India Inc Borrows Big in March,ECBs at 2-yr High

But borrowings for FY13 were lower at $31 billion compared with $36 billion raised in the previous year 

Indian companies overseas borrowings touched a 24-month high in March with a number of large companies in oil and other core sectors tapping the overseas market.An aggregate of 102 firms tapped the overseas market through both the automatic (86) as well as approval (16) routes in March this year to raise $5.08 billion through external commercial borrowings,or ECB,data released by the Reserve Bank of India said.Borrowings for the fiscal year ending March 2013 were lower at $31 billion compared to $36 billion raised in the previous year.

Only five firms have accounted for half the borrowings during the month.ONGC,HPCL,Bharti Airtel,Mangalore Refineries and IDFC together accounted for $2.5 billion of the $5.1 billion raised.Essar Oil ($275million),Tata Steel ( $200 million ),Wipro ( $150 million),and Indian Oil Corporation ($120 million) were also among those who sought to raise large amounts during the month.State-owned refinery Hindustan Petroleum Corporation raised $400 million for modernisation,while Indian Oil Corporation mopped up $120 million for import of capital goods.

The largest overseas fund raiser during the month was Bharti Airtel,which raised $434 million.Under the approval route,ONGC Videsh raised $900 million for overseas acquisition.Companies have been slow on borrowing through most part of FY13 as there have not been many viable projects on account of a slowdown in the economy.But during the year,the government relaxed lending norms and also allowed more sectors,such as housing finance companies,to tap the ECB market.

However,it is likely that firms have had to meet their year-end commitments,which prompted them to tap the overseas market during the month.Though domestic banks also lent substantial amounts during the month,borrowers who have a natural foreign currency edge tend to borrow from the overseas market.Such firms are typically engaged in exports.A top-rated export-oriented firm can get rates up to 250 bps over Libor,with borrowing costs working out to around 3%.Most of the developed world,especially the 17-nation euro zone,continues to grapple with a debt crisis.

The gloomy economic scenario has forced many of these nations to embrace easy money (low interest rate) policy,which,in turn,is considered to be a key factor in fuelling high inflationary trends in emerging markets,including India.To tackle inflation,central banks in some emerging economies are adopting high interest rate regime that is also making funding costlier compared to the developed world.

Economists See 25 bps Rate Cut

Never in the past 12 months have the economists and traders been so unanimous and optimistic about what RBI Governor Duvvuri Subbarao would do on interest rates a cut to revive the flagging economy.The governor,who put taming inflation ahead of growth revival in the last 18 months after being accused of being behind the curve to curb price rise,will take comfort from Wholesale prices falling to three year low in March.

A grim industrial scenario with output contracting to 0.6% from 4.3% in February last year should aid his argument for lowering interest rates.Governments decisiveness to raise administered prices of diesel and the fall in global commodity prices such as crude oil and copper due to fears of a slowing Chinese economy should provide the comfort that at least industrial commodity prices wont pose a threat on inflation.A 25 basis points reduction in the repo rate,the rate at which the central bank lends to the banks,to 7.25%,is near certainty when Subbarao announces the annual monetary policy on Friday,an ET poll of 15 economists shows.

A basis point is 0.01 percentage point.If the governor who had frustrated every lobby group from the corporates to politicians for the whole of last year by not yielding to pressure chooses to lower the repo rate by 50 basis points,it is a bonus.There is headroom for a 50 basis points cut too as global commodity prices are still modest, said Saugata Bhattacharya,chief economist,Axis Bank. Subbarao has been stubborn on bringing down inflation before yielding on demand for sharp interest rate cuts to revive growth that was stalled for a variety of reasons,including governments indecision on many issues.Also,the government has been profligate for much of the last fiscal year that held the governor from lowering the rates.But the situation has since changed with the biggest achievement being holding fiscal deficit below the targeted 5.3% of the gross domestic product.

WPI fell to 5.96% in March 2013 from 7.69% in March last year and IIP is at 0.6%,against 4.3% in February 2012.RBI last year reduced rates by 50 basis points,and the cash reserve ratio,the proportion of deposits that banks have to keep with RBI,by 75 points.It also bought back bonds worth.1.27lakh crores to keep the liquidity comfortable.Some global factors are also converging to favour an easing cycle.Crude prices have fallen nearly 15% in the last one month.Copper,aluminum,and zinc are all weak as Chinas economy is feared slowing.Along with that the Indian Meteorological Department has forecast a normal monsoon,a boon that could ease pressure on food article prices which have been keeping the consumer prices high.

The Rabi crop is likely to be good one, said Raghuram Rajan,chief economic advisor to the government-.That will help bring inflation down.So as inflation comes down,there is case for RBI to cut rate.I think,we have a case for stronger growth. Investors have nearly factored in rate cuts driving bond yields to three-year low at 7.74%.It may fall further as the governor could keep reducing rates throughout the year if inflation eases further,which most economist expect to happen.But some fear that given the volatility in commodity prices,and the governments potential temptation to turn profligate again in a year before general elections could temper the outlook for the rest of the year even though a cut is given next week.

Weekly Stocks Outlook

Bank Stocks Outlook: 

Bank stocks are likely to remain steady in the coming week eyeing cues from the Reserve Bank of India monetary policy announcement on May 3 and stock specific cues from Jan-Mar earnings for select lenders, analysts said. 

Capital Goods Stocks Outlook: 

Shares of capital goods and engineering companies are likely to trade in a thin band with a negative bias, as investors see a weak earning season for the sector, Larsen & Toubro being the only exception, dealers said. 

FMCG Stocks Outlook: 

Jan-Mar earnings of consumer goods major Hindustan Unilever will set the tone for the shares of all companies in the sector next week, though  the broad trend is seen positive following the forecast of a normal monsoon this year, dealers and analysts said. India's largest fast-moving consumer goods company Hindustan Unilever  will announce its Jan-Mar results on Monday. 

Oil Stocks Outlook: 

Shares of the three oil marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd--are seen steady with a negative bias next week and will take cues from crude prices and rupee-dollar movement. 

IT Stocks Outlook: 

Shares of major information technology companies are seen weak over the next five trading session due to uncertainties and worries arising from the draft US immigration bill that was unveiled last week. 

Steel Stocks Outlook: 

Shares of major steel companies are seen slightly down next week due to weak steel prices and expectations of not-so-bullish Jan-Mar earnings, brokerages said. 

Telecom Stocks Outlook: 

Shares of Bharti Airtel Ltd are seen up next week ahead of its Jan-Mar earnings announcement Thursday, as the company is expected to report 2.5 times sequential rise in its consolidated net profit to 7.12 bln rupees. 

Auto Stocks Outlook : 

Shares of major car manufacturers look positive for the coming week, while those of two-wheeler makers are seen moving in a narrow range, analysts from various domestic brokerages said. 

