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India Infoline Weekly Newsletter - March 02, 2012

The Indian market could consolidate in a sideways fashion in the near term as uncertainties over the European debt crisis and geopolitical tensions persist.

March 02, 2012 8:01 IST | India Infoline News Service
Weekly Outlook: Indian stocks notched their second weekly loss of 2012 after lot of volatility. Not much went in favour of Indian equities, as government data showed lowest GDP growth in nearly three years. Fiscal deficit has crossed the annual estimate, liquidity remains tight, FII inflows are tapering off and global economic scenario remains hazy. To add to the markets’ woes, the ONGC auction was a near disaster.

On the global front, oil prices continue to be elevated. While Fed chairman Bernanke has not committed to QE3, his counterpart in Europe, Mr. Draghi has announced LTRO-2 worth €530bn. LTRO-1 led to a spike in risky assets. The implication of LTRO-2 remains unpredictable at the moment. Watch out for the announcements from the weekend’s EU summit.

For Indian market, next two weeks will be really crucial. The big event next week will be counting of votes for the assembly polls. The week after that is packed with important events like IIP, Inflation, RBI meet, Advance Tax numbers and Budget. All in all, we will see continuation of volatility with no clear bias.
 
India's Q3 GDP grows by 6.1% vs. 6.9% QoQ

The Indian economy expanded at the weakest pace in more than two years in the third quarter of the current fiscal year, as sticky inflation, aggressive monetary tightening by the RBI, policy stalemate and a global slowdown crimped investments and consumer spending. The Gross Domestic Product (GDP) grew by 6.1% in the October to December quarter of FY12 from the year-ago period, after expanding by 6.9% YoY in the second quarter, the Government said in a statement. GDP growth in the first quarter stood at 7.7%. Economists had forecast a GDP growth of 6.2-6.4% in Q2 FY12.

This is the lowest GDP growth in 10 quarters and the fourth straight quarter where it is below 8%. India's economy grew by 8.3% in the third quarter of the previous fiscal year (2010-11). The Indian economy had expanded by 8.5% in FY11. India's GDP growth in the first nine months of FY12 stood at 6.9% YoY versus 8.1% YoY in the corresponding period of the last financial year, the CSO data showed today.

Sectoral Break-up for Q3 GDP Data:-
Agriculture - 2.7% vs 11% YoY.
Industry - 2.6% vs 7.6% YoY.
Services - 8.9% vs 7.7% YoY.
Manufacturing - 0.4% vs 7.8% YoY.
Mining - (-)3.1% vs 6.1% YoY.
Construction - 7.2% vs 8.2% YoY.

Source: CSO.

The growth in GDP at market prices during Q3 FY12 is estimated at 14.5% compared to the growth rate of 18.8% in Q3 FY11. Private final consumption expenditure is estimated to have grown by 6.2% in Q3 FY12 compared to 7.6% in Q3 FY11. Government Final Consumption Expenditure expanded by 4.4% in Q3 FY12 as against 4.7% in the year-ago period. Gross Fixed Capital Formation, which is an important indicator of investment in the economy, is estimated to have shrunk by 1.2% in Q3 FY12 compared to the increase of 11% in Q3 FY11.

Private final consumption expenditure is estimated to have grown by 5% in 9M FY12 compared to 8.5% in 9M FY11. Government Final Consumption Expenditure expanded by 4.4% in 9M FY12 as against 8.8% in the year-ago period. Gross Fixed Capital Formation is estimated to have declined marginally in 9M FY12 compared to the increase of 8.9% in Q3 FY11.

Quarterly GDP at factor cost at constant prices (2004-05) for Q3 FY12 is estimated at Rs. 13,39,603 crore, as against Rs. 12,62,794 crore in Q3 of 2010-11. The wholesale price index (WPI), in respect of Food Articles, Non-food Articles, Fish, Minerals, Manufactured products, Electricity and All Commodities, rose by 6.3%, 4%, 20.4%, 22.4%, 7.9%, 2.6%, and 8.9%ent, respectively during Q3 FY12, over Q3 FY11. The consumer price index (CPI) for industrial workers showed a rise of 8.4% during Q3 FY12 over Q3 FY11.

