>Daily Market & Technical Outlook (ICICI Direct)

Key points
■ Market outlook — Open flat to positive
■ Positive — FIIs buying
■ Negative — MFs selling, Crude oil @ $54/bbl

Market outlook

■ Indian markets are likely to open flat to positive, taking cues from Asian markets. Asian markets were higher in the morning, after positive economic data out of the US boosted investor hopes that the global recession was easing. Oil prices rose to their highest close of the year, encouraged by stronger equities markets and positive economic surveys in big fuel consumer nations China and India, showing their manufacturing sectors grew in April for the first time in
months

■ The Sensex has supports at 11900 and 11635 and resistances at 12285 and 12560. The Nifty has supports at 3630 and 3595 and resistances at 3680 and 3730

■ Asian stocks rose, extending a rally in which global equities have wiped out their 2009 losses, as better-than-expected US home sales added to signs that the worst of the global recession has passed

■ US stocks rallied on Monday, driving the S&P 500 into positive territory for the year as investors bet banks' capital shortfalls may be manageable and housing data fuelled hopes the recession is easing. The Dow Jones rose 214.33 points, or 2.61%, to 8,426.74. The S&P 500 gained 29.72 points, or 3.39%, to 907.24 -- its first close above the 900 level since early January. The Nasdaq climbed 44.36 points, or 2.58%, to 1,763.56

■ Stocks in news: ACC, Ambuja, Ultratech Cement, Grasim, Financial Technologies, GE shipping, Essar Oil, Polaris software, ONGC

To see full report: OPENING BELL 050509

>Bharti Airtel (CITI)

4Q – Robust Per Se, But a Notch Below Raised Expectations

■ Free mins slow down revenue growth — Bharti’s 4Q wireless revenue grew 3.6% qoq, higher than est. but lower than the raised hopes post Idea (9%qoq). Adjusting for the 2% EBITDA impact (~Rs2bn) on account of equity accounting of the 35k towers transferred to Indus, EBITDA was in-line. Net profit at Rs22.4bn came in ahead with lower forex losses (Rs2.3bn v/s Rs5bn est.).

■ Operating leverage should manifest in FY10E — Wireless margins remained stable as fuel price cut and lower distribution costs offset higher network opex. With 81% coverage done, network opex as % of revenues should also start moderating in the coming quarters. FY10E capex guidance at US$2.0-2.2bn (ex-towers) and maiden dividend (Rs2) are further indicators of reducing rollout intensity (read pure coverage capex).

■ KPIs were OK — MoU declined to 485 mins (4% qoq decline) though slightly higher than expectations. Rev/min remained stable in absence of any major tariff cuts to counter RCOM’s “trial offer”. These trends (though weaker than its listed GSM peer) continue to be encouraging given concerns on competition.

■ Non-mobile business was lackluster — Fixed line ARPU contracted; likely impact of economic slowdown and long distance volume growth slowed. “Other” EBITDA losses narrowed on lower DTH losses

■ Top pick — Our conservative FY10 wireless assumptions of 1) 2.3m net adds/month, 2) 50p rev/min, 3) usage elasticity of 0.13, 4) flat EBITDA margins and 5) tax rate of 16% leave room for upside.

To see full report: BHARTI AIRTEL

>INDIA ELECTION (NOMURA)

An election in the balance: Macro and market implications

Political outlook: An election in the balance
Markets are looking for a stable government that will push through incremental structural reforms after the election. But for now at least, the outcome of the election remains very much in the balance.

Economic outlook: Much rests on further reforms
The current slowdown notwithstanding, India’s economic fundamentals are in good shape. In our view, India’s potential structural economic take-off story, which was becoming evident before the global recession hit, still remains valid provided the new government continues with incremental reforms. Macro policies to revive the economy and instil investor confidence, fiscal prudence and pushing through reforms in what is likely to be another disparate coalition are the key challenges facing the incoming government.

Equity outlook: Curb your enthusiasm
Overall, we believe that the likelihood of a major post-election rally is small, save the possibility of a large single party in the driver’s seat. The only solace is that, given that uncertainty over its outcome is well-known, we do not expect to see any major post-election downside.

FX outlook: Post-election risk examined
Barring any pre- or post -election shock (at least immediately after the election) we expect INR to appreciate to 49.0 against USD by the end of 2Q09. Weighing on INR in the near-term is the abrupt deterioration in the risk backdrop, but we expect risk conditions to improve. We highlight support for a lower USD/INR from a weaker USD, favourable INR FX valuations, a raft of capital inflow liberalization policies and an improving current account position. But there are many post-election risks to INR that we address.

To see full report: INDIA ELECTIONS

>Balrampur Chini (CENTRUM)

Positive surprise on inventory gains

■ Results above expectations: Q2 adjusted profit stood at Rs662mn vs. our estimate of Rs405mn. PBIT margin in the sugar segment stood at 21.3% and in distillery at 36.6%.
Inventory gains on carry forward inventory of sugar and 39.1% rise in sugar prices led to improved performance.

■ Estimates/target price raised: We have raised earnings by 39.9% for FY09E and by 4.3% for FY10E, led by upward revision in sugar prices and reduction in interest cost (due to repayment of loan on higher cash flows). Accordingly, target price is raised to Rs81 from Rs78.

■ Inventory gains on carry-over stocks: Out of 124,000 tonnes of sugar sold, 110,000 tonnes was from carry-over stock, valued at Rs15,050/tonne vs average sugar price of Rs20,300. This accounted for Rs578mn out of total Rs625mn PBIT in sugar. The current cost of production is
much higher than last year’s inventory, the effect of which will be felt in the coming two quarters through lower PBIT margin in sugar on QoQ basis.

■ Retain Buy: At CMP, the stock trades at 8.6x FY09E and 8.4x FY10E. Reiterate Buy on the back of buoyant outlook for sugar prices with the upside potential of 24.6%.

To see full report: BALRAMPUR CHINI