Pharma Stocks Outlook: 

Shares of major pharmaceutical companies are seen taking cues from the broad market next week, with the focus mainly on shares of Pfizer India Ltd that will detail its Jan-Mar earnings Friday, market players said. 

Market Surges as Traders Roll Over Bets Ahead of RBI Policy

Punters purchase banking stocks on expectations of dividend payouts and hopes of rate cut on May 3 

Punters rolled over a higher proportion of derivative bets to May and purchased select bank stocks to rake in dividends,sharply pushing up the market in the last half hour of trade.Most expect an interest rate cut at the RBIs monetary policy meet on May 3.Benchmark indices Nifty and Sensex rose to their monthly closing highs.The Nifty ended up 1.36% to close at 5916.3,its highest since March 11;the Sensex rose 1.19% to 19406.85,the most since March 15.The underlying bullish sentiment was reflected in the increased positions moved to the next month.Marketwide rollovers stock and index futures stood at around 73%,a tad higher than the 70% seen in the past few expiries.

Nifty futures rolls stood at around 67% against 57% of the previous few expiries.Marketwide open interest (OI) the value of outstanding bets at the beginning of the May series is.35,300 crore,up from.30,400 crore at the start of the April expiry,according to Edelweiss.Nifty futures will start the May series with an OI of.9,400 crore.Banking and IT were among sectors that witnessed higher rollovers.HDFC Bank saw 61% rolls against 51% at the end of the previous series;LIC Housing Finance saw 92% rolls (90%),Infy 68% (58%) and TCS 76% (70%).Nonetheless,there was a degree of caution among traders,many of whom have burnt their fingers in choppy trades during the last few months.

Despite having carried forward their positions,they were reluctant to pay a high cost for the rollovers.The cost to roll over long bets at 65-68 basis points was not high, said Yogesh Radke,head of quantitative research,Edelweiss.This shows that sentiment,though positive,was cautious as high rolls typically stand in the 80-85 bps range, he said.Apart from the positive rolls,the sharp rally in the last half hour of trade was partly attributable to punters having squared off futures positions in select banking counters such as ICICI Bank,Axis Bank and HDFC Bank to buy shares of the companies in the cash segment on dividend expectations.This is borne out by the rise in traded volumes.In ICICI Bank,the number of shares traded stood at 62 lakh against the two-week average of 41 lakh;in HDFC Bank the volume was 64 lakh (41 lakh) and in Axis Bank,it was 38 lakh (19 lakh).

This,coupled with short covering in counters such as Hero,M&M and Bajaj Auto,drove the Nifty and Sensex to monthly closing highs,said Aadil Sethna,head of derivatives,Dolat Capital.The recent market rally picked up steam from April 16,following softening of prices in gold and crude oil,two of Indias major imports.Gold fell sharply on talks that Cyprus will sell its gold reserves to secure a bailout package from EU to recapitalise its banks,while a slowdown in China pulled down Brent crude below $100 a barrel last week.

Higher crude and gold prices expanded Indias current account deficit to 5.4% of GDP in the fiscal year through December 2012,way above the 4.2% in FY12.In the wake of the fall in gold and crude prices,the Sensex has risen 662 points since April 16 as this will translate into lower inflation and ease current account deficit,prompting RBI to cut interest rates.However,brokers like Nirmal Jain believe markets will consolidate in the short term given the magnitude of the recent rally.The fall in crude and oil has driven the current market rally, said Nirmal Jain,chairman,India Infoline.But we will consolidate in the short term until the RBI policy meet on May 3. Markets have factored in a 25 bps cut in the repo rate,and if that happens,some profit booking could be expected.However,if RBI cuts rates by 50 bps,the current momentum will continue,Jain said.Meanwhile,FIIs purchased shares worth.1,449.7 crore on Thursday,provisional data from BSE

Car makers that beat the slowdown

Domestic car makers ended 2012-13 with a 7 per cent drop in sales, the sharpest such decline in a decade. But there was silver lining amid the gloom for companies such as Maruti Suzuki, Honda, Nissan and Renault. They are among the car makers that bucked the trend, selling more cars in 2012-13 than in the previous year.

JUGGERNAUT ROLLS ON

Maruti Suzuki began the fiscal on a sober note with strikes/plant shutdowns and constraints on production of diesel engines. But, thanks to the runaway demand for mid-priced diesel cars, the company closed the year with a 1 per cent sales growth. This growth helped the company improve its market share in passenger cars to 45.4 per cent, compared with 42 per cent in 2011-12. Even as sales of older models such as the Alto, Wagon R and A-Star faltered, the Swift and the Dzire kept the company flag flying, mainly on the strength of diesel variants. Dzire alone clocked about 1.7 lakh units — up 54 per cent year-on-year.

Thanks to the Dzire, the ‘super compact’ segment (comprising also the Accent, Verito, Dzire and Etios sedan) was the only segment where volumes rose in 2012-13. Overall sales volumes for all other passenger car segments — micro, mini, compact, mid-size, executive, premium and luxury — took a beating. In fact, Maruti did well during the previous slowdown in 2008-09 too. While passenger cars as a whole achieved 1.3 per cent volume growth (year-on-year) that year, Maruti’s volumes grew by 3 per cent.

HONDA, NISSAN

Honda was another company that bucked the trend. Its sales volumes grew by 35 per cent in 2012-13, helped by small cars such as Jazz and Brio.

In 2008-09, its volumes had slipped by 15 per cent despite its popular high-end offerings, such as the City, Civic and Accord. In the coming months, the addition of the Amaze to Honda’s compact car portfolio could bolster sales.

For Nissan and Renault, new launches with diesel variants helped to keep sales ticking.

Nissan’s volume growth of 7.6 per cent in 2012-13, was predominantly aided by the mid-sized Sunny. The Micra could not muster enough sales, despite the availability of a diesel model.

The Nissan Micra’s sales volumes dropped by almost 40 per cent in 2012-13. This could be because of the Renault Pulse, a compact car on the same platform as Micra introduced in 2011-12.

Both the Pulse and the mid-sized Scala (introduced in 2012-13) helped Renault clock healthy volume growth amid the slowdown in the industry.

Unlike cars, vans notched up a 1 per cent growth in 2012-13 and utility vehicles had a dream run, growing 53 per cent.

Uncertainty Likely to be New Normal for Indian IT

Though there is a return to growth,demand recovery is patchy and volatile,say experts 

Despite two of Indias largest software exporters reporting betterthan-expected results for the March quarter,multiple data suggest that demand recovery for the countrys $108-billion (.5.9 lakh crore) information technology services sector may not be a given yet.On Friday,when Wipro,Indias third-largest software exporter,reported stagnant sales and issued a bleak outlook with the possibility of sales shrinking in the June quarter,another earnings held an important message for the sector.Global technology bellwether IBM missed earnings estimates for the first time in eight years.Shares of the company,which weathered the 2008-09 financial crisis without missing a beat,tanked 8% on the New York Stock Exchange (NYSE).

