India’s trade deficit halved to ~USD 10 bn in March – the lowest in 2 years as exports rose 7% YoY while imports contracted 2.5%.
There were positive surprises in both headline (down at <6% YoY) and core inflation (3.5% YoY) – which hit 3 year lows. Further, the
benchmark 10-year bond yield fell to its
lowest since July, 2010 reflecting easing
concerns over inflation. Softening global
commodity prices esp gold (down 17% CYTD) and crude (down 13%)
along with a firm INR will provide further
room to RBI for cutting interest rates in
its next policy meet in May to prop growth. However, we may still need liquidity
measures (OMOs/ CRR cuts) to transmit these cuts.
The Foreign Trade Policy failed to live up
to expectations of providing any major
exports boost, though some positives include the decreased land requirement for
SEZs and continuation of current sops. Yet, India’s exports should inch up in
FY14 anyway on improving developed world demand (led by the US & Japan), and
a more diversified market and product baskets. We expect India’s CAD to shrink
to <4% in FY14 due to a combination of improved export performance, falling
crude prices and shrinkage in non-oil imports.
March Quarter
Results: TCS’ Q4
volume growth of 4% (vs. 3% estimated) was a welcome surprise especially in the wake of disastrous performance of Infy
last week. TCS also reiterated
that it would beat NASSCOM guidance of 12-14% industry growth in FY14. HCL Tech too reported steady volumes, strong
deal wins and steady EBIT margin.
RIL’s weak operational
performance in Q4 was offset by higher other income. Appointment of Kelkar Committee to review domestic gas
pricing issue can possibly delay gas price hike, and hence is a
negative development for domestic gas explorers (RIL, ONGC, GSPC).
Near term, we expect
Banks, Auto, Oil mktg Cos to continue to do well, with expectations of continuing
softness in interest rates and crude. With early indications of a normal monsoon
from private agencies, and the Govt loosening its purse strings in a
pre-election year, Consumption (esp
durables) and agri-inputs should also recover.
Summaries of reports this
week:
q Bajaj Finance - Hungry for growth: Bank license + rural India
q Digitization - ETG - Series 3: Structural story intact albeit with execution delays
q Hindustan Zinc: Silver price correction to dent profit by 5%
q India steel:
Imports surge; price recovers
q Jaypee Infratech: Focus on deleveraging
q JPVL: Nigrie
execution on track; equity gap key overhang
q LIC Housing:
Margin to remain sluggish; cut valuation multiple
q McDonald’s:
A peek into India’s best supply chain
q NMDC: CMP
implies…
q Titan: Gold
prices correcting but no revelry in jewellery
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