021 / 5,144 – 5,158 levels. However, if NIFTY trades below 16,923 / 5,127 levels for the first half-an-hour of trade then it may correct up to 16,877 – 16,759 / 5,113 – 5,078 levels.

SAIL cuts prices of value-added product modestly
Steel Authority of India (SAIL) has slashed the price of galvanized corrugated (GC) sheets by Rs.600-3,000 (1-5%) per tonne for July due to slackening demand. GC sheets are mainly used for roofing, industrial sheds, paneling, automobile bodies, household boxes, etc. The contribution of GC sheets to SAIL’s total sales volumes would not be more than 4% of its consolidated volumes in our view. Hence, we do not expect any significant impact of price cut on SAIL’s financials. We maintain our Neutral view on the stock.

Hindalco reports consolidated results; delays Mahan smelter
Hindalco reported its consolidated results for FY2012. The company's top line grew by 12% yoy to Rs.80,821cr and its net profit grew by 38% yoy to Rs.3,397cr. However, the company reported revised timeline for commissioning Mahan smelter to CY2012 (earlier guidance: 1QFY2013). The delay in commissioning Mahan smelter was in-line with our expectation. Nevertheless, the company has broadly maintained its timelines for other projects. We continue to maintain our Neutral view on the stock.

Sadbhav Engineering bags orders worth Rs.353cr
Sadbhav Engineering (SEL) has bagged two major orders worth Rs.353cr. The company has been declared a successful bidder by Maharashtra State Road Development Corporation (MSRDC), Mumbai, for a contract valued at Rs.319cr. SEL has signed a joint venture with Hindustan Construction Company for the construction of terminal facilities for passenger water transport along the west coast of Mumbai at Marve and Borivali. The company will lead the JV with more than 51% participation share. The second order worth Rs.33.5cr from Delhi Metro Rail Corporation (DMRC) involves construction work for phase-III of Delhi MRTS. With these orders the order book of SEL stands at ~Rs.7,900cr (3.0x FY2012 revenue), providing good revenue visibility. We continue to maintain our Buy view on the stock with an SOTP target price of Rs.182, owing to robust order backlog, strong balance sheet (0.5x net debt/equity FY2012) and as the company’s equity requirement for under-construction/development projects is expected to be met by internal accruals.

Economic and Political News
- Oil falls on Europe anxiety, strike supports
- Monsoon likely to revive only after July 5
- Central Bank likely to impose curbs on gold coin sale
- Rupee, euro crisis hits gold demand in India
- Rupee down 12 paise to 57.14/dollar

Corporate News
- PMO asks Coal Ministry to give deallocated mines to CIL
- United Phosphorus soars as buyback offer gains momentum
- DOT plans to impose Rs.600cr fine on RCOM
- Brigade, GIC acquire HUL’s Whitefield land for Rs.125cr
- Tata Motors to halt output for 3 days on poor offtake

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Is the European crisis turning into a global crisis?

The recession fear is looming large again. The European sovereign debt crisis has been worrying the global market since a while now.  These tremors have crossed several continents and have reached the Indian shores too. Remember, India is a developing country and has some form of aid or other with the European Union.

     To explain the European crisis in the most basic, simple form, it is just that many countries in Europe have taken way too much debt, so much that they now a stand huge risk of being unable to pay it all back.

     Although some European countries are comparatively sound and better off financially, some are very over leveraged, which when translated means to excessive debts almost to the size of their economies. The eurozone officials have been working overtime and hard to pacify these effects. The 17 nation body that uses the euro as its currency since 1999 now faces a huge, hair-raising possibility of more than one country defaulting in its debts.  This can result in a possibility of more than one country in the eurozone defaulting in payment of its debts. 

This can result in adverse effects in the financial world, which can cause investors to panic and could possibly trigger an enormous banking and financial shock. Countries like Portugal, Ireland, Italy, etc. have been grouped under the unfortunate acronym PIIGS – i.e. some of the most highly leveraged countries and it is said that if a disaster takes place, it will start with any of these countries.

     Ireland is in 109% debt of its economy, Italy’s figure is 121% and for Greece it is a staggering 165%.

      India regularly imports and export in the Eurozone. Transactions of more than a billion dollars have been taking place under several bureaucratic and diplomatic relations. Under these circumstances, it is possible that many of these nations may stop transacting and trading not just with India but several other nations, which will result in a sudden halt of foreign investments.