Three weeks ago,Accenture said that it expects sales to grow at below the mid-point of its 5-8 % guidance for the year to August 31.The software services and consulting company blamed lower-than-expected discretionary spend by corporations,especially in Europe.There is a return to growth,but demand recovery is patchy and volatile, said Siddarth Pai,president for the Asia-Pacific region at outsourcing advisory ISG.The pace of growth will be nowhere near what it used to be in the pre-crisis era. According to ISG,outsourcing activity sagged in the first three months of 2013,when total value of technology contracts outsourced fell by about 30% both sequentially and from a year ago.

The top four Indian IT companies Infosys,Wipro,TCS and HCL Technologies said that discretionary spend remains muted.Even for TCS,which reported sequential growth of 3.1% and backed it up with bullish management commentary,growth was muted in the United States,its largest market.TCS sales growth got a major push from its India business.TCS growth in developed markets was only marginally better than that of Infosys and behind HCL Technologies,which came as a surprise to us, wrote Ashwin Mehta and Pinku Pappan of Nomura Financial Advisory and Securities in a post-earnings note to clients.TCS commentary,on the other hand,continues to be positive,with management reiterating its expectation that revenue growth in FY14 would be better than FY13. Even before the Indian IT earnings season,there were bad signs.Nearly a month ago,in mid-March,enterprise software maker Oracle reported worse-than-expected results,sending its shares sliding 7% on the Nasdaq.Of significance for the Indian IT sector was the fact that revenue from new software licences declined 2.6% from the previous quarter,against a guidance of 3-13 % growth.

SOFTWARE LICENCES 

Sale of software licences are typically considered an early demand indicator for the Indian IT services sector,which gets business related to customising and implementing the new software.Industry body Nasscom has projected 2013-14 growth of 12-14 % for the Indian IT sector,which expanded just about 10% in the last fiscal.Nasscom president Som Mittal did not reply to calls or text messages.With such divergence in growth rates at top firms,IT sector growth expectations have clearly come down, said Harit Shah of Nirmal Bang Institutional Equities We might be see a small uptick in technology spending,but the general consensus is that markets such the US are going to remain the same,especially after earnings from Oracle and Accenture which said discretionary spending is negative. 

While the pace and nature of recovery that awaits the Indian IT sector is not clear yet,industry experts said what is certain is that Indian IT companies will have to get used to the uncertainty and learn to survive in the new normal.Indian IT sector need to embrace the uncertainty that will continue for 12-24 months, said Kumar Parakala,chief operating officer for advisory services at the Indian arm of consultancy KMPG.They need to be prepared for smaller deal sizes and they will never have longterm commitment from enthusiastic buyers.It is going to be a different ball game.

Rs 4,000-crore boost coming for exporters

The Government is likely to hand out sops worth over Rs 4,000-crore to exporters to help them cope with uncertainties in the developed market and the low global demand.

Cash benefits for exporting identified products to chosen markets, discounts on bank interest rates, an amnesty scheme giving more time to units to meet their export obligation, and a package for Special Economic Zones are expected to form part of the annual supplement to the Foreign Trade Policy (FTP).

The FTP is set to be announced by Commerce Minister Anand Sharma on Thursday.

“Falling exports and the growing deficit in the trade and current accounts are a big worry for the economy. Attempts have been made in the FTP to ensure that exports get a boost and grow steadily in the current fiscal,” a Commerce Department official told Business Line.

Export growth in 2012-13 is likely to be lower than in the previous year despite a small increase in January and February. Eight straight months of decline in exports between May and December led to a 4 per cent fall in exports in the April-February period, to $265.95 billion.

With imports in the same period growing marginally at 0.25 per cent to $448.04 billion, the trade deficit, the gap between imports and exports, increased to $182.1 billion from $169.8 billion last year.

To ensure that exporters in SEZs do not get left out, units in such zones are likely to benefit from the Focus Product and Focus Market schemes. These have so far been restricted to exporters outside the zones.

The scheme offers duty-free import scrips to exporters of identified products and for exporting to specific markets that can be sold to others for cash.

A separate policy for SEZs, which is likely to be announced simultaneously with the FTP, will also ease operational rules, including lowering the minimum area and contingency requirements for both multi-product and sector-specific SEZs.

The Commerce Department may also give in to a demand that high-performing exporters designated as status-holders be allowed to trade the benefits accruing to them, including import duty discount.

With the Government’s revenue collections on target and resources less of a constraint this year, the FTP is expected to be more ambitious in its coverage.

Popular markets of Brazil and South Africa, so far not included in the Focus Market schemes due to resource considerations, may get covered. High-value products such as gems and jewellery and certain engineering goods may get included under the interest subvention scheme and the level of discount may also be increased from the current 2 per cent.

Global Agencies Forecast Better Monsoon for India

Absence of weather deterrents to help June-September rainfall,say experts 

International forecasters from Korea to Europe and the US have forecast better monsoon rains this year,cheering farmers whose crops suffered because of erratic rainfall last year,and consumers in general,as prospects of higher food production should keep prices under control.While no agency,including the Indian weather office,has an impeccable record of forecasting and some even caution that rainfall may not be normal,most forecasters agree that the June-September rainfall will gain from the absence of negative factors such as the dreaded El Nino phenomenon,in which adverse changes in ocean temperatures choke the monsoon.The Indian weather office has not issued its formal forecast yet,but experts including former top meteorologists agree with foreign scientists in their assessment that conditions are ripe for a good monsoon.

We are definitely going to have a much more positive monsoon than the previous year, said Dr DR Sikka,former director of Indian Institute of Tropical Meteorology.Other Indian experts agree.Large-scale indications made by global agencies based on scientific models are favourable for Indian monsoon, said Ajit Tyagi,former director general,Indian Meteorological Department. IMD is expected to issue its forecast based on statistical and dynamic models in a week.The APEC Climate Center,Korea,expects the monsoon to be normal to above-normal.

The European Centre for Medium-Range Weather Forecasts says monsoon rains have a higher probability of being normal or excessive than being deficient.The International Research Institute for Climate and Society,Columbia,has issued broad clima tological chances of rainfall across the country,but not given a clear forecast.Some agencies say factors such as the Indian Ocean Dipole can be disruptive.

The Japan Agency for Marine-Earth Science and Technologys analysis shows there is a possibility of such factors hindering the monsoon.In 2012,the country had a 8% deficit rainfall even with heavy rains across northern,western and southern parts of the country by September.With over 60% of the arable land rain-fed,the monsoon has a significant role to play in the countrys economy.A failed monsoon can seriously impact food prices and the economy.Experts said that most forecasts can only give broad indications.Predictions dont give a number.

