Not healthy for mkts to hold on every word from Fed: JPM

All eyes are once again on the US Federal Reserve and Janet Yellen. Most people will be closely hearing the statement coming out from the Fed for changes. But Geoff Lewis, ED, JPMorgan Asset Management believes Yellen will not want to make any major changes at this

“As we start to get better data and the high frequency indicators point that way then the Fed is likely to have quite a high threshold to change in that policy, they will continue with tapering,” he told CNBC-TV18.

The Bank of Japan unanimously voted against any changes in key policy rates today, as was expected by Lewis. It kept to its key policy of boosting monetary base by ¥60-70 trillion/year. He believes BoJ will only act if the Japanese economy weakens and if they see that inflation is starting to fall back. Hence, he was not expecting much from BoJ today.

Among asset classes in India, he likes equities the most. India infact is one of his preferred markets in the emerging markets space.

 

Latha: What do you expect to hear from the Fed today? What part of the statement will be important?

\A: I think people will be passing the statement very carefully and looking for any change in the wording. I think Yellen will not want to make major changes at this point. I think she wants to stretch continuity and so far things do not warrant any major changes to the statements and in fact as the economy starts to normalize, as we start to get better data coming and high frequency indicators point that way then the Fed is likely to have quite a high threshold to change in that policy, they will continue with tapering, the market will be used to that and it will be nice to get away from this situation where we are hanging on Fed’s every word. To me that is not healthy for the market.

Latha: There is another central banker who will be speaking and acting, Bank of Japan (BoJ). Will you watch out for anything they say or do?

A: I think the Bank of Japan wants to keep their powder dry, they are wanting to assess the impact of the consumption tax hike. We have seen consumption tax hike coming through pretty fully in terms of prices. We have the Tokyo CPI out, so inflation is definitely picking up in Japan and BoJ is bearish for additional monetary easing, at this point also it is higher than the market have been anticipating so. I think further real action from BoJ will only come if they see the Japanese economy weakening and if they see that inflation is starting to fall back, so nothing much from the BoJ today.

Sonia: What is your asset allocation strategy is for 2014 and how high does India feature on your list?

A: We still like equities the most but investors should be realistic; they should be overweight equities but fairly moderately so. Bonds have surprised us. I think what happened in the first quarter was a good reminder of the need for diverse vacation. We would still prefer high yield, global high yield in the credit space because we have got emerging market equities where neutral to slightly underweight on a tactical basis but preferring Asia over Latin America and within Asia, India is still one of our preferred markets.

Latha: What is your sense about what Yellan might hint towards interest rates? Will that be something we have to watch out for in the statement?

A: I do not think she wants to encourage markets to get excited about interest rates. The market was trying to get ahead of the Fed last year – pushing, bringing forward the timing of the first rate hike since then the Fed has managed to communicate its intentions more effectively and the forward rates are currently looking for the first increase run by the middle of 2015, the Fed will be happy with that. It is after all six months after the ending of quantitative easing (QE) tapering which is what Yellan had said in one of her first public announcements.

Nifty to hit 7400 by year-end; like pvt banks, telcos: BNP

Manishi Raychaudhuri of BNP Paribas Securities India foresees key Indian equity benchmarks – the Sensex and Nifty touching 24,000 and 7,300-7,400 respectively, by end of this year.

In an interview to CNBC-TV18 he says, both macro economic scenario and earnings environment is on a better footing across Asia, also inflows of foreign funds into emerging markets (EMs) has increased in last few weeks. Hence, investor sentiment relating to Asia and EMs has improved.

As far as the Indian market is concerned, Raychaudhuri says that outcome of the ongoing Lok Sabha elections on May 16, will be the key determinant of stock market movement.

On sectors, he expects private sector banks and non banking financial companies (NBFCs) to outperform and those looking to bet on the banking sectors can consider investing in public sector lenders who has low NPA concerns. From the auto space, he is positive on Tata Motors . He is overweight on the Indian telecom sector.

On the flipside, consumer and personal care companies seem to be on a shaky wicket as of now, he adds.

Latha: May 13 exit polls will be considered by guys like you almost as reliable as May 16, should we get our best guess on May 13?

