| What's Inside |
| Reliance Industries: Likely conversion of extant
refinery to EOU to result in lower taxation |
|
Refinery converted to EOU but development not confirmed by
management |
|
Raised FY2008E and FY2009E EPS to reflect lower tax |
|
Not much impact on SOTP valuation; higher cash
balance | |
| VSNL: Near term catalysts present a good buying
opportunity |
|
Flag listing will likely establish a valuation benchmark for
TGN |
|
Real estate de-merger timing remains uncertain but some progress
apparently |
|
Retain OP with SOTP-based target price of
Rs560 | |
| BPCL: Issue of oil bonds of Rs50 bn for 4QFY07 is
a positive for earnings and sentiment |
|
Government to give Rs49.7 bn of oil bonds in 4QFY07; Rs241 bn
total for FY2007 |
|
Fine-tuned estimates and gained more confidence in earnings
estimates |
|
Valuations are attractive given certain amount of assurance on
earnings | |
| Banks/Financial Institutions: Fear of further
CRR/interest rate hikes could lead to fall in banking and finance
stocks |
|
RBI raises CRR, banks will likely increase PLR by 50bps |
|
Banking valuations are attractive, but stocks unlikely to
perform till end of tightening period |
|
Sensitivity analysis shows some banks already factoring in
significant NPLs | |
| Economy: India's interest rate outlook: RBI takes
unnecessary risks with the India story |
|
RBI hikes CRR by 50bps, repo rate by 25bps, cuts interest on CRR
by 50bps |
|
Excessive monetary tightening a risk: CRR last increased by
150bps 20 years ago |
|
Futile against supply shocks; base effects, rabi crop to cut
inflation in 1QFY08E |
|
Lending rates to increase by 100 bps ' 50 bps earlier ' in
FY2008, impact growth |
|
Retain March 2007 10-year yield forecast at 7.5%; near-term 8.2%
(from 8.1%) |
|
Rupee forecast at Rs44/USD FY2008E: weaker US Dollar vs forex
intervention | |
| Economy: India's December 2006 External Debt:
Growing interest rate differential, project finance gap |
|
External debt at US$ 142.7 bn as at end-December 2006; 16.3% of
GDP FY2007E |
|
Indicators of sustainability remain in control |
|
Interest rate differential, domestic project financing gap
enlarging external debt |
|
70%+ FII equity investment /foreign exchange reserves
| |
| Economy: India's April 2006 - February 2007 fiscal
deficit: Well on track |
|
Center's April 2006 - February 2007 gross fiscal deficit at 80.0
% of budget estimates |
|
Government well on track to FY2007E 3.7% of GDP fiscal deficit
|
|
Substantial US$ 17.3 bn government surplus with the RBI. |
|
| |
| Economy: India's Apr-Dec 2006 balance of payments:
On firm footing |
|
Current account deficit US$11.8 bn; sustainable 1.2% of GDP
FY07E, 1% FY08E |
|
Invisibles strong support, BPO scaling up: US slowdown to impact
momentum |
|
Interest rate differential, domestic project financing gap
enlarging ECBs |
|
Rising FDI; US$ 8 bn FY2008E FII inflow assuming market
consolidation |
|
US$ 20 bn FY08E RBI forex intervention likely to ensure domestic
liquidity |
|
Rupee forecast at Rs44/USD FY2008E: weaker US Dollar vs forex
intervention | |
| Property: Rising interest will likely affect
housing affordability in our view |
|
Increase in interest rates to have lesser impact on commercial,
retail properties | |
|
|
