Equity Research Report Ways2Capital 4 Sep 2017
The Indian Benchmark Index Nifty closed in green after consecutive 4 days of negative close In last week. The Index moved up by 74 points and closed at 9852. Nifty opened at 9803 and made a low of 9787. Metals & Minnig remained the top performing sector. Indian Benchmark Index Nifty gave a lackluster movement ahead of 3 days holiday on Ganesh Chaturthi and Weekend. The index closed 9857 after making low of 9849; Nifty made a high of 9882 and opened at 9881. Indian Benchmark Index Nifty opened at 9886 and closed at 9794 after making low of 9784. The Index ended 117 points lower from its previous close of 9912. The Sell Off pressure was generated on rising geopolitical concern from North Korea. North Korea fired a missile that flew over Japan, however the execution did not cost any sort of loss to mankind and property. The 40 companies has been sent to National Company law Tribunal as these companies loans turned to NPA since 2016. Indian Benchmark Index Nifty rallied for the second day and closed at 9917, 33 points above its wednesday’s close of 9884. The Index opened at 9906 and made a high 9925. The Index has closed above its week one high of 9884, immediate target for the Index is at 9948 which is a two week high of Nifty. The Indian gross domestic product GDP grew 5.7 percent in April-June, badly lower than last years 7.9 percent expansion in the same quarter where in previous quarters 6.1 percent growth, this signals that India is still under the pressure of demonetisation and GSTs effect on business. Time & Price action suggests that, The Nifty has to sustain over 9980 area for further rally towards 10030-10075. On the flip side, sustaining below 9960 area, Nifty may fall towards 9905-9800- 9750 area in the short term.
BANK NIFTY : - Bank Nifty too gave a lackluster movement and closed at 24274 after making a low of 24225. Canara Bank up by 1.5%, Bank Baroda zoomed by 1.35% and SBI moved up by 1.20%. Bank Nifty closed at 24317 after making a high of 24350, the Index opened at 24085 and made a low of 24074. PNB Bank rose 3.33%, Canara Bank jumped 2.60%, IDFC Bank moved up by 2.20%. Bank Nifty opened at 24351 and closed at 24377 after making a low of 24301. The index was up by 103 points from its previous close of 24274. Bank Nifty opened at 24253 and closed at 24309 after making a low of 24241. The Index was up by 180 points from its previous close of 24129. Bank Nifty opened around its 5 High DMA 24355 approx the 31st of August. The Index traded in a narrow range of 147 points throughout the day and closed marginally above the 5 DMA of 24281 approx. Public sector banks have taken loan recovery action under Sarfaesi law against 5,954 wilful defaulters owing about Rs 70,000 crore to the lenders. At the end of March 31, 2017, 21 banks together have taken action against 5,954 wilful defaulter under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, as per data collated by the Finance Ministry.Bank Nifty has to sustain over 24400 area for further rally towards 24525-24575 & 24675- 24775. On the flip side, sustaining below 24350 area, Bank may fall towards 24200-24000 & 23850-23700 area in the near term.
NSE - WEEKLY NEWS LETTERS
✍ TOP NEWS OF THE WEEK
Economics for Everyone: Purchasing Managers' Index - The Purchasing Managers' Index is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The purpose of the PMI is to provide information about current business conditions to company decision makers, analysts and purchasing managers. Purchasing Managers Indexes are economic indicators derived from monthly surveys of private sector companies. The data for the index are collected through a survey of 400 purchasing managers in the manufacturing sector on different fields, namely, production level, new orders from customers, speed of supplier deliveries, inventories, order backlogs and employment level. Respondents can report better, same or worse conditions than previous months. For all these fields the percentage of respondents that reported better conditions than the previous months is calculated. The percentages are multiplied by a weighing factor and are added.