A: In the previous two general elections exit polls gave a better idea about final election results than opinion polls. The opinion polls in the previous two elections were horribly wrong. But the exit polls gave us a better sense. If I draw lessons from history, I would think that exit polls would provide some indication.

Latha: So you will make your moves on that day on May 13?

A: It is not that we would be upgrading or downgrading stocks or the country or sectors as a whole on that day itself, but we will clearly be preparing our grounds because we will get a sense of what is going to be on May 16.

Sonia: This is a classis bull market behaviour that we are seeing, a couple of weeks of a good run then a minor correction and then again a resumption of a bull trend, so would you at this point in time – election outcome notwithstanding – continue to be positive on the Indian markets with a long-term horizon in mind?

A: Over a long-term horizon, one has to look at the entire emerging market or Asian picture. I don’t think India would be able to perform in isolation. If one looks at how Asia has performed this year, it is just about flat. It went up initially then it corrected again etc. First of all, investor’s sentiment about Asia or emerging market has to improve. It has improved somewhat.  In the most recent period, we have seen some inflows coming back into the emerging markets over past three weeks, after losing money for almost about 24-25 weeks in succession. That is a positive sign.

The recovery that we are seeing, the strength in the Indian market is also related to that. On top of that, we have seen some positive signs as far as the macroeconomic numbers are concerned and as far as the earnings environment is concerned. This earnings environment improvement is in not just in India, it has happened all across the Asia.

Asia ex-Japan has surprised positively by close to about 2 percent compared to expectations and India has surprised slightly higher about 2.7-3 percent. There is still some steam left here but in case of India, there is some political hope that has also got factored in into the valuation. We will have to watch out for that outcome very closely. If we don’t get the kind of outcome that the opinion polls have been forecasting for the previous few months then we would obviously be in for a short-term disappointment.

Latha: Speaking of economic recovery itself, the Hindustan Unilever Ltd (HUL) numbers if anything showed us that the consumption is terribly weak, so is this restricted to consumer goods and you would say that earnings are otherwise looking better for other sectors?

A: Close to half of Indian corporates have reported by now and the positive surprises have come predominantly from some of the domestic cyclicals like banks, even IT was kind of okay to slightly marginally positive at the beginning of the year. Disappointments are beginning to come now, we have seen some small disappointments from the consumer space and some bad apple in engineering, construction, infrastructure or materials like metals haven’t reported yet. That has been an area of caution at this point of time.

The consumption demand has been weak, though there is a clear polarization across rural and urban consumption. The reason why many of these companies are surprising negatively on the margin side is that the relatively high margin activity comes from urban consumption, which is possibly far worse compared to rural consumption. Though the concern, going forward as far as rural consumption is concerned, pertains to the special and temporal distribution of rainfall in the context of an El Nino situation that we might get in the second half of the year. The consumer companies particularly the home and personal care companies do look on a shaky wicket right now.

Hope to see markets rise by another 8% by year-end: Walker

Jim Walker, MD of Asianomics, thinks the business cycle in India is improving. He maintains a long position on Indian stocks “regardless of the election outcome”.

Fairly defensive by nature as he claims, Walker said he would rather go aggressive utilizing the current stock market cycle. He is looking to buy beaten down industrials, especially in midcaps, cyclicals, infra & manufacturing stocks.

The markets have so far gained over 7 percent this year, Walker hopes to see it rise by another 8 percent by 2014-end.

He expects Federal Reserve Chairperson Janet Yellen to continue tapering till bond buying reaches zero. He thinks the disappearance of entire quantitative easing program will be very positive for emerging markets.

Sonia: All hopes are high on a pro-reformist, pro-business party coming into power. How are you approaching India now?

A: We still have the same view on India that we had in October. It has been in a process of repairing itself, paring down debt, improving its balance sheet and ready to spring to the next up cycle and the business cycle, so we have been long India since October and continue to be long regardless of the election outcome.

Latha: If the election outcome were to not give such a definite mandate to the Bharatiya Janata Party (BJP) which is now of course the hot favourite, if it were to be dependent on the support of some other parties. Would you mellow your purchases?

A: No, in fact on the basis of that we would constitute a pullback in the market. We would be telling our clients that increase their purchases at that point and take advantage of lower stock prices because the call that we have on India is for the next three-five years rather than next three-five weeks.