Although India is suitably equipped to tackle the situation, the everyday unearthing of new scandals, increase in corruption and day-to-day rise in cost of living has made things worse for India. The FII’s are slowly withdrawing their support towards Indian investments and many of these companies are facing financial crunches which are resulting in an either abrupt shut-down or debt crisis for these countries.

Because a majority of these companies are in the private sector, it is very difficult for the Indian government to bail these companies out.

      Though India is trying its best to improvise its economic reforms, the broader picture is bleak and only time will tell about the effects on Indian economy.

Indian stock market and companies daily report (June 08, 2012, Friday)

The Indian markets are expected to open in the red tracing negative opening in most of the Asian bourses and the SGX Nifty. Asian stocks were trading lower after comments by Federal Reserve Chairman Ben S. Bernanke overshadowed China’s first interest-rate cut since 2008.
The People’s Bank of China has lowered its benchmark lending and deposit rates by 25 basis points. The announcement, two days before China is due to report inflation, investment and output figures, may signal that the economy is weaker than the government expected. Bernanke said the central bank will need to assess conditions before deciding if more measures are needed to stoke an economy threatened by Europe’s debt crisis and U.S. budget cuts.
Meanwhile Indian shares extended recent gains on Thursday after the rupee breached the 55 mark to hit a two-week high against the dollar reflecting a return of appetite for risk. Talks of the government giving a big push to infrastructure development bolstered sentiments. Although there were reports of the Union Cabinet deferring a decision on the Pension Bill due to lack of consensus, the benchmark indices ended the trading day with significant gains.

Markets Today
The trend deciding level for the day is 16,617/5,039 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 16,713 – 16,777/5,070 – 5,091 levels. However, if NIFTY trades below 16,617/5,039 levels for the first half-an-hour of trade then it may correct up to 16,552 – 16,456/5,018 – 4,987 levels.

China cut borrowing costs
China reduced interest rates for the first time since 2008 and loosened controls on banks’ lending and deposit rates, in its bid to combat a deepening slowdown as Europe’s ongoing debt crisis threatens global growth. The one-year lending rate and one-year deposit rate were reduced by 25bps to 6.31%, and 3.25%, respectively. Banks are now given more leeway to offer upto 10% higher than benchmark deposit rate to depositors and to charge upto 20% lower than the key benchmark lending rate (previously 10%).

RIL plans a capex of Rs.100,000cr over next 4 years
Reliance Industries (RIL) conducted its Annual General Meeting (AGM) for FY2012. With cash and equivalents of ~Rs.80,000cr as of March 31, 2012 on RIL’s balance sheet, Chairman Mr. Mukesh Ambani announced that the company plans to invest Rs.100,000cr across business segments over the coming four years. It targets to invest ~US$3.5bn on shale gas. On its core petrochemical business, RIL aims to increase its capacity to 25mn tonnes from the current 15mn tonnes and also invest in operational efficiency projects. RIL aims to become a market leader in retail business and targets to achieve top-line of Rs.40,000-50,000cr over the next threefour years (current top-line Rs.7,600cr). Further RIL informed that although KG D6 production has declined over the past one year to 34mmscmd, it aims to raise total gas production to 60mmscmd by 2015. On profitability front, Mr. Ambani said that RIL aimed to double its operating profits in the coming five years. RIL has bought back 2.79cr shares at a cost of Rs.1,929cr under its share-buyback program. Alongside decline in KG D6 gas output, deployment of huge cash pile was amongst the key concerns on the stock. Clarity over deployment of cash is positive in our view. We maintain our Buy rating on the stock with a target price of Rs.879.

L&T bags orders worth Rs.2,410cr
L&T’s construction arm has won Rs.2,410cr new orders across various businesses during April-June 2012. The Buildings and Factories IC has secured new orders worth Rs.1,921cr. The orders are from leading developers for the construction of major residential towers across various cities in the northern part of the country. L&T Infrastructure IC has won orders to the tune of Rs.345cr for the design and construction of viaducts and three elevated stations from Delhi Metro Rail Corporation which also includes additional orders from various ongoing projects. Water effluent and treatment business has bagged new orders worth Rs.244cr from Bangalore Water Supply and Sewerage Board for upgrading the existing water distribution systems including additional orders from various ongoing projects.
At the CMP of Rs.1,277, the stock is trading at 16.7x FY2014E earnings and 2.4x FY2014E P/BV on a standalone basis. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on a P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,553, which provides 21.6% upside from current levels. We recommend Buy on the stock.

