Equity Research Report 07 November 2016 Ways2Capital

The Indian market ended the week on a soft Note, As Market were taken off on the News of the US FOMC meeting or ahead of US elections on 8 Nov. The Indian Equity benchmark Nifty opened in Positive Note on Monday up by 28 points or 0.32 per cent at 8653.


TECHNICAL TREND ( NIFTY - BANK NIFTY FUTURES )
NIFTY FIFTY : - The Indian market ended the week on a soft Note, As Market were taken off on the News of the US FOMC meeting or ahead of US elections on 8 Nov. The Indian Equity benchmark Nifty opened in Positive Note on Monday up by 28 points or 0.32 per cent at 8653. The market gave us a reasonable idea about how it plan to react to the US elections. The main benchmark Nifty has been trading in a range since last few weeks with an upside resistance of 8800 and support of 8510. The range has continued for more than ten weeks and the probability of markets breaking out of this range in the coming days is very high. Nifty has a Positive day on Monday, where the market after opening buying still 8700 before profit booking set in and Nifty closed at 8668. The Market sentiment is now driven purely by US politics rather than economics data and Fed meet. The 8520 level is very significance for Nifty this is a big monthly level where the Market have reverse twice in the past few Trading Sessions. The big area of concern was the broader market which saw relentless selling throughout this week. If market remains below the trend will change to sell. FII selling in cash and F&O segment is putting pressure on the market. GST rate slabs have been announced and automobile companies have been kept in higher slabs of 28 per cent can come for some selling for next week trading sessions. The crucial levels for Nifty is 8490-8520is up side 8420-8340 is down side
BANK NIFTY : - The Bank Nifty opened in positive note on Monday up by 55 points or 0.28 per cent at 19578. State-run banks, other than State Bank of India, have been lagging far behind their private sector peers when it comes to lending. While the industry growth rate itself may be barely in double digits, PSU banks, barring SBI, are growing at a paltry pace over the past two quarters pushing back hopes of any recovery in investments. Loans at state-run banks grew just 1.4% in the March and June quarters, the lowest in past four years, data from the Reserve Bank of India shows. Poor capital positions, risk aversion and top corporates moving to bond markets are among the reasons why these banks which once thrived on project financing are lagging. The Banking stocks were in selling pressure in last week. In the last week the Banking stocks were big performer but in recent week traded in a range bound or in negative bias. Correction seen in the Bank Nifty fro the level of 19590-19200. From now Bank Nifty need to sustain over 19250-19340 Area, otherwise it may further fall towards 18850-18600 zone. For any strength Bank Nifty need to sustain above 19250 for further rally towards 19800-20250 zone for Next week. The Significance levels for Nifty is 19260-19520 up side or 19043-18870 is down side.

NSE - WEEKLY NEWS LETTERS
? TOP NEWS OF THE WEEK
India Nikkei Manufacturing PMI at 22-month high in October Supported by stronger contributions from three of its five sub-components – new orders, output and stocks of purchases – the Nikkei India Manufacturing Purchasing Managers’ Index climbed to a 22-month peak in October, rising from 52.1 in September to 54.4, the latest reading was indicative of a robust improvement in manufacturing business conditions that was in line with the long-run series average. Once again, consumer goods producers outperformed their intermediate and investment goods counterparts, registering stronger rates of expansion for both output and new orders. In October, output increased for the tenth straight month and at the quickest rate in nearly four years. Survey respondents attributed the latest rise in production to strong growth of new orders. The amount of new work received by manufacturers grew markedly during October, with anecdotal evidence linking the latest rise to improved underlying demand. In fact, the rate of expansion was at a 22-month high. Data indicated that although foreign orders contributed to the upturn in total new work, the rate of growth in new business from abroad eased to a three-month low. Outstanding business rose again during the latest survey period. The overall rate of accumulation was solid and the quickest in almost three years, with survey members reporting capacity pressures. In spite of this, businesses left employment unchanged.

Fund raising via debt surges 60% to Rs. 70,395 crore in October -India Inc raised a staggering Rs. 70,395 crore in October through private placement of corporate debt bonds, a surge of 60 per cent from the year-ago period. In debt private placement, firms issue debt securities or bonds to institutional investors to raise capital. According to the data available with Securities and Exchange Board of India , companies garnered a total of Rs. 70,395 crore from debt on a private placement basis last month, much higher than Rs. 43,931 crore raised in October 2015. In terms of numbers, 275 issues have been made last month 2016 as compared to 214 in the year-ago period. The funds have been raised for business expansion plans, to support working capital requirements and for repayment of debt. With the latest mobilisation, the total fund raising through private placement of debt securities reached Rs. 3.81 lakh crore in the current financial year.