Sonia: Somebody was suggesting to us earlier that regardless of the Indian elections this market perhaps is getting into a bull market phase for multiple years then how do you position yourself in terms of a portfolio approach? Is it still your defensive names that you tank up or do you think that now one should get aggressive and move into cyclical?

A: We would by nature normally be fairly defensive but at this stage on the Indian business cycle and in terms of stock market we would be much more aggressive. So, we are looking to buy into industrial cyclical, the beaten down stocks over the last two-three years especially in the midcap space, so buy manufacturing cyclical and partly the infrastructure story.

Latha: Moving to some of the global events – how are you seeing the Fed policy panning out 12 months from now and what interest rates maybe staring at on treasuries and what might that to do fund flows into emerging markets and to India?

A: We are of the view that the tapering will continue until the bond buying levels zero which will be at the end of this year. At that point have no doubt that the Fed led by Janet Yellen, who is the most dovish person you can possibly hope to have in charge of the central bank, will pause and pause for a long time to watch and see what is happening.

My view is that that process of the whole quantitative easing programme disappearing from the scene is going to be very positive for emerging markets. I think it has been the disastrous policy for emerging markets over the course of the last few years which is why they have underperformed and now as we get much more clarity, although economic fundamentals rather than money printing, the emphasis will come back on to the emerging markets and particularly those who sorted some of their problems and have begun a new economic upswing, so India is right at the top of that list.

Sonia: What kind of returns do you think India could generate by the end of the year. We are up about 7 percent this year, much higher than what we did all of last year, but what could the returns be?

A: I would hope that the market would double again from here by the end of the year and then going significantly higher in 2015-16 as corporate earnings start to rebound and investors begin to concentrate again on an upswing and economic growth in India. So I would see further gains, further advances during the course of 2014 but the real cream is coming in 2015-2016.

Latha: Will Ukraine bung a spanner in the works?

A: It is difficult one to call, so many things can happen that I do not think that the market in Europe have sold off in the way that they probably should have in the face of the spread and I still think there is far-far too much optimism in Europe about the prospects of economic growth. So, Ukraine might bung a spanner. I think much more likely is that the realisation that Europe is still stagnating is going to be a problem for European equity markets and developed markets all together over the course of the next 6-12 months.

Sonia: Did you say the market will double from here until the end of 2014 or 2015?

A: I said I would hope that the gain so far this year would be matched again in the second half so the market up 8 percent and I would hope by the end of the year it would be up 16.

OBC Q4 net up 0.8% on other income but provisions jump 23%

Public sector lender  Oriental Bank of Commerce (OBC) surpassed street expectations by reporting net profit at Rs 310.3 crore in the quarter ended March 2014, up 0.8 percent compared to same quarter last year supported by higher other income and net interest income. Asset quality was stable but provisions increased during the quarter.

According to CNBC-TV18 poll estimates, analysts had estimated net profit of Rs 240 crore and net interest income of Rs 1,289 crore for the quarter.

Net interest income, the difference between interest earned and interest expended, jumped 7.8 percent year-on-year to Rs 1,308.7 crore in the quarter gone by while other income (non-interest income) shot up 63.4 percent on yearly basis to Rs 754.5 crore during the quarter.

Asset quality was stable during the quarter. Gross non-performing assets (NPA) climbed 12 basis points sequentially (79 bps on yearly basis) to 3.99 percent while net NPA declined marginally (up 55 bps Y-o-Y) to 2.82 percent in the quarter ended March 2014 from 2.91 percent in previous quarter.

In absolute terms, gross NPA jumped 8.4 percent Q-o-Q (34.3 percent Y-o-Y) to Rs 5,617.86 crore and net NPA soared 1.9 percent quarter-on-quarter (34.5 percent year0-on-year) to Rs 3,904.42 crore during the quarter.

Provisions and contingencies increased significantly to Rs 930.7 crore in January-March quarter from Rs 561.1 crore in previous quarter and Rs 758.8 crore in same quarter last year.

Capital adequacy ratio (as per Basel-III norms) was 11.01 percent as of March 2014 compared to 11 percent in corresponding quarter of last fiscal. Tax expense for the quarter was Rs 142.7 crore as against tax credit of Rs 120.2 crore in year-ago period.

