Category: Breaking Corporate India Earnings News

Weekly spike continues. For the week ending 9 May ’09, headline inflation (wholesale price index, WPI) was 0.61%, in line with our and market estimates. The WPI for the week ending 14 Mar ’09 was raised to 0.71% from 0.27%. The consumer price index for industrial workers for Mar ’09 was 8.03% and for FY09 was 9.1%

Prices of primary articles stay up. Primary article prices continue to rise due to the jump in food prices. All the major components – food grains, fruit, condiments and spices, other food and non-food articles rose. Vegetables and pulses dipped marginally

Manufactured prices up. The rise in manufactured prices is largely due to the upward move in food product prices. Edible oil, textiles, chemicals and basic metals prices have also jumped up. Non-metallic products, machinery and transport equipment remained unchanged.

Outlook. We expect the WPI to slip into deflation by the end of May ’09. Inflation has spiked up w-o-w and we expect the trend to continue. This trend has reduced the likelihood of any further policy rate cuts in the near future.

Engineering and turnkey construction major Punj Lloyd has decided to offload its stake in the realty joint venture with the Delhi-based Ramprastha group. The latter will pick up Punj Lloyd’s 50% in the venture set up to develop a 29-acre project in Ghaziabad.

Company chairman Atul Punj stated that while the company will continue servicing construction contracts, it will not be a developer. The company’s order book includes a clutch of state-promoted housing projects in the Middle East.

The scrip price has witnessed upswings of 30.94% since last week and 49.27% since last month. Punj Lloyd is currently trading at Rs 168, up by 6.70 points or 4.15% from its previous closing of Rs 161.30 on the BSE.

With a stable Government in place, Analysts believe business confidence will look up and the prospects of fiscal consolidation will improve. The street is Overweight the investment cycle and adding to our positive stance on Financials.

• Upgraded Industrial from Underweight to Overweight
• Utilities from neutral to Overweight
• Financials from Underweight to Overweight
• Healthcare and Consumer Staples from Neutral to Underweight
• Materials – Underweight
• Downgrading IT Services, from an Overweight to Neutral
• Upgrading Telecoms from Underweight to Neutral

However, the big question is will earnings match the new ratings for FY10 or will they start selling the FY11 story ? Tezi Mein Tezi seems to be the buzzword 🙂

We wouldn’t be surprised if raters – Fitch just sounded caution – downgrade India on fiscal risks. And we wouldn’t be astonished, if fiscal sustainability fears, like in the previous down cycle, prove wrong. We do not share concerns about a medium-term impact on the India story, as the present spike in the fiscal deficit is essentially cyclical . Risk: election of a completely irresponsible fiscal regime next week.

It is critical, in our view, to appreciate that the causality essentially runs from growth to the fiscal deficit, rather than the other way round. It is surely no one’s case that the benign 5.4% of GDP FY07-08 fiscal deficit led to the current growth collapse! Once growth revives FY11 on, we expect the fiscal position to improve with a rebound in tax revenue.

The very growth collapse contracting taxes, after all, is also shrinking credit demand. This leaves banks with surplus to fund the fisc, moderating the yield impact of high government borrowing and enabling softer lending rates to support growth.

MSCI has announced changes to MSCI India index constituents under its May 2009 Semi
Annual Index Review (SAIR). There will be 3 additions to, and 4 deletions from the MSCI India Index. New number of constituents will be 58. Changes will be effective from as of close on May 29, 2009. Based on these changes, India country weight in the MSCI EM Index will reduce marginally from 6.47% to 6.36%.

Additions: Idea Cellular, Bajaj Auto and United Phosphorus
Deletions: Essar Oil, Unitech, Tata Communications, and Indian Hotels
Significant weight changes: Reliance Petroleum (+0.62%), Tata Consultancy (+0.36%) and Grasim (-0.43%).

Merchandise exports fell sharply by 33.3% yoy in March from a 21.7% yoy fall in February, marking a sixth consecutive month of fall in exports. In INR terms, exports contracted by 15% yoy, reflecting the large yoy INR depreciation. On a sequential basis, exports fell 18% mom; seasonally adjusted.

Imports slid sharply by 34.0% yoy in March, compared to the 23.3% yoy fall in February. Non-oil imports fell rapidly by 19% yoy in March, from 10% yoy in February. Oil imports continued to contract by 58% yoy versus a 48% yoy fall in February.

The trade deficit narrowed substantially to US$4 billion versus US$5 billion in February and a peak of US$13 billion in August as the contraction in imports was a tad more rapid than the fall in exports.