They give a probability so it will be early to predict where we will have deficit rainfall or by how much the temperature will rise, said a meteorologist with a private weather service provider.The chances of a normal monsoon will brighten the possibility of a higher output of summer crops like rice,sugar cane,cotton and pulses.India received 92% of the 50-year average of about 89 centimetres of rain in the June-to-September monsoon season in 2012,triggering drought-like conditions in several parts of Maharashtra and Karnataka.Dry weather in June and July delayed kharif crop planting,but an above-average rainfall through September helped soil moisture to recover in major agricultural regions of the country.

Tatas allowed to hike tariff for power generated from Mundra plant

Power regulator CERC orders compensation package for costlier imported coal

Tata Power won a major relief on Monday after the electricity regulator allowed it to increase tariff for power generated from its 4,000 MW Mundra plant. Allowing the hike, the Central Electricity Regulatory Commission ordered that a committee be set up to work out the price increase and decide the compensatory package. The committee is to submit its report by May 15.

To affect Discoms

The Commission’s decision to permit a tariff increase will affect consumers of seven electricity distribution utilities in Gujarat, Maharashtra, Rajasthan, Punjab and Haryana. The revised tariff will be higher than existing levelised tariff of Rs 2.26/unit. The current tariff for new power projects is in the Rs 3.50-7.00/unit range.

This is the second such decision by the CERC allowing projects fired on imported coal to increase tariffs, as fuel prices have risen. On April 2, the regulator allowed a similar hike for Adani Power’s 4,620 MW Mundra plant.

Adani judgment

As in the Adani judgment, one member of the commission dissented the increase.

Coastal Gujarat Power Ltd, the special purpose vehicle that runs Tata’s Mundra plant, petitioned the CERC that because of the rise in the Indonesian coal price, the project had become economically unviable at electricity rates decided in 2007.

Tata Power said that this decision was an important step in resolving the impasse affecting imported coal based power projects that were taking a hit due to extraneous factors.

According to industry watchers, the tariff relief clears the way for Tata Power to go ahead with the second phase of the project.

“It all depends on how Mundra shapes up. That would be a major consideration for Tata Power.

“For us to make sure that Mundra becomes viable and does not eat into our cash flows is a very important factor,” Anil Sardana, Managing Director, Tata Power, had earlier told Business Line.

Amit Kapur, Partner at J. Sagar Associates, a legal firm that represented Tata Power in the case, said: “Though at this stage it is premature, if not satisfied with the CERC directive, the Discoms may approach CERC (review) or the Appellate Tribunal for Electricity on the matter.”

“Now that CERC, a quasi-judicial body, has given a clear finding and laid down principles for arriving at the compensatory tariff, it is expected that the parties will be guided to resolve matters through mutual consultation with the intervention of two independent reputed experts,” Kapur explained.

The order was passed by three members of CERC — Pramod Deo, M. Deena Dayalan and V.S. Verma. Chairperson of Central Electricity Authority A S Bakshi is a member in the panel that heard the case.

Dissenting member

CERC member S. Jayaraman disagreed with the other members. According to him, there is no scope either under the power purchase agreement or under the Act to establish a mechanism to grant relief to the petitioner as prayed for. “The petition lacks merit and is liable to be dismissed,” Jayaraman said.

India among nations with cheapest petro products

According to a recent policy research paper by the World Bank for key petroleum products, India is among those countries in the world where the prices of petroleum products are at the lower end.

The study, ‘Petroleum Product Pricing and Complementary Policies — Experience of 65 Developing Countries Since 2009’, found that the lowest prices were found in Venezuela and Egypt, closely followed by Iran and Iraq for gasoline and diesel, Indonesia and India for kerosene, and Iraq and Bolivia for Liquefied Petroleum Gas (LPG). Venezuela stands out as having petroleum product prices far lower than in any other country, with the exception of LPG, for which the official price in Egypt was even lower.

The study says about two-thirds of the study countries have kept domestic prices below market-clearing levels for one or more fuels in the past three years, subsidising consumers. It adds that with the additional burden sharing by the oil and gas companies included, fuel subsidies amount to about 2 per cent of the GDP.

“This is so because of the government policies and because of the larger subsidy that we have. We have the largest number of people living below the poverty line. While assessing these, one should also keep in mind that a large number of people are still living off-grid to power and it is because of the subsidies that these people are able to afford these products,” said Kalpana Jain, senior director, Deloitte.

Notifying the different prices by end use in LPG, the report said the differences in unit prices have been as large as 280 percent favouring LPG sold in small cylinders in India, 220 percent in Tunisia, 175 per cent in Indonesia, and 170 per cent in Thailand. According to a ministry official, rather than higher subsidy rates, the government is looking at whether it goes to the deserving.

The United Progressive Alliance government is likely to start using the Direct Benefits Transfer scheme for disbursal of subsidy on cooking gas from May 15. The Cabinet is likely to take a call on this by this week.

Meanwhile, according to the Petroleum Planning and Analysis Cell, too, the prices of LPG and kerosene in India are lowest compared to its neighbouring countries.

Oil companies in India are suffering an underrecovery of Rs 6.52 a litre on the sale of diesel, Rs 30.49 a litre on kerosene and of Rs 434.50 per cylinder on LPG. During the April to December period, the underrecovery on diesel stood at Rs 73,815 crore, kerosene at Rs 21,891 crore and LPG at Rs 29,148 crore.

Fall in input prices cheer FMCG companies

Key FMCG inputs have been softening in the last few months bringing respite to companies who've been struggling with volume growth

Consumer product companies are likely to benefit in the fourth quarter of the 2012-13 financial year from softening commodity prices. Demand for these inputs remain tepid in a weak economic environment.

In recent months, palm fatty acid distillate (PFAD), used in making soap, is down by 25 per cent over the year-ago period. Liquid paraffin, used in manufacture of hair oil, is down 10 per cent. Mentha oil and peppermint oil, used in making toothpaste, are down 25-30 per cent over the year-ago period.

Hence, makers of these products would find their manufacturing costs lower in comparison to the year-ago period, translating into higher gross margins. Analysts estimate that gross margins of companies in the three months ended March 2013 will improve by at least 100 basis points over the year-ago period, thanks to commodity prices coming off their peaks in this time frame.

The other fallout is price cuts that companies will initiate. Hindustan Unilever Ltd (HUL), for instance, cut soap prices by 12-20 per cent in the past one month, thanks to lower PFAD prices. Nitin Mathur, consumer research analyst at brokerage Espirito Santo Securities, says by cutting prices, companies hope to prop volumes at a time when it has been weak.

HUL's volume growth in the last three quarters, for instance, has steadily come down from nine to 10 per cent in the June 2012 quarter to seven per cent in the three months ended September 2012 to five per cent in the three months ended December 2012.

The scenario has been no different for Marico, the maker of Saffola and Parachute oils, with volume growth for the two brands coming down from levels of 12-18 per cent in the June 2012 quarter to four to six per cent in the three months ended December 2012. Ghaziabad-based Dabur saw its volume growth come down to nine per cent in the December 2012 quarter from 10-11 per cent in previous quarters.

