Year: 2008

The Indian inflation touched a record 40 month high to 7.41% mostly by the centralization and rise in prices of Iron and Steel. The annual inflation rate was 5.94% during the corresponding week of the previous year. The Government of India has banned primary exports of Iron and Steel and Cement with immediate effect fearing the collapse of coalition Government.

However, their is a reason to cheer as well, the Indian Industrial Output for the month ended Feb-08 has risen back to 8.5% from 5.3% in Jan-08.

Citi expects 4Q08 profit growth for the Sensex at 19%, Sensex (ex-Oil) at 11%, and Citi India Universe (ex-oil) at 12%. This is a continuation of the moderation trend of the last few quarters; but ex-oil, it is the most pronounced dip in growth rates over the last few quarters. There is potential downside risk, too – from one-offs, on FX derivatives mark-downs.

The topline should perk up a bit after 5 moderating quarters – 20% up, and relatively broad based across sectors. Margins are however likely to head down; estimate a 90bp dip yoy, and about the same qoq (though there is seasonality), offsetting the top-line buoyancy.

Higher profit growth – Brokerages (46%), Hotels (37%), and Petrochemicals (32%). The offsets – Metals (-8%), Oil & Gas (-26%), and Pharma (3%). Citi expects 20% earnings growth for FY09; but see risks from a slowing economy, higher costs and market risks (FX derivatives, equity markets slowdown). 4Q08 results could be more directional than recent quarters. Unlike in the past, the market seems to be factoring in meaningful downsides, expectations are low, and ‘no new bad news could well be good news’

Yes Bank’s FY08 results did not disappoint, with net profit growing 112% YoY to Rs2bn (vs our forecast of Rs1.96bn). Recent concerns on forex derivative losses were unfounded and did not hurt 4QFY08 profits. Profit growth was driven by a strong increase in net interest and non-interest income, lower cost/income ratio and partly offset by rising provision charges. Key profitability ratios remain healthy, with ROA of 1.4% and ROE of 19%. After last month’s earnings downgrade, we still forecast 38% earnings CAGR over FY08-10ii.