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Fundamentals March 13, 2013


Nik's Diary
Indian markets opened in the red tracking negative trade in the major Asian Indices like Hangseng, Shanghai and Nikkei which are lower by 0.3% to 0.6%. SGX Nifty too is currently trading lower by ~0.3%. US markets were weak on Tuesday after having a strong rally over the past few trading sessions. The modest weakness onWall Street is attributable to profit booking by traders after the strong rally. US markets will keenly await the release of key reports during the week on industrial production and consumer price inflation. European markets were mixed on Tuesday as weaker than expected British industrial production data led to some negative investor sentiment in certain markets. However, positive news flows from US resulted in gains for other markets. Meanwhile India’s Key  benchmark indices fell on Tuesday for second consecutive day. There was a positive news on the macro economic front, as the IIP for the month of January 2013 improved to 2.4% yoy as compared to de-growth of 0.5% yoy in December 2012 and 1.0% yoy growth in January 2012. However, the hopes of rate cut announcement in RBI quarterly review receded as retail inflation in February 2013 accelerated to 10.91% vs. 10.79% in January 2013. 

Industrial growth rebounds to 2.4%, CPI inflation on upward trajectory
The Index of Industrial Production (IIP) rose a modest 2.4% in January, reversing the falling trend seen in the previous two months. The return to positive territory was on the back of higher manufacturing sector output and electricity generation, but it does keep the pressure on RBI to cut key policy rates next week. Although the overall numbers will provide some comfort, there are several reasons to worry and it may be early to term it a turnaround, warned industry captains and economists. "While some signs of revival of industrial activity are indicated, it is too early to assume that the slowdown has bottomed out and green shoots of recovery are around the corner. If we factor in the base effect, the performance of industry is still below potential," CII chief Adi Godrej said. Even in the coming months, the recovery is unlikely to be sharp. "Industrial production growth prints will likely be hovering in the low single-digit zone in the coming months rather than recording any faster recovery," Barclays economists Siddhartha Sanyal and Rahul Bajoria said. As a result, most economists are betting on a 25-basis-point cut next week, especially when overall growth is still subdued.  Source: Times of India

CPI inflation at 10.9%
India's annual consumer price inflation accelerated to 10.91 percent in February from the previous month, government data showed on Tuesday. Consumer prices rose an annual 10.79 percent in January. India's retail inflation is the highest among the BRICS group of emerging economies - Brazil, Russia, China, and South Africa.Food prices for consumers rose 13.73 percent in February from 13.36 percent in January. Source: In.reuters

Komatsu set to buy out L&T Stake in JV, deal likely to be valued at `600-700cr
Japanese Engineering Firm – Komatsu is set to buyout the 50% stake in the Hydraulic equipment manufacturing JV – L&T Komatsu Limited from its partner Larsen & Toubro. The deal excludes the Bangalore land and Komatsu has to relocate the unit to its manufacturing facility in Chennai. This is a strategic decision from L&T to exit non-core businesses at a time its core engineering and construction operations are under severe stress. L&T will use the land to build residential and commercial properties. The diversified conglomerate has already rolled out its first real estate project in the south — L&T South City in Bangalore. L&T Realty owns 1,200 acre across the country. L&T-Komatsu was established in 1998 as 50:50 JV between L&T and Komatsu Asia Pacific Pte Ltd, Singapore (a wholly owned subsidiary of Komatsu, Japan). LTK manufactures hydraulic excavators and other hydraulic equipment.  In the recent past L&T has sold many no-core businesses which includes – L&T sold its medical equipment to Mysore based startup Skanray Healthcare; L&T divested its entire stake in L&T Plastic Machinery limited to Japanese Firm - Toshiba Machine. Source: Dealcurry

JLR registers lower-than-expected retail volumes in February 2013 
Tata Motors slipped over 1 percent on Wednesday morning after its Jaguar Land Rover unit reported subdued growth in February sales. The UK-headquartered maker of luxury saloons and sports utility vehicles said sales last month rose just 3 percent year-on-year to 26,855 units, as holidays hurt sales in China, one of its biggest markets. There was a week long holiday in China last month to celebrate the new year and that meant less selling days for dealers. As such luxury car industry volumes were down 14 percent YoY in China, point out Hitesh Goel and Vinay Kumar of Kotak Institutional Equities. The company's sales in China declined 22 percent in Feb. On the other hand, sales in Asia Pacific region and North America were up 20 percent respectively, UK sales rose 15 percent and sales in Europe gained 6 percent. Jaguar sales rose 27 percent last month to 4,595 units, with strong demand for the XF (up 27 percent) and XJ (up 15 percent). Land Rover sales, meanwhile, were down slightly at 22,260 units due to drop in Chinese demand. The analysts say, growth outlook at JLR remains strong, given the "impressive ramp-up in new model launches." The new Range Rover Sport which will be unveiled later this month, continued strong demand for its Evoque compact SUV and other new launches like the small Jaguar and the China plant launch in FY2015 (it will help reduce price by at least 25 percent), should help its market share "inch up," they say. While JLR's drive ahead seems a cruise, Tata Motors continues to hit speed bumps in the domestic market. Its market share in the passenger car segment hit a new low of 4.9 percent in Feb, according to a report by Economic Times. The maker of Indica, Vista, Indigo and Nano range of cars only managed to sell 10,613 passenger vehicles last month in domestic market, compared with 34,832 units it sold a year ago. While the overall passenger car industry as such as hit a slowdown in India due to high fuel prices and expensive loans, analysts have pointed out that lack of any new big car launch from the Tatas in the last 2-3 years has hurt the company. Kotak Institutional Equities has a "buy" rating on the stock with a Rs 340 target price. At 9:45 hrs, Tata Motors was down 1.5 percent at 300.25 on NSE. Source: Moneycontrol






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