All Eyes on RBI Policy...
The Market didn't find any
cheer despite the biggest reshuffle of the Congress-led United Progressive
Alliance Cabinet, Manmohan Singh inducted 17 new faces and a total of 22
ministers giving several new and young faces a chance to prove their mettle as
his government tries to remove the taint of scams and non-performance from its
progress report. The Congress has also shown that it is the big brother in the
UPA by having 69 of the 79 ministers, including the Railways.
The Indian market closed flat amid volatility on Monday. The Sensex rose 10.48 points to close at 18,635.82. The Nifty went up 1.30 points and ended at 5,665.60.
Today all eyes are on the
Reserve Bank of India’s policy.
RBI policy expectations: There is almost
a war cry out for a rate cut. A poll indicated that 80 percent of the
respondents see a CRR cut. Of this, 20 percent see a 50 bps cut. On the repo,
the market is divided with 50 percent expecting a repo rate cut. A day before
the monetary policy, the professional forecasters' survey conducted by the
Reserve Bank of India revised GDP forecast to 5.7 percent as against 6.5
percent in 2012-13 while raising inflation estimate to 7.7 percent versus 7.3
percent for the year. Persistent inflation and easy availability of money
(liquidity) may to prompt the central bank keeping rates unchanged on Tuesday.
Domestically, it has been a
potholed road in the second quarter for Maruti Suzuki given the labour unrest
at Manesar, continued pressure on demand and higher discounts offered to boost
petrol car sales. So expect a weak results announcement on Tuesday. The India's
largest passenger car maker is expected to report a net profit of Rs 215 crore
in July-September, down 10.4% from a year ago and 50% sequentially. On a
year-on-year basis, its revenue is expected to rise just 2.7% and decline 25%
quarter-on-quarter at Rs 8,050 crore. Earnings before interest, taxes,
depreciation and amortization (EBITDA) is seen down 11% year-on-year and 44%
sequentially at Rs 440 crore and operating profit margin is expected at 5.4% in
July-Sep, compared with 7.3% in April-June and 6.3% a year ago.
Maruti had shut the Manesar
plant following a workers unrest that left a general manager dead and 96
supervisors and managers injured, many with fractures, on July 18. The plant
re-opened on Aug 21 and under heavy security with the company slowly ramping up
production there. The company lost production of 1,700 units per day during the
lock-out at Manesar. It makes Swift hatchback and DZire sedan, both among its
top selling cars, at the plant. The strike apart, the demand for its small cars
like Alto, A-Star and Wagon R, which are mostly petrol driven, has remained
sluggish due to high fuel prices and expensive loans. Maruti like other car
makers offered higher discounts to drive small car sales, which in turn put
pressure on margins. Maruti's Q2 performance is expected to be impacted due to
supply constraint in diesel cars given recent labor unrest at its Manesar
plant. Moreover, margins will be hit by (1) weak petrol car demand and
consequent high discounts, (2) lag impact of unfavorable currency movement in
Q1, and (3) recent wage hike negotiated with workers (assuming first half
provisioning happens in Q2).
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