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Monday, 1 December 2014

Nifty below 8550, RBI meet eyed; banks, auto under pressure

10:30am DLF under pressure

Shares of DLF fell more than a percent intraday Tuesday after Bank of America Merrill Lynch reinstated an underperform rating on the stock with a price target of Rs 130.

The prime reasons, according to the brokerage, are slow housing market recovery in Gurgaon; negative cash-flow; elevated debt levels; and legal issues.

BoAML does not expect a housing volume recovery in DLF’s core market, Gurgaon in the near term. "Gurgaon’s unsold inventory has risen exponentially over the past three quarters, indicating a significant slowdown in sales. We see weakness for three to four more quarters for DLF before a possible recovery becomes visible," the brokerage said.

The brokerage expects DLF to remain cash-flow negative through FY17E – lack of launches and higher costs (operating, finance and construction) should lead to cash deficiency.

It also sees DLF’s debt levels to remain elevated in FY16E as well despite asset sales as proceeds from the sale will be used to offset the lack of cash.

According to the brokerage, a verdict against DLF in any of the ongoing legal issues (CCI, SEBI) can potentially dampen its brand equity and financial performance.

Upside risks include quicker market recovery, leading to better-than-expected launches/pre-sales, and pick-up in commercial leasing.

10:00am Market Check

Equity benchmarks continued to see marginal selling pressure as rate sensitives like banks and autos declined ahead of RBI credit policy.

The 30-share BSE Sensex slipped 67.61 points to 28492.01 and the 50-share NSE Nifty fell 22.75 points to 8533.15. The broader markets remained flat.

India's biggest lenders State Bank of India, ICICI Bank, HDFC Bank and Axis Bank, and housing finance company HDFC declined 0.5-0.9 percent. Auto stocks like Tata Motors, Mahindra & Mahindra, Bajaj Auto, Hero Motocorp and Maruti Suzuki slipped 0.5-1 percent post November sales data.

Infosys lost 1.5 percent after adjusted for bonus issue in the ratio of one share for every one share held.

However, shares of Reliance Industries, ONGC, Larsen & Toubro and BHEL bounced back, up 0.5-1 percent. Power stocks like Tata Power and NTPC too rebounded with a percent gain.

Cairn India bounced back with more than a percent gain after Brent crude recouped some losses to trade at USD 72 a barrel from five-year low of around USD 68-69 a barrel. However, BPCL and Asian Paints fell 2-3 percent. More information please visit this site

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