 

China to overtake US economy; India trumps Japan

China is set to overtake the US as the world’s number one economy, while India has jumped into third place ahead of Japan, according to a new study from the world’s leading statistical agencies.

The 2011 International Comparison Program (ICP), which involves the World Bank, assesses economies based on purchasing power parity (PPP), an estimate of the real living costs. The results revealed on Wednesday paint a new and different picture of the global economy compared with the last update in 2005.

The research puts China’s GDP (gross domestic product) at 87 percent of the US in 2011 and says the Chinese and Indian economies have more than doubled relative to that of the US. In the 2005 study, the ICP believed China’s economy was less than half the size of the US, at 43 percent.

“The United States remained the world’s largest economy, but it was closely followed by China when measured using PPPs. India was now the world’s third largest economy, moving ahead of Japan,” the report said.

It added: “The results indicate that only a small number of economies have the greatest shares of world GDP. However, the shares of large economies such as China and India have more than doubled relative to that of the United States.”

The ICP program is the largest global statistical operation, covering 199 economies from eight regions. It said that changes to its methodology help explain the estimates for the size of China’s economy.

Rapid growth has led many economists to anticipate that China, the world’s second biggest economy, would move into the number one position over the next few years. The latest findings from the ICP could fuel a debate on whether that is likely to happen sooner rather than later.

The Financial Times used the ICP figures to predict that China could overtake the US as the world’s largest economy as soon as this year – at least five years earlier than previously forecast.

Reliable?

Because economies estimate their GDP at national price levels and in national currencies, those GDPs are not comparable, the ICP said. To be compared, they must be valued at a common price level and expressed in a common currency, the ICP said, explaining why it uses PPPs.

“The ICP is quite well-known and my take on this is that purchasing power parity measures are quite tricky to undertake and a lot of assumptions go into them,” said Frederic Neumann, the co-head of Asia economic research, at HSBC in Hong Kong.

“It is true that China and India are certainly very large in size,” Neumann added. “At the same time these [PPP] measures shouldn’t be the be-all and end-all of international comparisons. When, for example, we measure international purchasing power expressed in dollars, which matters in international trade, the U.S., Europe and Japan continue to be the dominate economies in the world.”

China’s economy grew an annual 7.4 percent in the first quarter of this year, slowing from a 7.7 percent increase in the final quarter of 2013. Still, its economic growth continues to outpace that of developed world economies.

An advanced reading due for release later on Wednesday is expected to show the US economy expanded an annual 1.2 percent in the first three months of this year.

The Fed, markets watch the same things Wednesday

The findings of the ICP report meanwhile might come as welcome news in India, an economy that came under heavy fire last year for not doing more to address a wide-current account deficit and implement long-term structural reforms.

India was the tenth largest world economy in the 2005 ICP study.

The 2011 report lists the world’s 10 biggest economies in the following order: U.S., China, India, Japan, Germany, Russia, Brazil, France, the U.K., and Indonesia. The ICP noted that changes in its methodology and country coverage made comparisons with the previous results difficult.

“This study is a useful reminder of how rapid really the progress has been in China and India and that the domestic economies are larger than first meets the eye,” said HSBC’s Neumann.

Expect NIMs to remain around 3.3% in FY15: Federal Bank

The 2.46 percent gross NPA is the best ever in pre-2008 crisis. So for us, it is quite significant and I mentioned this is on a denominator which hasn’t grown profoundly.

SHYAM SRINIVASAN

MD & CEO

Federal Bank

Federal Bank   reported a fairly robust set of quarterly earning numbers Wednesday with net interest income rising 30 percent quarter on quarter to Rs 625 crore while net profit jumped 25 percent to Rs 277 crore.

This was even as year-on-year, other income declined while provisioning rose.

On the asset quality front, gross non performing assets (NPA) declined from 2.83 percent to 2.46 percent while net NPA fell from 0.83 percent to 0.74 percent.

MD and CEO Shyam Shrinivasan, in an interview with CNBC-TV18’s Latha Venkatesh and Sonia Shenoy, said the results were encouraging thanks to some “disciplined credit lending” the bank had been doing for many quarters. “The NPA challenge has been very squarely addressed by us.”