S&P affirms 'BBB-/A-3' rating on India with stable outlook - The global ratings agency Standard & Poor's affirmed its BBB- /A-3 ratings on India, citing the ongoing policymaking continues to strengthen growth prospects and fiscal performance, as per media report. The agency said stable outlook balances India’s sound external position and inclusive policy making against low per capita income and weak public finances. The government has been hoping for a rating upgrade following its reform measures such as passage of the Insolvency Code and Constitution Amendment Bill for GST by Parliament. "The outlook indicates that we do not expect to change our rating on India this year or next, based on our current set of forecasts," S&P said. "The ratings on India reflect the country's sound external profile and improved monetary credibility. India's strong democratic institutions and a free press, which promote policy stability and predictability, also underpin the ratings," added further.

India's gross-value added growth to hit 7.6 per cent this year: DBS - India's gross-value added growth is expected to quicken to 7.6 per cent this year from 7.2 per cent in 2015-16, driven by sustained support from public capex spending, says a DBS report. According to the global financial services major, while private sector activity remains subdued, high frequency fiscal numbers point to sustained support from public capex spending. "We expect gross-value added growth to quicken to 7.6 per cent year-on-year this year from 7.2 per cent in FY15/16," DBS said in a research note.
According to DBS, after an upside surprise from China, India manufacturing PMIs also jumped in October, affirming signs of a cyclical upturn in the region. India's October Nikkei manufacturing PMI ticked up to nearly two-year high of 54.4 from September's 52.1. "The improving order pipeline is encouraging and points to better industrial and business outlook. Also being a de facto business confidence/sentiment gauge, these PMIs partly reflect broad optimism on the back of strong asset market performance and stable rupee," the report said.

Private equity investment in RE rises 22 per cent y-o-y in Jan-Sept 2016: Report - Private equity investment in the real estate sector has grown 22 per cent during January-September this year to Rs 28,300 crore, from Rs 23,200 crore a year ago, reflecting improved confidence among investors to make larger investments, says a Cushman & Wakefield report. According to the report, private equity inflow increased to Rs 28,300 crore during the period, out of which nearly Rs 9,200 crore were recorded during the third quarter July-Sep of 2016.

While the number of deals closed during the third quarter moderately declined by 3 per cent quarter-on-quarter (q-o-q) to 32 per cent, the total investments increased by 1.2 per cent, reflecting increased confidence amongst investors to make larger investments. The average deal size, therefore, increased from Rs 275 crore in Q2 2016 to Rs 287 crore in the third quarter of 2016. "Owing to the continued interest in pre-leased office assets, the investments in the commercial office assets have already surpassed the total investment received during the calendar year 2015," the report said.

GST may not stoke inflation, 50% CPI items out of tax net - The multi-layered structure along with a large number of exemptions could mean that the goods and services tax may not be inflationary as some feared. Nearly half of the items in consumer price index basket, including cereals, will not be taxed under the new levy that will replace a plethora of indirect taxes. Besides that all other essential commodities will come under 5% tax bracket, down from initially proposed 6%. However, there could be an impact on services that make up 30% of CPI. Many services are proposed to attract 18% tax, up from 15% now. Chief economic adviser Arvind Subramanian said GST will bring down inflation. “I don’t think there is any fear on inflation. On an average this should probably serve to lower inflation. If at all, the impact on inflation will be very small. Today’s change should probably bring it down.” Last year, a committee headed by Subramanian had recommended standard GST rate at 17-18%. Standard rate is one that will be levied on most goods, except some essential ones that will be levied at a lower rate. Neha Saraf, India economist at Nomura, said, “With a standard rate of 18%, we had expected a 20 basis point impact on CPI headline inflation.

Economy set to perform better in 2nd half of FY16: Assocham - Indian economy would be performing better in the second half of the current fiscal and the trend appears to have begun from the quarter beginning October, 2016 with 66.7% of the latest Assocham Bizcon Survey respondents expecting uptick in sales, capacity utilization, though Positivity on fresh investment is tentative. Increased spend on infrastructure development, largely in the government is seen as the most important driver for a turnaround in the economic outlook for the current quarter and the last quarter of the financial year 2016-17. The second best driver for the optimistic outlook is effective policy reforms followed by a stable foreign exchange rate of the Indian currency despite global head winds like uncertainty on account of the Federal Reserve’s next policy move and the most bitterly fought US Presidential elections. While a big chunk of Bizcon Survey participants felt the present economic situation appears to be in a better shape than the previous six months on several parameters, the optimism is more pronounced for the second half of the current fiscal. For instance on the parameter of industrial performance, the Assocham Bizcon done in September , noted over 83 per cent of the respondents believing things would look better in at the industry level in the ongoing six month period.