FDI flows into India to rise to 2.5% of GDP in 5 years: UBS - : FDI inflows into the country is likely to rise to 2.5 per cent of GDP over the next five years, helped by economic growth and ongoing structural reforms, said a report by UBS Securities India. The foreign direct investments into India have nearly doubled over the past decade to USD 42 billion, which was 1.9 per cent of GDP in 2016-17. "Post 2014 general election, FDI inflows saw a compound annual growth rate of 11 per cent versus a dip of 6 per cent seen over the previous 5 years," UBS said. "We expect FDI inflows to India to rise further to 2.5 per cent of GDP over the next 5 years," added the foreign brokerage. UBS noted that unlike China, where the government has phased out FDI-favoured policies, India will be increasingly recognised as a favoured destination by overseas investors "if growth is accompanied with continuous structural reforms". Interestingly, the report said that over the last couple of years, India has recorded a pickup in FDI inflows to the manufacturing sector. Historically such investments have been more towards the service sector.
Fiscal deficit touches 92.4 per cent of budget estimates at July-end - India’s fiscal deficit in July end came at Rs 5.05 lakh crore or 92.4% of the budgetary estimates for 2017-18 as against 73.7% in the corresponding period last fiscal. For this fiscal, the government has set a target of 3.2% of the GDP. The fiscal deficit is the gap between expenditure and revenue, which for the whole fiscal has been pegged at Rs 5.46 lakh crore. Experts point out that the increase in government’s expenditure is mostly due to the early presentation of the budget and subsequent front-loading.The government’s capital expenditure rose by a robust 33% in the first four months of this fiscal. Moreover, major subsidies are estimated to have grown by 30% in the same time period," said Aditi Nayar, Principal Economist, ICRA Ltd. The government's revenue receipts improved at Rs 2.91 lakh crore during April-July period, which works out to be 19.2% of the target of Rs 15.15 lakh crore for the whole year. In the comparable period last fiscal, revenue receipts comprising taxes and other items were 18.6 % of the target.
FDI jumps 37% to $10.4 billion during April-June 2017 - Foreign direct investment into the country grew by 37 per cent to USD 10.4 billion during the first quarter of the current fiscal, DIPP said today. According to the figures of the Department of Industrial Policy and Promotion, India had received USD 7.59 billion FDI during April-June 2016-17. The main sectors which attracted the highest foreign inflows include services, telecom, trading, computer hardware and software and automobile. Bulk of the FDI came in from Singapore, Mauritius, the Netherlands and Japan. The government has announced several steps to attract foreign inflows. The measures include liberalisation of FDI policy and improvement in business climate. Foreign investments are considered crucial for India, which needs around USD 1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth. A strong inflow of foreign investments will help improve the country s balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar. The DIPP through its 'Make in India' twitter handle also stated that FDI equity inflow in manufacturing sector grew by 31 per cent to USD 4.19 billion during April-June this fiscal.
Tepid credit growth: RBI data missing non-bank, debt markets - Though there's no denying that credit growth continues to decline, the RBI data on sectoral credit growth shows only one side of the story as credit per se has been expanding through non-banking channels, primarily in the debt market, said a report. During the week to August 4, there was an incremental credit de-growth of Rs 1.1 trillion, according to the RBI data. This comes after a record low full year credit growth in FY17 when credit growth slipped to the lowest in the past six decades at 5.1 per cent. This was the lowest since fiscal 1953 when it grew a tepid 1.8 per cent. "Sectors reporting decline in loan funds in listed corporates may contradict with increase exhibited in RBI sectoral credit deployment, but this only shows that credit has flown to unlisted MSMEs. Overall, this augurs well for banks who are de-risking and reworking their model for a better tomorrow," said the report.
India Inc overseas direct investment plunges 47% to $1.77 billion - India Inc's overseas direct investment fell over 47 per cent to USD 1.77 billion during July 2017, the RBI data showed today. Indian companies had invested USD 3.35 billion in the same month of last year. Of the total investments in foreign ventures by Indian companies overseas, USD 900.66 million was in the form of issuance of guarantee, USD 513.81 million as loan and USD 353.55 million was part of equity investment. In preceding month June 2017, the outward foreign direct investment stood at USD 1.11 billion. Among major investors, SAS Hotels and Enterprises put in USD 360 million into a wholly owned subsidiary in Singapore; Intas Pharmaceuticals USD 68.66 million in two separate tranches in wholly owned units in Spain and the UK. While ONGC Videsh Ltd invested a sum of USD 51.88 million in its various joint ventures located in Vietnam, Russia and Myanmar.