"While HUL will benefit from softening input prices, competitive activity will continue to be high," says Amar Ambani, head of research at Mumbai-based brokerage India Infoline.

Marico, Dabur, Colgate and Godrej Consumer are also likely to benefit from lower input costs.

Competitive pressures, say analysts, will keep advertising and sales promotion (ASP) expenditure high. From 11-12 per cent some quarters earlier, ASP expenditure has increased to 13-14 per cent. This expenditure, says V Srinivasan, analyst for fast-moving consumer goods at Mumbai-based Angel Broking, will continue to hover at these levels in the fourth quarter.

CONSUMER BENEFIT

* Key inputs such as palm fatty acid distillate are down 25 per cent. Liquid paraffin is down 10 per cent, peppermint oil and mentha oil are down 25-30 per cent in the last three months

* The fallout of this is that companies will see gross margins improve in the fourth quarter of the 2012-13 financial year

* HUL and Marico have already begun cutting prices of soaps (in the case of HUL), hair oils and edible oils

* Some of the other beneficiaries of lower input prices will be GCPL and Dabur

High base drags Mar WPI inflation to 40-mo low of 5.96%

--India Mar WPI inflation rate 5.96% vs 6.84% Feb

--Cogencis poll estimated India Mar WPI inflation rate at 6.4%

--India Mar WPI primary articles inflation 7.60% vs 9.70% Feb

--India Mar WPI manufactured pdts inflation 4.07% vs 4.51% Feb

--India Mar WPI fuel & power group inflation 10.18% vs 10.47% Feb

--India Mar WPI food articles inflation 8.73% vs 11.38% Feb

--India Jan WPI inflation rate revised to 7.31% vs 6.62% prov

--India Mar WPI all commodities index up 0.2% on month

--India Mar WPI primary articles index up 0.4% on month

--India Mar WPI fuel & power group index up 0.4% on month

--India Mar WPI manufactured products index up 0.1% on month

--India Mar WPI non-food articles index up 0.6% on month

--India Mar WPI minerals group index up 2.1% on month

--India Mar WPI core inflation 3.5% vs 3.8% Feb.

India's headline inflation rate, based on the Wholesale Price Index, slumped to a 40-month-low of 5.96% in March due to the statistical effect of a high base, the commerce and industry ministry said today.

The inflation rate was 6.84% in February and 7.69% in the year ago period. The all commodities index had risen 1.1% on month in March last year, compared with 0.2% increase this year.

The inflation rate for March, last month of the financial year 2012-13, is way below expectations. According to the median of a Cogencis poll of 10 economists, the inflation rate was seen falling to 6.4% in March.

However, the data showed a scale-up in the final inflation rate for January to 7.31%, from the provisional estimate of 6.62%. The inflation rate for March is way lower than Reserve Bank of India's base line projection of 6.8% for the month. Gilt prices rose sharply as the higher-than-expected decline in inflation rate gave rise to expectation that the central bank might cut repo rate at  its

Annual Policy on May 3.

The central bank, which cut the benchmark repo rate by 25 basis points each in the last two policy reviews in January and March, has said headroom for further monetary easing remains quite limited. RBI has projected the WPI inflation rate to be range-bound around 

current levels through 2013-14.

Non-food manufactured products inflation, which is a proxy for core inflation, fell to a 37-month-low of 3.5% in March from 3.8% a month ago. Despite the moderation in WPI inflation rate, the retail inflation rate continues to rule high. The inflation rate based on the most-watched Consumer Price Index (Combined) eased to 10.39% from 10.91% a month ago. 

Get cracking on reducing bad loans, FinMin tells govt banks

Wants NPAs reduced to 1% of total advances by fiscal-end; suggests board-level monitoring of recovery

The Finance Ministry has asked all public sector banks to reduce their bad loans, or non-performing assets, to one per cent of their total advances by the end of the current financial year (March 31, 2014).

A senior Finance Ministry official hoped there will be “significant improvement” in the gross and net NPA position for fiscal 2012-13, which ended on March 31.

Talking especially about the nation’s biggest lender State Bank of India, the official said, it had managed to reduce its NPA by over 1 per cent in March alone.

That still leaves SBI with a fair bit to do to achieve its new NPA target. As of end-December 2012, SBI’s bad loans were at over 6 per cent (gross NPAs) of its advances.

The final figure will emerge when the bank announces its annual financial result for 2012-13.

With the economy registering the lowest growth in a decade, public sector banks have seen their NPAs go up significantly.

According to data collected for a meeting between Finance Ministry and public sector bank officials last month, bad loans with respect to the priority sector, which include agriculture and medium and small enterprises, had gone up during the quarter ended December 31 vis-à-vis the previous quarter.

Interestingly, however, the NPA position in relation to retail and real estate loans improved during the period.

Another highlight is that the top 30 non-performing accounts made up close to half (around 44 per cent) the bad loans of the 19 nationalised banks. While for the SBI group, this was around 19.3 per cent, for public sector banks as a whole they were around 34 per cent.

MULTI-PRONGED PLAN

Banks have been advised to adopt a multi-pronged strategy for loan recovery.

This includes constitution of a board-level committee for monitoring recovery, review of NPA accounts of Rs 1 crore and above by the board of directors, and the top 300 NPA accounts by the management committee of the boards, and guidelines for NPA management as part of an early-warning system.

Apart from restructuring, banks have been advised to initiate penal measures against wilful defaulters.

These include not granting them additional facilities and debarring the entrepreneurs/promoters of defaulting companies from getting institutional finance for floating new ventures for a period of five years.

FORMAL COMPLAINT

Banks have also been asked to lodge a formal complaint against the auditors of the borrowers with the Institute of Chartered Accountants of India, if it is observed that there was negligence or deficiency in the conduct of audit.

Lower crude oil prices to benefit select firms

After hovering around $113 a barrel in the quarter ending March 2013, prices have dropped to $103 a barrel

The fall in Brent crude oil price could ease the cost pressure of a large number of companies, especially those which use petrochemical products as a key input.

“On a broader level, the fall in crude oil price means lower subsidy burden for both, the government and companies. Some benefits will also flow to many other companies as well,” said Ravati Kasture, head of research at CARE Ratings.

Oil and gas companies will obviously be the biggest beneficiaries. A sustained downtrend in crude oil prices means there will be lower under-recoveries and companies in this space will have to share lower subsidy burden. However, this may not be true in all cases and analysts believe companies like Cairn India could in fact see a negative impact as low crude oil prices will impact realisation and thus, earnings.

Paints companies such as Asian Paints and Berger will be cheering the fall in the prices of crude oil, which accounts for almost a third of its raw material cost. For instance, titanium dioxide alone accounts for about 20 per cent of raw material cost.