“ there is a clear turnaround in business confidence, which holds the key to new investment and consumer confidence”, the chamber President Sunil Kanoria said. He said unlike the previous surveys, the latest round indicates a slight uptick even with regard to capacity utilization going forward and the order book. However, generation of new employment and improvement in wages is still some distance away. The confidence was quite pronounced at the level of individual firms’ level, as about 89% of the respondents expressed optimism about better days ahead.




? TOP ECONOMY NEWS
Indicating a sharp uptick in industrial activity, the Nikkei India Manufacturing Purchasing Managers’ Index TM rose to a 22-month peak in Oct of 54.4. It stood at 52.1 in Sept.

The Centre’s fiscal deficit ballooned to 83.9% of the Budget Estimates in the first half of 2016-17, the highest in the first six months of a financial year since 1998-99, on account of elevated capital spending and higher salaries outgo. On revenue side, lower realisations from disinvestment and other streams hurt the exchequer.

Core sector output rose a three -month high of 5% in September, mainly due to sustained growth in the steel sector and an increase in refinery production, broadly indicating that the Index of Industrial Production growth may reverse a two-month declining trend a month before the festival season. The eight- industry core sector index had grown 3.2% in August and 3% in July.

Rural employment scheme Mahatma Gandhi National Rural Employment Guarantee Act is facing shortage of funds despite the highest ever budgetary allocation to the programme this year, and the Rural Development Ministry is now seeking an additional Rs. 100 billion for its smooth functioning.

The government has excluded 40-odd grades of stainless steel used in auto and engineering sectors from the Stainless Steel Quality Control Order, 2016.

Government is considering further relaxing foreign direct investment norms in several areas, including trading, with an eye on more inflows.

To support financing for start-ups, the Reserve Bank of India issued rules permitting these to raise external commercial borrowings.

India may turn into a net importer of fuel oil as its state-owned refiners are making Multi - billion dollar investments to upgrade their refineries and produce more profitable refined products such as gasoline or diesel.

New ultra mega power projects based on imported coal may be insulated from uncertainties in fuel costs, with the power ministry deciding to factor in indexed imported coal prices into tariff for such plants.

The Goods and Services Tax Network — a not-for-profit company set up to provide IT infrastructure and services for the implementation of GST - -has entered into an memorandum of understanding with the Directorate General of Foreign Trade for sharing of foreign exchange realisation and import export code data.

The government has proposed to come out with annual surveys that would give it estimation of Labour and workforce and unemployment rates nation-wide.

Of the 101 power plants under daily review of the Central Electricity Authority as on October 31, about 40 plants are found to have coal stock for less than 15 days, six plants have stock for less than seven days and 12 plants with less than five-day stock.

The Indian government and three state-run firms will jointly set up an equity fund of up to USD 2 billion for renewable energy companies to help New Delhi meet its clean energy goals.

The number of people earning more than Rs. 10 million annually has jumped by 10% and those earning between Rs 0.50 million to Rs. 10 million by 22% according to the latest tax returns figure by income tax department for the year 2014-15.

A 4-tier GST tax structure of 5, 12, 18 and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess.

The Finance Ministry has imposed provisional anti-dumping duty on import of hot rolled steel products from China. This anti-dumping duty will be valid for a period of six months.

? TOP CORPORATE NEWS -
Strides Shasun Limited has received approval from the US health regulator for Abacavir tablets used in the treatment of HIV.

BGR Energy Systems Limited has bagged a contract worth Rs. 26 billion from Tamil Nadu Generation and Distribution Corporation Ltd for the execution of a thermal power project.

Reliance Industries Limited and its foreign partners, BP Plc and Niko Resources, may have to pay a penalty of more than USD 1 billion for commercially using the migrated gas from the block of Oil and Natural Gas Corpn. in the Krishna-Godavari basin.

Ujaas Energy Limited has bagged an order from Airports Authority of India for design, manufacturing and commissioning of rooftop grid-connected solar photovoltaic system.

Indian Oil Corporation Limited, Fertiliser Corporation of India and Hindustan Fertiliser Corporation of India were roped into the joint venture to revive Sindhri and Gorakhpur urea units of Fertiliser Corporation of India.