Moody's Analytics on India Q3 GDP data

ONGC share auction draws muted response
The Government’s already battered image suffered another knock in the form of a disappointing ONGC auction. A last-minute rescue by LIC reportedly saved the Government the blushes. The Government is believed to have raised Rs 127.66bn from the infamous ONGC auction. The floor price for the ONGC auction had been set at Rs 290 late on Tuesday, a 2.3% premium to the day's closing price. The Government proposed to offer 427.77mn shares, or 5% of equity. According to reports, state-owned financial institutions led by LIC were asked to bail out the ill-timed and poorly conceived ONGC issue at the last minute, which led to the exchanges not being able to release the final bid quantum. But, Additional Secretary, Disinvestment, Siddhartha Pradhan denied that state-owned institutions were asked to bail out the offer after it was undersubscribed. FIIs reportedly kept away from this offer for sale as the base price was set at a premium and uncertainty prevailed on the sensitive issue of subsidies given by upstream companies to the state-run refiners for selling fuels below cost.

A government official was quoted as saying that details of final bids were delayed by a system glitch caused by a lot of last-minute order. The exchanges in a joint statement clarified that while the buy orders at both exchanges reflected a demand of 292mn shares around the market close, there were certain buy orders which were not immediately confirmed or were erroneously rejected by custodians due to a mismatch at the custodian end, even though, the orders were funded. "These orders were not reflected in the demand of 292mn shares. After rectification of these errors, the final demand was for 420mn shares. Monies and orders received after normal market close have not been considered by the exchanges in the offer for sale," they said.

Still, the lukewarm response will irk the Centre. It may also hit sentiment for upcoming auctions unless the Government gets its act together. ONGC stock was down on Thursday and suffered more damage on Friday. The approval of share buyback for PSUs may act as a blessing in disguise as far as the Centre's flagging disinvestment programme is concerned. But, one has to see how the market views that in light of the ONGC fiasco.

Company Name S3 S2 S1 Closing Price R1 R2 R3
ABB 740 766 797 827 853 879 910
ACC 1,149 1,221 1,266 1,310 1,383 1,456 1,500
Ambuja Cem 147 155 160 165 173 182 187
BHEL 243 259 281 302 318 335 356
BPCL 567 601 629 657 692 726 754
Bharti 326 336 341 347 356 365 371
Cairn 331 343 358 374 385 397 412
Cipla 295 301 309 318 324 330 339
DLF 154 168 190 211 225 239 261
Gail 355 360 367 373 378 382 389
Grasim 2,543 2,596 2,665 2,733 2,787 2,840 2,909
HCL Tech 445 456 470 484 496 507 521
HDFC Bank 468 484 503 521 537 553 572
Hero Honda 1,703 1,769 1,875 1,981 2,047 2,113 2,219
Hindalco 122 130 139 147 156 165 174
HUL 362 369 376 383 390 397 405
HDFC 637 649 660 672 684 696 708
ICICI Bank 809 840 871 902 933 965 996
Idea 87 90 92 94 97 100 102
Infosys 2,619 2,686 2,779 2,872 2,939 3,006 3,099
ITC 191 195 201 207 211 215 221
L&T 1,131 1,183 1,248 1,314 1,365 1,417 1,482
M&M 591 616 655 694 719 744 783
Maruti 1,164 1,229 1,265 1,301 1,366 1,432 1,468
Nalco 53 56 58 61 64 66 69
NTPC 164 169 174 180 184 189 195
ONGC 250 259 272 285 295 304 317
Powergrid 106 108 110 113 115 117 119
PNB 807 860 901 941 994 1,047 1,088
Ranbaxy 402 410 420 430 438 446 456
Rcom 78 84 88 93 99 104 109
Reliance 714 752 777 802 840 877 902
Reliance Infra 468 525 558 592 649 706 739
Reiance Power 96 106 113 119 129 140 146
Satyam 53 57 64 72 76 80 87
Siemens 685 724 757 791 829 868 901
SBI 1,967 2,071 2,143 2,215 2,319 2,423 2,495
SAIL 86 91 96 101 106 112 116
Sterlite 105 112 117 121 129 136 141
Sunpharma 521 538 549 560 578 595 606
Suzlon 19 23 25 28 32 36 39
Tata Com. 208 222 230 237 251 265 273
TCS 1,117 1,144 1,190 1,235 1,262 1,290 1,335
Tata Motors 232 244 256 267 279 291 303
Tata Power 99 105 109 114 119 125 129
Tata Steel 404 427 444 461 483 505 522
Unitech 20 24 27 30 34 39 42
Wipro 393 404 417 430 442 454 466
Zee 110 120 127 133 143 153 160

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