The Zacks Analyst Blog Highlights: Tata Motors, Infosys, Wipro, HDFC Bank and ICICI Bank

The Zacks Analyst Blog Highlights: Tata Motors, Infosys, Wipro, HDFC Bank and
                                  ICICI Bank

PR Newswire

CHICAGO, July 11, 2013

CHICAGO, July 11, 2013 /PRNewswire/ announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Tata Motors Ltd (NYSE:TTM-Free
Report), Infosys Ltd. (NYSE:INFY-Free Report), Wipro Ltd. (NYSE:WIT-Free
Report), HDFC Bank Ltd. (NYSE:HDB-Free Report) and ICICI Bank Ltd.
(NYSE:IBN-Free Report).


Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

The Rupee's Plunge: An Opportunity?

A Steady Decline

The Indian Rupee hit a new record low against the dollar this Monday. Falling
to 61.21, the rupee was in keeping with the weakness it has suffered in recent

The rupee first slipped below the psychological barrier of 60 to the dollar on
June 26. Since then, it has continued to slip, but for the occasional session
gains. This is attributable to two major factors.

Key Reasons for the Fall

The first of these is the weakest economic growth that the country has
experienced in a decade. In a report released this week, the International
Monetary Fund (IMF) has lowered its projection for the country's growth to
5.6% in the current financial year. This is marginally lower than its April
estimate of 5.8%.

The second reason is the alarmingly high current account deficit of the
country. The most representative measure of a nation's international trade, it
accounted for 4.8% of GDP in the last fiscal year.

In its report, the IMF has said that the tapering of the U.S. Federal Bank's
monetary stimulus could have serious implications for developing nations. The
most immediate impact would be felt in the form of capital outflows.

A winding down of the bond purchase program is a direct result of positive
economic data from the U.S. This would result in a flight of foreign capital.
In June itself, $7 billion of portfolio funds have exited the country.

Differential Impact

A weaker rupee has a differential impact on various economic sectors. Imports
become costlier, whereas exports become cheaper. Those companies which are
heavily reliant on imports stand to lose the most. These include the likes of
Tata Motors Ltd (NYSE:TTM-Free Report).

On the other hand, exporters, especially those from the outsourcing domain
such as Infosys Ltd. (NYSE:INFY-Free Report) and Wipro Ltd. (NYSE:WIT-Free
Report) will gain from such an environment. They may be good additions to your

Incidentally, Tata Motors has an expected earnings growth of 21% and the
forward price-to-earnings ratios (P/E) for the current financial year (F1) is
7.28. Expected earnings growth for Infosys and Wipro are 13.4% and 11.5%.
Their P/E (F1) are 3.02 and 15.93, respectively.

Leading Indian banks will also feel the heat if the rupee continues to fall.
These include the likes of HDFC Bank Ltd. (NYSE:HDB-Free Report) and ICICI
Bank Ltd. (NYSE:IBN-Free Report). This is because a weak rupee would more or
less rule out prospects of a rate cut.

Interest rates have been maintained at a low level to combat inflation, which
has reduced somewhat only now. But a weaker dollar would result in higher oil
prices, a key trigger for inflation, which is why the possibility of a rate
cuts remains elusive.

Regulatory Action

The Reserve Bank of India (RBI) has now taken decisive measures to combat the
situation. It has imposed restrictions on the derivatives market, focusing on
currency derivatives. It has prohibited banks from trading in domestic
currency futures and options. The Securities and Exchange Board of India has
significantly increased the required margin to be maintained on dollar-rupee
forward trades.

A significant amount of dollar demand is attributable to oil companies. The
RBI has directed these companies to purchase their dollars from a single bank.
It is believed that the fact that such companies were seeking more than one
quote was adding to speculation and consequently, volatility.

Long-Term Measures

With elections around the corner, the Indian government can hardly afford to
be complacent about the situation. Indian finance minister P. Chidambaram is
currently visiting the U.S. to encourage companies to invest in India.

Of course, such investments can only come about only if India relaxes its FDI
norms further. On the slate are plans to raise foreign stakes in supermarkets
to 74%. Similarly, there is a proposal to raise the foreign investment in the
defense sector to 49%.

In Conclusion

The current situation is symptomatic of a phase when developing economies need
a fresh set of reforms. Though there may be some opposition to such measures,
they will, in all probability, eventually go through.

And despite the current situation, India's long-term prospects remain
encouraging. This is equally true of its prominent companies, including those
mentioned earlier. If you're willing to weather short-term volatility, Indian
stocks remain a good choice for the long term.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of
the Day pick for free.

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