“There is an elaborate process that we have gone through,” Shrinivasan said, on how the bank’s asset quality has improved in an environment several other banks are struggling.

Latha: A very good set of numbers. There seems to be a distinct improvement on your non-performing loans (NPL). Would you say the worst is over and things will look better in the current and the next quarter as well?

A: Yes, the numbers have been good. Q4 in particular both sequentially and year-on-year was quite encouraging and this is largely on the strength of some disciplined credit lending that we have been doing for many quarters now.

The reduction in NPL — both gross and net have come down substantially — is on a denominator that hasn’t grown significantly.

The outlook remains quite confident in the coming quarters. The NPA challenge has been very squarely addressed by us both through management of new accounts as also reduction in slippages and recoveries increase.

So on balance, it is a good outcome. NPA has done well.

Sonia: I wanted your view on the margin picture going ahead. This time, your reported margins were 3.59 percent — there was some one-offs in that on account of interest from an income-tax refund etc — but going ahead, in FY15, what kind of net interest margins (NIMs) do you think Federal Bank could hold on to?

A: If you pull out the one-off benefits and look at full year FY14, it is around 3.3 percent. Our outlook for the coming year is in the same zone — 3.3-3.35 percent — because this year there was a sharp reduction in gold loans for the first nine months.

It is only in the last quarter that we grew Rs 360 crore [in gold loans]. So, if that run rate continues in FY15, which it should, I see NIMs to be somewhere in the region of 3.3-3.35 percent.

Latha: Gold loans have become popular again after the nine-month downtick?

A: No. If you recall last year in the fourth quarter (March 2013 quarter), there was a significant correction in gold price. Thereafter, business remained very volatile and we took extreme caution to ensure that we don’t run into a problem both for ourselves and the customers.

As gold prices have stabilized, the business is back to normal. The steady-state run rate is about Rs 100-150 crore per month incremental, which will continue in FY15 unless there is material volatility in commodity prices, which is not expected for now.

Latha: You have had a one-off in IT refund of about Rs 100 crore and then a non-tax provisioning also coming lower because of a reversal of provisioning. Should we take both these as one-offs?

A: The IT refund consequence is the tax benefit so they are linked. But on a contra, there are one-offs on account of increased provisioning for MTM impact on treasury. That is almost the same Rs 100 crore that is the tax benefit.

For the full year period, the mark-to-market impact is Rs 100 crore. One hopes the interest rate environment turns more supportive in the coming year.

Latha: What is your guess though?

A: For the first half we don’t see significant changes [in interest rates]. We will have to wait for the full year.

Latha: Fresh restructuring has been higher. What is the status there, should we continue to expect some more restructuring, is the economy still showing that kind of pain?

A: Our restructured for Q4 is Rs 327 crore and there is no pipeline for restructuring now of any significant nature. Of that Rs 327 crore, one account was a discom account, which in the normal course was to be restructured.

The others are really smaller tickets in the Rs 20-30 crore space. There is really no significant restructuring pipeline that we carry right now.

Sonia: Overall your asset quality has improved this quarter around. That is a relief to see at a time when so many banks are struggling to hold their asset quality. Do you expect stressed loans to decline further in FY15 and what kind of gross NPA do you think Federal Bank could hold?

A: The 2.46 percent gross NPA is the best ever in pre-2008 crisis. So for us, it is quite significant and I mentioned this is on a denominator which hasn’t grown profoundly.  So actually the improvement is slightly not showing up as well.

But the greater point is: the reduction in slippages sequentially or year-on-year is quite marked because of the underwriting difference that we have made and there is an elaborate process of what we have gone through over the years.

The gross slippage for the full year was half of last year in a year where the environment has gone through a lot of stress.

Majority govt no magic wand for Indian economy: Dimensions

The market and experts alike are contemplating various outcomes; if the BJP get 240, 200 and 180 seats respectively, in the current general elections. However, even if a majority government comes to power, it is unlikely to do any wonders for the Indian economy that continues to be plagued by high inflation.