The other beneficiary will be the aviation sector. Fuel accounts for nearly 45 per cent of Jet Airways’ total operating costs and about 48 per cent of SpiceJet’s. Analysts say even a one per cent correction in jet fuel prices could mean a 4.5-4.7 per cent gain for airline companies at the operating profit levels before rentals.

Textile companies, too, will benefit, especially those operating in the manmade fibre space like synthetic yarn. Crude oil derivatives such as purified terephthalic acid and mono ethylene glycol are the primary raw materials constituting about 50-70 per cent of the total sales value for polyester yarn. Companies like Alok Industries, Indo Rama and JBF Industries, which generate over a quarter of their revenues from the polyester segments, could also save heavily on cost.

In the case of Sintex Industries, materials like plastic granules and PVC resins form a major part of the plastics division, accounting for over 70 per cent production cost. These materials are supplied by companies like Reliance Industries, GAIL and others. Companies like Jain Irrigation and Finolex Industries, which manufacture PVC pipes, will have a similar positive impact. Tyre companies – Apollo, CEAT and MRF among others – will also benefit, though to a lesser extent. These companies use carbon black and synthetic rubber, which are crude oil derivatives. Analysts suggest that a 10 per cent hike in prices of these products could push up operating margins to the tune of 100-200 basis points.

After hovering around $113 a barrel in the quarter ending March 2013, crude oil prices have dropped to around $103 a barrel. This means a 12 per cent correction in the last three months and seven per cent in the last month alone.

Weekly Stocks Outlook

Oil Stocks Outlook:

Reliance Industries Ltd will be in focus next week ahead of its Jan-Mar results on Tuesday while the counters of state-owned oil marketing companies may witness subdued activity.

Reliance Industries is expected to report a 30% rise in Jan-Mar net profit at 55.10 bln rupees and a 10% rise in turnover at 937.40 bln rupees. Higher refining margins are likely to be the biggest contributor to the company's performance in Jan-Mar. The company's gross refining margin--the difference between the price of a barrel of crude oil and the basket of products derived out of it--is expected to be $9.5-$10.3 a barrel in Jan-Mar, flat sequentially but sharply better than $7.6 a barrel a year ago.

Bank Stocks Outlook:

Bank stocks are likely to trade in a narrow range next week in line with the overall market, with stock-specific cues emerging from smaller private banks that will report their Jan-Mar earnings, analysts said.

Cement Stocks Outlook:

Shares of major cement makers are seen rangebound next week, and may take cues from the market trend, analysts said.

Investors are likely to wait and watch for Jan-Mar earnings before taking any further views about the sector. India's largest cement maker by capacity,UltraTech Cement, will detail its earnings on Apr 22. Other companies are expected to announce Jan-Mar earnings over the following weeks.

FMCG Stocks Outlook: 

Fast-moving consumer goods stocks are seen remaining strong ahead of their Jan-Mar earnings, as they are expected to report steady sales volume and net profit growth in an otherwise tough macroeconomic scenario, analysts said.

Dabur India and Godrej Consumer Products are expected to report their Jan-Mar earnings on Apr 30.

IT Stocks Outlook:

With Infosys delivering tepid Jan-Mar earnings and guidance for the current year, results of Tata Consultancy Services, Wipro Ltd and HCL Technologies due next week will set the tone for the information technology sector in the coming few sessions.

Auto Stocks Outlook:

Shares of major automobile manufacturing companies may trade in range with a negative bias during the coming week due to the continued lull in the sector on account of falling sales, analysts from various brokerages told Cogencis.

Tata Motors Ltd saw its counter rise on account of the company posting strong global sales figures for March, something which would correct over the next week as the company has lost ground in its domestic sales, and does not present a very pretty picture.

Steel Stocks Outlook:

Shares of major steel companies are seen down in the next 4-5 sessions on expectations that poor domestic demand in Jan-Mar despite it being the peak season may have affected earnings, analysts said.

Capital Goods Stocks Outlook:

Shares of capital goods and engineering companies are seen mixed next week, with investors likely to cherry-pick those of Larsen & Toubro and Cummins India on account of their attractive valuations. L&T is likely to post good results, and is currently trading at a good valuation, a dealer said. The company has strong fundamentals and is largely seen meeting its order inflow guidance for the year.

Pharma Stocks Outlook: 

Shares of major pharmaceutical companies are seen in a range next week with an upward bias, thanks to positive earnings expectations among investors, according to market players.

Telecom Stocks Outlook:

Reliance Communications Ltd is seen extending its rise next week as the overall sentiment over the stock remains positive following the recent fibre optic deal with Reliance Industries Ltd, while legal issues faced by Bharti Airtel will keep that scrip in focus, analysts said today.

India Feb industrial growth 0.6% & Inflation slows to 10.39% in March

• India Feb industrial growth 0.6% vs 4.3% yr ago

• Cogencis poll estimated India Feb industrial growth at (-)1.0%

• India Feb manufacturing sector growth 2.2% vs 4.1% yr ago

• India Feb mining sector growth (-)8.1% vs 2.3% year ago

• India Feb electricity sector growth (-)3.2% vs 8.0% yr ago

• India Feb basic goods growth (-)1.8% vs 7.6% year ago

• India Feb capital goods growth 9.5% vs 10.5% yr ago

• India Feb intermediate goods growth (-)0.7% vs 1.0% yr ago

• India Feb consumer goods growth 0.5% vs (-)0.4% year ago

• India Feb consumer durables growth (-)2.7% vs (-)6.2% yr ago

• India Feb consumer non-durables growth 2.9% vs 4.4% yr ago

• India Jan industrial growth unchanged from prov at 2.4%

• India Apr-Feb industrial growth 0.9% vs 3.5% year ago.

• India's annual consumer price inflation slowed to 10.39 percent in March from the previous month, government data showed on Friday.

• Consumer prices rose an annual 10.91 percent in February.

• 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 12.42 percent on year in March, slower than an annual rise of 13.73 percent in February.

Car Sales Post Steepest Fall in 12 Years

Sales dip 6.7% in FY13,but they may grow 3-5 % in FY14 on the back of a recovery: SIAM 

Indias annual car sales posted its steepest decline in 12 years.The numbers also showed a shift in consumer preference to utility vehicles that posted its highest ever tally of over 5-lakh deliveries in the March ending financial year.Sales dipped 6.7% with 18.95 lakh units sold in the domestic market in 2013 fiscal,the worst after FY 2001 when sales fell by a higher 7.7%.

Weak consumer sentiment,high interest rates,a slowing economy and record fuel prices proved to be major dampeners.March was also the fifth consecutive month of decline in car sales that fell by 23% over the last year.

The only silver lining was from the sale of utility vehicles including crossovers and sports utility vehicles (SUV).A stupendous 52% growth and 5.53 lakh units sold in the 12-months ended March,brought hopes of a possible rebound in the coming months.This helped the Society of Indian Automobile Manufacturers (SIAM) project a positive picture in its fiscal forecast.It said local deliveries of passenger vehicles including cars and SUVs,may gain 5-7 % for the fiscal starting April.