NHPC Limited announced commissioning of a 50 MW wind power project in Rajasthan.

NCR Corporation has bagged a Rs. 3.34 billion order from State Bank of India to install over 7,000 cash-vending machines, making this the single largest order in the country.

Pokarna Limited has announced that its 100% subsidiary, Pokarna Engineered Stone Limited has exited the Corporate Debt Restructuring mechanism.

NMDC Limited has signed a tripartite agreement with the Madhya Pradesh Directorate of Mines and Geology and MP State Mining Development Corporation Ltd to explore mineral resources.

Tata Steel Minerals Canada has announced that it has decided to invest CAD 125 million as equity and CAD 50 million as debt with the Government of Quebec’s investment entities, Resources Quebec and Investment Quebec respectively, totaling CAD 175 million.

Advanced Enzyme Technologies Limited has entered into definitive agreements with API maker JC Biotech to acquire 70% stake for a consideration of Rs. 500 million.

Tata Steel Limited said it continues to pursue its European consolidation strategy and is in talks with Thyssenkrupp AG for a potential joint venture for its European steel business, following a purported disclosure from ousted chairman Cyrus Mistry that some group firms could face a potential writedown of USD 18 billion.

The Information and Broadcasting ministry has given permission to a company related to the Sun TV Network Limited to operate five channels that they had bagged in e-auction in the first batch of Private FM Phase III expansion last year.


Siemens Limited said it will modernise the energy management systems of Uttar Pradesh’s transmission utility UPPTCL.

Bosch Limited has resumed operations at its Jaipur plant following the Rajasthan State Pollution Control Board keeping a notice to close the plant in abeyance for a month.

Heritage Foods Limited has executed an agreement to acquire the dairy business of Reliance Retail Limited through slump sale.

Godrej Properties Limited has sold villas worth over Rs. 3 billion on the first day of the launch of 100-acre township in Greater Noida, bucking the existing slowdown in the NCR property market.

MMTC Limited plans to sell sovereign gold coins to non-resident Indians through branches of Indian banks with which it has tied-ups.

Central Electricity Regulatory Commission is expected to deliver its verdict this month on permitting Tata Power tariff compensation to recover losses suffered by the Mundra Ultra Mega Power Project due to high prices of imported coal.

Bharti Airtel Limited has awarded a USD 60 million pan-India deal to Finnish gear maker Nokia to implement voice-over-LTE calling technology which may be launched within this year.

Cyrus Mistry, the ousted chairman of Tata Sons, holds nearly Rs. 10 billion worth of stocks of Tata Consultancy Services.

Zensar Technologies Limited has acquired Foolproof Ltd along with its three wholly owned subsidiaries for an undisclosed amount.

Lupin Limited has received final approval from the US health regulator for marketing Norgestimate and Ethinyl Estradiol tablets, used for the prevention of pregnancy, in the US market.

Ajanta Pharma Limited has launched in the US market tablets used for lowering blood pressure.

Cox & Kings Limited has partnered with UAE Exchange India to foray into the money transfer business in India.

Tech Mahindra Limited bagged a five-year deal from Finland's Stockmann. The deal will allow Stockmann to consolidate its vendor portfolio and reduce its ICT costs.

Strides Shasun Limited plans to list its biotechnology business, Stelis Biopharma.

Aurobindo Pharma Limited has expressed preliminary interest in acquiring Portuguese drug maker Generis Farmaceutica for about USD 200 million.

In a setback to Oil and Natural Gas Corporation Limited and Cairn India, the government will from this fiscal levy service tax of about Rs. 7.30 billion on royalties they pay to the exchequer on oil and gas they produce.

Sterlite Technologies Limited has approved an interim dividend of 25% for the year 2016-17.

Jindal Steel and Power Limited has failed to pay Rs 154.3 million interest on non convertible debentures , which was due on October 31.

Bharti Airtel Limited has provided over 7,000 additional points of Interconnect to Reliance Jio, taking the total number till date to over 17,000, which is sufficient to serve over 75mn customers.

Zain said it will pay USD 129 million to Bharti Airtel Limited over a settlement related to the sale of Zain's Africa operations to the Indian firm in 2010.

Jet Airways Limited will prepare crew’s duty rosters in consultation with the pilots’ union. This was agreed between the pilots' union and the airline management after protests by pilots against the new duty hours.