The BJP has only announced a minimum supply price (MSP) 50 percent over the cost of production of food grains inclusive of labour and land cost. This will only increase the inflation further and the Reserve Bank will keep increasing rates, he explains.

“The crude ground reality is that inflation has eaten into purchasing power. Autos, FMCGs are all suffering due to this and it is unlikely to sort out soon. We have a tough year ahead of us,” he highlights.

Sonia: We got a couple of cautious views this morning that one should perhaps stay away at this point, not make fresh investments and take some profits. Is that your view as well?

A: It depends on what you are buying and what is the time horizon because it is not like one should stay away from the market. Some shares are always good to buy, some shares are when they get correct are good opportunities to buy. Some things like nationalized banks perhaps have surged beyond fundamentals, there we are going short in most of the shares at this point of time.

We would like to even cut down and go short on some of the shares because one lives on hope and dies by reality and that might get very fast into this market in the next 15 days or so. So, one’s got to be careful but it is not like it is an open sell all or buy all.

Latha: We are normally told to think in terms of three scenarios post May 13 and May 16, a BJP with 240, a BJP with 200-220 seats and a BJP with 180 seats. How would you react to each of these or how would you prepare for any of these scenarios?

A: What I am preparing for is that April to June Gross domestic product (GDP)will be perhaps one of the lowest in the country. The consumer demand continues to fall irrespective of segments, consumer durables, consumer products, cars, automobiles you name it. There is a major shrinkage happening in the consumer buying in this country which is not stopping at the end of the day.

Now irrespective of which political party comes in, let us say all BJP, full victory what do they announce? They just announce that MSP will be 50 percent profit over the cost of production of the food grains including labour and land. What does it mean to the MSP therefore? Where does it take the prices and the inflation to?

So it doesn’t matter who wins. The political voices are telling you that to fulfill anything what they are asking you to do it, inflation is going to be one of the biggest ones which will go up in the economy if anything is going to happen and Reserve Bank of India (RBI) is going to keep slamming the interest rates on it. Therefore if this agenda continues I think we got a very bad year ahead of us. Optimism is there, yes things may start moving and so on but the reality of the ground is that the inflation has eaten into purchasing power which is why the real estate, the consumer sectors are down today. We have already seen the results of Hindustan Unilever, Godrej etc they are looking bad, car companies are anyway looking bad.

So the question is would a majority translate into consumer buying in the immediate future, perhaps the answer is no. Would an uncertain government become a bigger burden on the economy? Perhaps yes. But is it the fact that by single party coming there is a panacea for all economic evils, I would definitely say that is one, you live on hope and you die in reality.

Sonia: Would that really stop you from buying because all these macro worries have been on for a while, that hasn’t stopped the market from moving higher?

A: Of course not. As I said you keep buying things, let us take things like open offers coming up, let us take the liquor companies, pharma companies which you have always been educating as pharma and IT are two indices not linked to the government at this point in time or broadly not linked to the government but linked to more fundamental factors like global M&A for instance. So when you see pharma rerating which is already happening in the economy you have seen all the midcaps have been rerated in the last 15 days. It is not a function of government or new party come into power, it is a function of global derating or M&A going around in the world which allows these companies to be sold to the highest bidder in the next 12-18 months. That is why we are positioning ourselves for a Suven Life Sciences , for a  Shasun Pharma went up by about 40-50 percent and so on.  Wockhardt has gone up for no reason but again the positioning is it should be sold as a company or will be invested in buy a company. So it is not all macro economic, it is about pharma sector, IT sector, are pretty well delinked at this point of time. Infact worse the economy goes the better these sectors will do. Latha: Would you not be buying any of the power companies? There is an expectation that since the Modi government could ensure 24×7 power in Gujarat, they could find a way out of the obstacle that national power companies find themselves.

A: No the reason I am not going to buy power companies is that for the power companies to make a decent rate of shareholder return, let us understand globally utilities are bought by large institutions not by retail investors because they give you stable returns and they give you good dividends over a period of time. I don’t think that is an objective of most equity investors like us or our customers.

