Technicals - Axis bank, Insecticides India, BEML, United Bank of India, Mindtree, Persistent Systems, Max India :: Business Line

Pivotals - Reliance Industries, Tata Steel, Infosys, SBI :: Business Line

Fishing for stocks? Go with the FIIs :: Business Line

Zee Entertainment:: Result Update :: Centrum Research

Positives priced in
We maintain Hold rating on ZEEL and believe ad revenue would be under pressure
in the near term on the back of company cutting its ad inventory while higher
sports losses on account of India-SA series would impact margins. While
curtailment of matches for the series and market share gain could be positives for
the company, 19% increase in stock price in the past one month captures all the
positives. In Q2FY14 results, lower sports losses and strong yield improvement
across channels led to healthy growth of 10.5% YoY in ads and 42.7% in operating
profit while non-sports margins were at 34.9% despite two new channel launches.
Subscription revenues continued to grow.

Index Outlook: Over to you, Governor :: Business Line

21,000, but who’s counting? :: Business Line

Higher retail participation will come about only if the bull market percolates to a larger set of stocks.

There was a marked lack of fanfare on Thursday as the Sensex reclaimed its peak of 21,000 after a three-year interval. Although propelled by a surge in FII (foreign institutional investor) flows, the mood on the street is suffused with scepticism. Far from being secular, the rally has been fuelled by selective stocks; hardly anyone who plays the market, retail investors included, believes the upturn is grounded in fundamentals. It is difficult to explain why FIIs have poured $3.8 billion into Indian stocks since the beginning of September, after having beaten a hasty retreat in the preceding months. In the last couple of quarters, Corporate India’s sales have slowed to a crawl and profits have shrunk; with rate cut hopes fading, balance sheets have taken a turn for the worse. Adding insult to injury, global agencies such as the IMF and World Bank have slashed India’s GDP growth estimates for this fiscal to sub-5 per cent, the lowest in a decade. Recent reform announcements, such as liberalised FDI (foreign direct investment) limits, have been slow in the implementation. A plethora of allegations has been levelled against large corporate groups on the coal and spectrum controversies.

Under the circumstances, there are only two rational explanations for the recent surge in FII flows — the recent stability in the exchange rate and the reflexive ‘India’ allocations from emerging market funds, thanks to the US Fed deferring its dreaded ‘taper’. The fact that FIIs have not turned specifically bullish on India is evident from their sector and stock choices. While pumping in new money, they have raised allocations to defensive and export-reliant sectors such as FMCG , pharmaceuticals and technology. They have stayed clear of banks, infrastructure and the core sectors that have close linkages with the economy. FIIs have also accumulated index stocks, shunning the vast majority of mid- and small-caps, polarising both stock valuations and returns. While a fourth of the listed stocks trade at over three times their book value, half of them languish below their book value. While the Sensex has gained 6 per cent this year, BSE Mid-cap and Small-cap indices have suffered steep losses of 16 and 21 per cent respectively.

These trends also explain why the recent Sensex move to 21,000 hasn’t seen retail investors thronging the markets as they have done during market highs. They have continued to sell stocks, pull money out of mutual funds and generally give equities a wide berth. Clearly, higher retail participation in equities, which policymakers are trying so hard to drive, will come about only if the bull market percolates to a larger set of stocks and creates wealth for small investors. This will require a concrete revival in the core sectors of the economy — from manufacturing and infrastructure building to services. The FIIs may be quite content with the promise of 5 per cent growth and quick-fix measures to shore up the currency, but domestic investors are much harder to please.

Technicals: Gold (Rs 30,734), Silver (Rs 49,709), Crude Oil (Rs 6,045), Natural Gas (Rs 227.3) :: Business Line

Hindustan Zinc:: Centrum

Superior operational show; maintain Buy
We maintain buy on Hindustan Zinc (HZL) with a target price of Rs161 on the back
of i)strong metal premiums and higher integrated output coupled with weak rupee
aiding realizations ii)marginal upward revision in EBITDA estimates for FY14E/15E
by 2.2%/3.4%, and iii) favourable risk-reward. Q2 results were better than
expectations operationally with margins at 52.9%, driven mainly by higher
integrated volumes, strong metal premiums, lower costs and a weak rupee.
Despite reduction in volume guidance to 950kt MIC zinc-lead production in FY14E,
we don’t see material change in our volume estimates due to strong H1. We prefer
HZL as our top pick in the non-ferrous group on strong fundamentals and
undemanding valuations.

Merck-Q3CY13 Results Update - Centrum

Margin under pressure
We retain Buy rating on Merck but reduce target price to Rs802 from Rs851 due to
lower than expected Q3CY13 results. Merck’s revenues were in line with our
expectations but EBIDTA margin fell short. The company’s pharma segment grew at
16%, double the industry growth rate of ~8%. However, the chemicals segment
showed marginal revenue decline. We expect the growth rate to improve as one of
its major brands Evion has come out of price control and also vitamin E API. We have
revised our CY13 and CY14 EPS downwards by 8% each. Our target price of Rs802 is
based on 14xSept’15 EPS of Rs57.3, giving an upside of 35.3%