Bharti Airtel Limited launched its 4G services across 120 towns of Uttar Pradesh promising high speed mobile broadband experience for its subscribers.
The National Aluminium Company is likely to keep in abeyance its plans to put up a greenfield smelter in Iran

? TOP BANKING AND FINANCIAL NEWS OF THE WEEK
Some 14 nationalised banks have been charging a total Rs. 26 crore every year – one fourth its annual administrative expenditure, from Coal Mines Provident Fund Organization for collecting life certificates on its behalf. Nevertheless, CMPFO is in the process of doing away with this costly affair of collecting life certificates through banks after seeding Aadhaar with every account holders’ CMPF Account Number. Pension is now directly transferred pensioners accounts. While appreciating the efforts of CMPFO, coal secretary, Anil Swarup said that the online transfer should be effected by 31st December, 2016.

The rate war has begun with the country's largest lender State Bank of India and the topmost private sector lender ICICI Bank going all out to lure home loan customers in a bid to improve their market share. State Bank of India has slashed its home loan rate to a six-year low to 9.10%. Under this new scheme woman borrowers will be able to avail home loans at 9.10% while other borrowers will be able to avail loans at 9.15%. These rates will be applicable top loans up to Rs 75 lakh w.e.f 1st November. On Home Loan of Rs 50 lac's, reduction in interest rate by 0.15% by SBI will help a home buyer to save Rs. 542 per month and approximately Rs. 2 lac's during the loan tenure of 30 years. SBI’s home loan tenure of 30 years.

Private sector lender Yes Bank has launched “Yes Mobile 2.0” its new mobile banking app with multiple new features and extensive support for banking transactions on Apple and Android based SmartWatches. The app is compatible with all mobile devices including Android tablets and Apple iPads in addition to smartphones and wearables. With multiple added functionalities and a customisable interface Yes Mobile 2.0 will replace the older Yes Mobile application that was being used by bank customers.
State-run banks, other than State Bank of India, have been lagging far behind their private sector peers when it comes to lending. While the industry growth rate itself may be barely in double digits, PSU banks, barring SBI, are growing at a paltry pace over the past two quarters pushing back hopes of any recovery in investments. Loans at state-run banks grew just 1.4% in the March and June quarters, the lowest in past four years, data from the Reserve Bank of India shows. Poor capital positions, risk aversion and top corporates moving to bond markets are among the reasons why these banks which once thrived on project financing are lagging.

Central bankers rarely talk straight, more so when it comes to the state of the banking industry. But the Reserve Bank of India deputy governor SS Mundra came close to it when he recently raised the red flag about the state of human resources in the banking industry. When Mundra calls this a ‘decade of retirement’, it should be the beginning of sleepless nights to chiefs of banks and the biggest stakeholder in the system — the government, if it wants to save whatever little value is left of the sector after bad loans had eroded its worth.

State-run banks, which used to be the most sought after for job seekers in the three decades since the 70s, not only lost sheen to more lucrative career options in technology and other sectors, but the efforts to make it more efficient by ending indiscriminate hiring and not replacing it with a suitable hiring plan is beginning to bite.

US-based ATM manufacturer NCR Corporation has bagged a Rs 334-crore order from State Bank of India to install over 7,000 cash-vending machines, making this the single largest order in the country. NCR is the largest player in the domestic ATM market with over 1 lakh cash-vending machines running. Its new ATMs are equipped with the latest anti-fraud security solutions.

"State Bank of India has awarded NCR with the single largest order of ATMs in the country. The agreement, valued at around Rs. 334 crore, has to be executed over the next seven years, and NCR will deploy 7,070 cash-vending machines, software solutions and provide services support," NCR India Managing Director Navroze Dastur told PTI.

Joining the rate cut war, biggest mortgage firm HDFC and private sector lender ICICI Bank today cut home loan rates by 0.15 per cent, a move that may be followed by other lenders. Home loans up to Rs 75 lakh for women borrowers will now attract an interest of 9.15 per cent and for others it will be 9.20 per cent, HDFC Ltd said in a statement. "Over the past couple of months, we have seen a drop in our marginal costs of funds and as always, HDFC has ensured that benefit is passed on to its customers," HDFC Ltd Managing Director Renu Sud Karnad said.
Five new banks have joined the Unified Payments Interface bandwagon, thereby taking the total number of banks using UPI to 26. The five latest entrants include public sector lenders, State Bank of India, Allahabad Bank and Bank of Baroda and two private banks HDFC Bank and IDFC Bank. These applications are currently in their final testing phase being active only in closed user groups, they are expected to go live for the public within the next six weeks,” said bankers in the know of the matter, who did not wish to be identified.


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