In terms of pure big bucks returns, I don’t think power utilities will happen for the simple reason that for any power tariff realignment to take place of a major kind, it needs a major push, you got to increase the rates. Because the corporates in India are just too strong to even justify their cost structures. You have seen already the opposition to the audit of power companies. Why is the opposition? Because we all know that the cost is parried up to a level which is unbelievable. So what is the next step, it is to hurt the customer who is already dying in any case. So to say that it is easy for power rates to go up, I don’t think it will be that easy. To say that power companies will get bumper profit, I don’t think that will happen. So in my view power utility companies will become a stable performer but may not going to be an over performer environment that we are contemplating.

Bharti Q4 net seen up 6%, India biz may be stable: Poll

Bharti Airtel  , India’s largest telecom operator by subscriber base, will announce its fourth quarter (January-March) earnings today. According to CNBC-TV18 poll estimates, analysts expect a decent quarter driven by a strong India performance while Africa is expected to drag.

India business wireless growth is seen to be driven by a volume growth of 3.5 percent and improvement in average revenue per user (ARPU). March quarter is a seasonally weak quater for Africa; hence they expect flat to negative revenue and EBITDA. Also African currencies have depreciated by 3 percent against US dollar.

There may be a one month interest expense for the newly acquired spectrum. IIFL expects Rs 80 crore of one month amortisation and interest. Analysts feel March quarter may see a forex gain of Rs 100-190 crore as against forex loss of Rs 200 crore.

Analysts say despite flat revenue per minute (RPM) in Q4, the outlook on yield improvement for the next four quarters is bright. Data growth may continue; in Q3 data volume growth was robust at 15.8 percent on sequential basis and data contribution jumped to 10.3 percent (up 460 basis points Y-o-Y and up 110 bps Q-o-Q).

Q4FY14 Q-o-Q

Rupee revenue seen up 2 percent at Rs 22380 crore versus Rs 21938.5 crore -EBITDA seen up at Rs 7245 crore versus Rs 7093.4 crore -EBITDA margin seen at 32.37 percent versus 32.33 percent -PAT may fall 6.4 percent at Rs 1000 crore versus Rs 1068.2 crore

India wireless Q-o-Q

Rupee revenue seen up 4.4 percent at Rs 12158 crore versus Rs 11644.6 crore -EBITDA may be at Rs 4220 crore versus Rs 3974.8 crore -EBITDA margin may increase to 34.7 percent versus 34.13 percent

India Wireless key point indicators (KPIs) Q-o-Q -

Minutes of usage (MOU) expected to be at 437.5 versus 434 -ARPU may go up 1.3 percent at 197.5 versus 195 -Total minutes seen up 3.5 percent at 264 billion versus 255.03 billion -RPM may increase at 45.1 paise versus 44.9 paise

Africa Q-o-Q

Dollar revenue may fall to USD 1163 million versus USD 1165 million -EBITDA may decline at USD 296 million versus USD 300 million -EBITDA margin may slip to 25.45 percent versus 25.75 percent

Nifty likely to breach 7100 before May 16: Nirmal Bang

The Nifty is likely to breach 7100 before May 16, says Rahul Arora, CEO, Nirmal Bang Securities. According to him, the market, which is currently trading at its all-time high of around 6700 does not looks oversold. The F&O indicators from last week also suggest that the market sentiment is pretty positive and one would easily get more than 7000 just based on those factors.

In an interview to CNBC-TV18, Arora also says that if the Narendra Modi-led National Democratic Alliance garners 240-250 seats then the current series may breach the 7500 mark on its expiry.

Anuj: I was just reading your note where you have mentioned that before May 16, you expect the Nifty to go to more than 7,100, explain that rationale?

A: That is a call predominantly on your side of the market. If you look at the futures and options (F&O) market, the Put/Call ratio is at about 0.8, it is more a technical F&O call rather than a fundamental call. By no stretch is it indicating an oversold market because generally 0.8 indicates an oversold market but if you look at Friday’s data, the 8,000 Call was pretty active. Market sentiment is extremely positive and just with the help of F&) indicators, you will head to 7,000-7,100 reasonably before May 16.

Ekta: How are we placed fundamentally?

A: Currently, where the Nifty is trading, people are discounting NDA seats between 240-250 and if you get that, there is a reasonable chance that the Nifty expiry will happen more than 7,500 in this current series. If you get between 225 and 240, we will probably be between 6,800 and 7,200 and if you get below 220-225, there is a reasonable chance the expiry will be before 6,500.