Economic and Political News
- People’s Bank of China cuts interest rates as economy continues to slide
- Monsoon 36% below average in first week: IMD
- PM's push for infra sector to boost investor confidence: CII
- Cabinet defers decision on pension reforms bill

Corporate News
- Tata Steel to set up Rs.30,000cr plant in Karnataka
- Suzlon to invest Rs.15,000cr to set up a 2,500 MW wind farm in Karnataka
- Dr Reddy's launches generic Parkinson's disease tablets in US
- BHEL commissions 250MW unit at UP thermal power project
- Jubiliant Life Sciences to invest ~Rs.1,000cr across businesses in Karnataka

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Life Insurance Industry in India

Life insurance is a contract bound between an insurance policy holder and an insurer, where the insurer pledges to pay a designated and fixed sum of money upon the demise of the insured individual. Depending on the contract, various other events like terminal illness or critical illness may also prompt for payment. The policy holder has to pay a premium, either in installments or as a lump sum.

Some times other expenses such as the funeral expenses are also included in the premium.

The main advantage for the policy owner is a “peace of mind” in understanding that the death of the insured individual will not result in any financial difficulties for the loved ones.

Life policies are legal contracts and the terms and conditions of the contract describe the limitations of the insured events. However, specific exclusions are more often not described due to the limit of the liability of the insurer. Some common examples regarding claims such as suicide, fraud, war, riot and civil commotion, etc are not included in cover for claim of life insurance.

Life insurance is the fastest growing sector in India since 2000. The Indian government has given the private players and FDI’s upto 26% stake in the insurance sector. Life insurance in India was nationalized by incorporating LIC in 1956. All private life insurance companies during that time were taken over and governed by LIC.

The government of Republic of India set up the RN Malhotra committee in 1993 to lay down a road map which would lead to privatization of the life insurance sector in India.

Though the committee submitted its report in 1994, it took another 6 years before the legislation was passed in the year 2000, legislation amendment of the insurance act of 1938 took place and legislating the insurance regulatory and development authority act was passed in 2000. In the same year, the newly appointed insurance regulator – insurance regulatory and development authority IRDA began issuing licenses to private life insurance.

Some of the Life insurers in private sector are mentioned below:

•             SBI Life Insurance

•             Metlife India Life Insurance

•             ICICI Prudential Life Insurance

•             Bajaj Allianz Life

•             Max New York Life Insurance

•             Sahara Life Insurance

•             Tata AIG Life

•             HDFC Standard Life

•             Birla Sunlife

•             Kotak Life Insurance

•             Aviva Life Insurance

•             Reliance Life Insurance Company Limited - Formerly known as AMP Sanmar LIC

•             ING Vysya Life Insurance

•             Shriram Life Insurance

•             Bharti AXA Life Insurance Co Ltd

•             Future Generali Life Insurance Co Ltd

•             IDBI Fedaral Life Insurance

•             AEGON Religare Life Insurance

•             DLF Pramerica Life Insurance

•             CANARA HSBC Oriental Bank of Commerce LIFE INSURANCE

•             IndiaFirst_Life_Insurance_Company

•             Star Union Dia-ichi Life Insurance Co. Ltd

•             Edelweiss Tokio Life Insurance Company Ltd

According to the current FDI norms, foreign participation in an insurance company has been restricted to 26% of its equity. The insurance regulators have stipulated that foreign investment in Indian Insurance companies to be limited to 26% of total equity issued by investment includes foreign insurance companies for a change in regulations to increase the FDI limit by 49%.

The Indian government has agreed to an increase in the FDI limit, which requires a change in the Insurance Act. The union budget for the fiscal year 2005 had suggested that the ceiling on foreign holdings can be increased upto 49%.

A change in the insurance act will require the passing of the bill in both the houses of the parliament.  The Indian government has tabled the bill in the upper house of parliament in August 2010.

At Angel Broking, the financial advisors not only explain all the nuances on Life Insurance but also help the investor in choosing the right Insurance Policy for self. For more details, please contact: Tel: (022) 3935 7600 or SMS EBRO to 5757587.