Market Outlook FLAT Monday, July 01, 2013 Expect market to open on a flat note led by global cues. US markets ended down by half a percent on Friday. Asian markets are trading marginally lower this morning. As the government picks up pace in reforms, the market sentiment turns positive. In an effort to the same we saw Gas price hike by the CCEA. Other developments, appreciation in Rupee by over a percent and positive flow by FII in Cash market could also augur well for the market. Monthly Auto numbers will be announced today. Research Updates: INDIA FINANCIALS: RBI notification for valuation of Discom bonds; No immediate impact on P&L; MTM hit based on 5 year G Sec movement - RBI has notified valuation for bonds to be issued by Discoms under Financial Restructuring Plan (FRP). Our interaction with managements of banks suggest that at the initial listing of bonds there will be a positive MTM of 25-30bp. Post that, MTM hit will depend upon on movement of 5 year G Secs. Key positives for banks in conversion of loan to Bonds under FRP” (a) release of 275bp provision on restructured loans (b) Fully guaranteed state government asset and reducing the risk weightage to 20% vs 100% currently and (c) No MTM/NPV hit on the bonds at the time of listing/conversion. Key negative for banks is the compromise on future earnings as the bonds will have 250-300bp lower yields as compared to loans. INDIA UTILITIES: Gas prices increase pass through for regulated, merchant capacity of IPPs impacted, DISCOMs tariff hike a concern- - Cabinet Committee on Economic Affairs (CCEA) has approved the Rangarajan committee’s gas pricing formula – doubling gas prices from USD4.2/mmbtu to USD8.4/mmbtu. New prices would be applicable from April-14 valid for 5 years. This would result in the variable cost of generation for gas based project at INR4/unit, ~100% higher than even the imported coal project on coast, in our view. We note that cost for JSW Energy in 4QFY13 was INR2.57/unit. -We continue to maintain our positive stance on the NTPC and JPVL.
Posted on: Mon, 01 Jul 2013 05:14:33 +0000
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