I do not think this series will be governed much by fundamentals. The Friday’s close of the Dow was down about 150 points and should have meant a very significant downtick for us as well. But the market is in no mood to look at anything but May 16.

If the main mandate is not favourable on May 16, on May 17 morning most of the concerns that we have been speaking about will become concerns again and if the mandate is very favourable then people will start discounting FY16-17 earnings already.

This series is not going to be driven by fundamentals as much as we would like it to be but if you strip the election outcome also aside, I think the valuations at more than 15X are discounting a fairly valued market at about 6,800-5,700. We will be reasonably uncomfortable giving a buy call on the market as a whole at these levels.

Ekta: What are you advising clients in terms of positioning themselves for a portfolio upto May 16? Are you advising profit booking at current levels?

A: Absolutely, I think the rally has been led by banks. Looking at the bank earnings on an FY16 basis,  HDFC Bank is trading at three times price to adjusted book, even public sector banks, State Bank of India ( SBI ) is at two times, Punjab National Bank ( PNB ) is north of three times, Bank of Baroda ( BoB ), Bank of India ( BoI ) are at two times,  Larsen and Toubro (L&T) has had a fantastic run, Bharat Heavy Electricals Ltd ( BHEL ) has had a fantastic run,  Hindalco has had a fantastic run, I think all of these stocks and sectors across the board have their own issues to contend with and a lot of those rises had to do with sentiments. So yes, from a tactical point of view, it would be prudent to book profits out of them.

IT and pharmaceuticals is giving an interesting entry point especially IT with the correction that you have seen. If the US is going to revive or even stable from here, stocks like HCL Technologies ,  Infosys in midcap space, Mindtree , Infotech Enterprises and even in pharmaceuticals  Natco or  Aurobindo can give you very good entry points and the larger ones,  Sun and  Lupin as well.

IT and pharmaceuticals are not looking too bad at this point but in some of beta or cyclicals, I think the valuations are definitely trying to look a bit stretched.

Planning Commission may not lower 12th Plan growth target

The Planning Commission’s internal meeting on Wednesday, to be headed by Prime Minister Manmohan Singh, may not suggest any cut in 8 percent annual average growth target for the 12th Plan though the economy performed below average in the first two years of this period.

“The Planning Commission may refrain from suggesting any cut in the annual average growth target of 8 percent in the 12th Plan during the internal meeting scheduled on Wednesday,” a source said, adding that it would deliberate on the draft mid-term appraisal document for the 12th Plan. According to the advance estimates of the Central Statistics Office (CSO), the economy is expected to grow at 4.9 percent in 2013-14.

The economy grew by 4.5 percent in 2012-13, the first year of the five-year Plan period. As regards the current fiscal, the economy is projected to grow at 5.5 percent. In order to achieve annual average growth of 8 percent in the 12th Plan period, the economy would have to expand at over 12 percent in 2015-16 and 2016-17, which is not feasible.

Earlier, the full Planning Commission had cut the annual average growth rate of the 11th Plan to 8 percent from targetted 9 percent in the mid-term review of the five-year long policy. The mid-term review of 12th Plan will be conducted sometime in the end of this year and the onus of revising the growth target will rest on the new government to be formed after general elections.

The meeting, however, will put on record the achievements and initiatives taken in the last decade, besides deliberating on the draft mid-term appraisal document for the 12th Plan. According to sources, the aim of the meeting, the last under the chairmanship of Singh, is to put across his message to the opposition about the UPA’s efforts to improve economic situation in the country.

The term of the Commission is co-terminus with the government. Thus the new government after the elections will constitute the new Planning Commission. According to sources, the Prime Minister’s Office has asked for comparative data on key economic and social indicators since 1984 so that a broad comparison of UPA’s decade-long regime could be made.

Besides Deputy Chairman of the Commission Montek Singh Ahluwalia, the members of panel are BK Chaturvedi, Saumitra Chaudhuri, Syeda Hameed, Narendra Jadhav, Abhijit Sen, Mihir Shah, K Kasturirangan and Arun Maira. Minister of State for Planning Rajeev Shukla will also attend the meeting.