After a tough year,we are optimistic for the future.Automotive is directly linked to the economy and going by the recent initiatives of the government to spend more,we are expecting demand to pick up and translate into improved sales in the coming months, SIAM president S Sandilya said.SIAM is also expecting higher government spending under the JNNURM project where 10,000 new buses are likely to be purchased by states and municipal bodies across the country.Direct cash benefit to families would also help build incremental demand.Sale of off-road and crossover models provided incremental growth for manufacturers like Mahindra and Mahindra,whose sales grew 27% and helped it to become third-largest automaker in India.Thanks to the shifting demand,with our utility vehicles and off roaders,Mahindra had been able to outsell most peers.

We expect growth to continue in FY 14 as well as we have the right products to sustain demand in the Indian market, said PN Shah,Mahindra chief executive,automotive sector.The robust demand for utility vehicles helped French carmaker Renault sell over 40,000 of its budget SUV Dusters since its launch in July 2012,and helped the company to overtake rivals like Skoda Auto and Fiat India in the domestic market share.

Analysts tracking the industry were cautiously optimistic.Many companies like Hero MotoCorp Tata Motors,TVS Motors continue to report negative growth.We expect volumes to grow over the medium term as factors such as monsoon and economic recovery will play a key role in reviving demand sentiments, says Arun Agarwal,an analyst with Kotak Securities.Rakesh Batra of Ernst & Young added,We expect interest rates to come down in the second half of FY14 with better economic growth allowing surge in vehicle sales.Car sales are expected to grow at 1-3 % for FY14 and utility vehicles may grow at 15-18 %. 

The slowdown in sales and concerns around the short-term economic outlook for the country has seen global automakers revisiting future strategies with the realisation that India needs a different approach.The recent hike in duties (read custom) is not a positive indicator.India needs to send out signals if it would align with global markets or remain a closely protected one.Incessant hike in taxes would not help the auto industry, said Mercedes Benz India MD & CEO Eberhard Kern.Siam has shared the concerns with the government.It has told the government that falling sales has the potential to derail the auto industry,which accounts for 6% of Indias GDP and employs around 15 million people directly.

Pharma Cos Look to be in Better Shape in March Qtr

Sun Pharma,Lupin and Cipla are expected to outperform their peers in this period 

A favourable currency movement,opportunities for exclusive drug launches in the US and a marginal recovery in the domestic pharma market (on a sequential basis) will ensure an improved performance by local pharma firms in the quarter to March.Among local drugmakers,Sun Pharma,Lupin and Cipla may outperform their peers.In the US,most Indian pharma companies are looking at increasing their product portfolio by filing for niche limited-competition products.

Sun Pharmas US business is going to benefit from drug shortages and the consolidation of its latest acquisitions DUSA and URL Pharma.Lupin is expected to do well on the back of its product launches in the US and its strong performance in Japan.Companies such as Ranbaxy,Dr Reddys Labs (DRL) and Cadila Healthcare are likely to report a subdued performance in the March quarter.

Ranbaxys top line is going to be impacted due to the recall of atorvastatin and delayed launches of its products having exclusive opportunities.A high base effect will work against DRL,although the company is expected to perform better in the domestic and the Russian market.Cadila Healthcare is also likely to continue its lacklustre performance on account of a slowdown in its US business.Contract manufacturing firm Divis Labs is expected to post a strong operational performance.

Among mid-tier pharma companies,Aurobindo Pharma is expected to improve its performance in the quarter to March on the back of more product launches in the US.MNCs,with the exception of GSK Pharma and Sanofi,are expected to report a lacklustre performance due to the slower growth in the anti-infectives segment in the domestic market.Growth in the domestic pharma sector,which has recovered marginally from the December quarter,still remains disappointing impacting the prospects of the domestic formulations business of most drug firms.With operations outside India increasingly generating higher income,the tax rates for most pharma companies have climbed up impacting their profitability.A sustained recovery in the domestic market,faster approvals of products in the US and increased exclusivity launches will be key triggers for Indian pharma companies in the quarters ahead.

Chidambaram promises to get stalled projects moving

Finance Minister P. Chidambaram will “get in touch” with various Ministries to remove the hurdles that are holding up some 300 projects.

After meeting industry leaders and top bankers here on Monday, Chidambaram said: “The agenda (of today’s meeting) was to identify the projects that have been stalled. We have identified 215 projects that have been stalled for one reason or other. We have identified another 126 new projects to which banks have sanctioned loans but which have not taken off.”

Finance Ministry estimates that of the 215 stalled infrastructure projects, 106 are in the power sector, 79 in road, 20 in iron and steel, and 5 each in cement and port sectors.

BANK FUNDS LOCKED UP

All these projects, which collectively involve an outlay of over Rs 7 lakh crore, have been funded by public sector banks (PSBs). As of December-end 2012, public sector banks had disbursed Rs 54,000 crore to the projects.

The meeting comes on the back of a government estimate that economic growth will fall to a decade low of 5 per cent in FY13. Many analysts are blaming stalled projects and declining investments as among the major factors hurting growth

The Minister said that “most of the reasons for project delays are related to land acquisition, gas or coal linkages, environmental or forest clearances and in some cases the inability or the unwillingness of the bank to restructure loans.”

State Bank of India Chairman Pratip Chaudhuri hoped the Finance Minister will resolve some of the issues faced by the industry. He said there could be more such meetings.

At today’s meeting, there was discussion over why things are not moving forward in the infrastructure space.

Bankers also conveyed to the Minister that due to current dispensation on non-performoing loans (bad debts), there are difficulties in providing more finances.

Kumar Mangalam Birla, Chairman, Aditya Birla Group, said: “The Finance Minister went into a lot of nitty-gritty. He was very concerned and felt that these projects need to be completed.”

MINISTER TAKES NOTES

Birla also said that Chidambaram took notes about of the grievances of the industry and assured them of action soon.

Indiscriminate mining by some large corporations in complete violation of norms led the Supreme Court and the Environment Ministry to put curbs on mining. In the last couple of years, environment clearances have been hard to come by.

As for land acquisition, it is hoped the new Land Acquisition, Rehabilitation and Resettlement Bill will solve issues of inadequate compensation that have led to inordinate delays in getting land for key infrastructure projects.

FIIs bet big on oil sector as govt adopts reform measures

Foreign institutional investors (FIIs) are betting big on the Indian oil sector. With the government adopting reforms-related measures in the second half of the previous financial year, oil counters witnessed buying interest from foreign investors.

Oil India, a Navratna company, saw the highest participation, thanks to the offer for sale (OFS) transaction in February this year. FIIs took their holding substantially up in the oil giant by 6.23 per cent during the second half of FY13 to 7.65 per cent as on March 31, 2013.

Oil India, which became a wholly state-owned enterprise in 1981, is engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of liquified petroleum gas (LPG).

Meanwhile, the company declared two successive interim dividends in the January-March quarter amounting to Rs 23 a share. On Friday, shares of the company closed firm at Rs 530.9, up around two per cent. The counter had touched its 52-week high in January when it crossed the Rs 600 mark.

Hindustan Petroleum Corporation Ltd (HPCL) was another hot favourite of FIIs from India’s oil counters. Foreign investors increased their stake in the company by 3.5 per cent to close to 10 per cent against 6.24 per cent as on September 2012.

Similarly, Indian Oil Corporation (IOC), the country's largest oil-marketing company, saw FII holding inching up 87 basis points (bps) to 1.91 per cent during the later half of FY13. One basis point is a 100th of a percentage point.

The government of India offloaded a 10 per cent stake in the company via the OFS route and offered 60.1 million shares at a floor price of Rs 510 to raise around Rs 3,100 crore. The issue attracted bids for 154 million shares worth nearly Rs 8,000 crore or about 2.5 times the offered shares.

The latest shareholding data of Bharat Petroleum Corporation Ltd (BPCL) is not yet available on the stock exchanges. However, the trend till the December quarter shows a rising holding of FIIs on the counter.

Market participants had hinted that if oil-related reforms were implemented well, it would result in a total turnaround of the sector leading to its re-rating.

Interestingly, domestic institutional investors (DIIs) do not seem gung-ho about the oil story. Barring, Oil India, DIIs chose to cut their holdings in IOC and HPCL.

Weekly Stocks Outlook

Bank Stocks Outlook: 

Bank stocks are likely to trade with a slightly positive bias next week as the beginning of the new financial year brings hopes of a lower interest rate regime, better margin and economic growth, analysts said.

"We have positive stance on the sector with overweight on Private Banks, and selectively positive on public sector banks," said Dolat Cap in a note. "We believe that as the economic growth starts to improve, and interest rates soften, the asset quality fears for banks should reduce."

Oil Stocks Outlook:

Shares of the state-owned oil marketing companies--Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp--are seen rangebound next week while those of Reliance Industries may witness some buying activity.

Continuous softening of crude oil prices provides much-needed relief to oil marketing companies, but traders are concerned that the reversal in the rupee-dollar trend may take away most of that benefit.

FMCG Stocks Outlook: 

Fast-moving consumer goods stocks are expected to trade with a positive bias next week as analysts expect a rise in gross margins of companies in this sector, when they announce Jan-Mar results, due to fall in raw material prices.

"Prices of key raw materials like palm oil and copra (dry coconut) have dropped and are expected to consolidate at current levels for a few months, this will help FMCG companies post better margins this quarter," said an analyst at a leading domestic broking firm.

Steel Stocks Outlook:

Shares of major steel companies are seen rising next week because of a technical bounce back, and on expectation of bullish earnings for Jan-Mar quarter, analysts said.

On the earnings front, since prices of coking coal have declined 50% on year in the quarter ended March, steel companies are likely to benefit despite the not-so-strong steel prices, said analysts. Coking coal and iron ore are key raw materials used to make steel.

IT Stocks Outlook:

Shares of information technology companies are seen trading in a thin band next week as investors will await Jan-Mar earnings that kick start with Infosys on Apr 12.

Cement Stocks Outlook: 

Shares of major cement makers are seen trading with a negative bias next week, as March despatch data disappointed investors, analysts said, adding, expectations that companies may post a muted revenue growth for Jan-Mar may also weigh on the stocks.

The brokerage sees UltraTech Cement leading the pack in Jan-Mar earnings growth, but both Holcim group companies--ACC and Ambuja Cement-- are expected to report flat-to-lower earnings. The companies' inability to increase prices amid low demand during Jan-Mar is likely to hurt earnings for the quarter.

Capital Goods Stocks Outlook: 

Shares of most capital goods and engineering companies, except Larsen and Toubro, are seen in the red next week owing to lack of visibility in orders and government spending, dealers said.

"We expect the moderating trend in revenue growth to continue in 4QFY13E, up 4.8% YoY (v/s 8% YoY in 9MFY13), impacted by depleting order book and

execution constraints due to overall economic slowdown," Brokerage Motilal Oswal said in a research report.

Auto Stocks Outlook:

Shares of major automobile manufacturing companies may trade with a negative bias during the coming week due to the continued lull in the sector on account of falling sales, analysts from various brokerages told Cogencis.

"Maruti (Maruti Suzuki India Ltd) is one of the very few companies that looks positive, which is because of the depreciating value of Yen, thereby

favouring its import costs," Automobile Analyst at Prabhudas Lilladher Surjit Singh Arora said.

Telecom Stocks Outlook:

Buoyed by the optic fibre network sharing deal with Reliance Industries Ltd, Reliance Communications Ltd is seen trading with a positive bias next week.

On Tuesday, Reliance Communications announced that it has signed a 12-bln-rupee pact with Reliance Industries, wherein it would share its fibre optic network with the latter's telecom arm Reliance Jio Infocomm.

Govt decontrols sugar, companies to save Rs 3000 cr

In a major reform, the Indian government on Thursday partially decontrolled the Rs 80,000-crore sugar sector by giving freedom to millers to sell in the open market and removed their obligation to supply the sweetener at subsidised rates to ration shops.

Food Minister K V Thomas maintained that the decision will not lead to any increase in retail prices and said the government will continue to sell subsidised sugar through ration shops after procuring the sweetener from open markets.

The decision will lead to government's annual sugar subsidy doubling to Rs 5,300 crore, while industry will save about Rs 3,000 crore per year.

The decision to partially decontrol the sugar sector, the only industry left under the government control, was taken by the Cabinet Committee on Economic Affairs (CCEA).

Mills at present have to sell a portion of the sweetener they produced at a fixed rate of about Rs 20 per kg to the government. After the decision, they are free to sell all of their produce in the open market.

After buying sugar from mills, the government supplies to people via ration shops at Rs 13.50 per kg.

Following the decision taken by CCEA, headed by Prime Minister Manmohan Singh, states will now procure sugar from open market. The centre will subsidise such state purchases up to Rs 32 per kg for two years (till September, 2014).

Thomas said the government subsidy outgo - because of having to subsidise state purchases - would rise from Rs 2,600 crore to Rs 5,300 crore per annum.

"Chini meethi thi, meethi rahegi (sugar was sweet and will remain sweet for common man)," Information and Broadcasting Minister Manish Tewari said when asked if the decision would lead to an increase in retail prices.

C Rangarajan, whose panel recommendations formed basis of the CCEA decision, said the decision was "sufficient incentive to the sugar mills".

Industry body ISMA said the move would improve cost of production and improve liquidity with millers which in turn will ensure timely payment to farmers