Quarterly headline inflation in first half to be between 2-3.5%: RBI - The Reserve Bank of India, in its second bi-monthly Monetary Policy Committee meeting, has projected quarterly average headline inflation in the range of 2-3.5 per cent in the first half of the year and 3.5-4.5 per cent in the second half. In its outlook, the central bank said the actual outcome for the first quarter has tracked projections. Looking ahead, as base effects fade, the evolving momentum of inflation would be determined by the impact on the CPI of the implementation of house rent allowances under the 7th central pay commission; the impact of the price revisions withheld ahead of the GST and the disentangling of the structural and transitory factors shaping food inflation," said the minutes of the meeting -- held on August 1-2 -- which were published on Wednesday. The inflation trajectory has been updated taking into account all these factors and incorporates the first round impact of the implementation of the HRA award by the Centre, RBI said.
✍ TOP ECONOMY NEWS
August saw a rebound in manufacturing new orders and output across India. The expansions were modest but represented a substantial turnaround from July’s GST-related contraction. Underlying data pointed to a broad-based recovery, with factory orders and production up in each of the three monitored sub-sectors.
India and China have jointly submitted a proposal to the World Trade Organisation calling for the elimination by developed countries of the most trade-distorting form of farm subsidies, known in WTO parlance as Aggregate Measurement of Support or Amber Box support as a prerequisite for consideration of other reforms in domestic support negotiations, said a government release on Thursday.
Under the Commerce and Industry Ministry, the Department of Industrial Policy and Promotion is likely to release a new industrial policy by October which will focus on encouraging Indian branded products with higher value addition. The proposed policy will also review the existing foreign direct investment policy regime to facilitate greater technology transfer. The policy is expected to replace the United Progressive Alliance government’s National Manufacturing Policy released in 2011, which sought to create 100 million jobs by 2022.
The Central Statistics Offer is going to release India’s Gross Domestic Product numbers on Friday for the first quarter of the current financial year. For the previous quarter of the FY17, India’s GDP numbers had missed the street estimates and declined to 6.1%. After demonetisation, experts believe that GDP data will be hampered for next few quarters as the consumption demand of various sectors was adversely affected. According to street expectations, GDP numbers are expected to expand to 6.6% in Q1FY18 as compared to the previous year.
The Government’s construction major, Central Public Works Department has undergone a major digital transformation enabling payments worth Rs 20,000 crore per year electronically, said a government release on Wednesday. This has been done by networking all the 400 field offices of CPWD across the country through a special integrated portal ensuring digital payments from this month. With this, CPWD has become the first organisation of a civil ministry to become digital at the field level, it said.
The fiscal deficit of Rs 5.05 trillion for April-July or 92.4% of the budgeted target for the current fiscal year that ends in March 2018, showed a data released by the government on Thursday. The data furnished by the Comptroller General of Accounts, showed that the deficit was 73.7% of the full-year target during the corresponding period last year. Net tax receipts in the first four months of the financial year 2017-18 were Rs 2.58 trillion, the data added. The government aims to trim the fiscal deficit to 3.2% of gross domestic product in 2017-18 compared with 3.5% in the previous year.
The combined Index of Eight Core Industries stands at 119.8 in July 2017, which was 2.4% higher compared to the index of July 2016. Its cumulative growth during April to July 2017-18 was 2.5%. The Eight Core Industries comprise 40.27% of the weight of items included in the Index of Industrial Production. On the strong core production data, one can expect positive sentiment across core sectors on D-street on Friday's session. According to the data, Coal production increased by 0.7% in July 2017 over July 2016. Its cumulative index declined by 3.3% during April to July 2017-18 over the corresponding period of the previous year.
The Q1FY18 GDP slowed down to 5.7% as compared to 7.9% on YoY basis and against 6.1% on QoQ basis, showed the data released by the Central Statistics Office, Ministry of Statistics and Programme Implementation. The Q1 GDP has hit its 13-quarter low. Quarterly GVA at basic price at constant (2011-2012) prices for Q1FY18 is estimated at Rs 29.04 lakh crore, as against Rs 27.51 lakh crore in Q1FY17, showing a growth rate of 5.6 percent over the corresponding quarter of previous year.
Sidelining the apprehensions about the GST rollout, Prime Minister Narendra Modi said that a smooth transition to the new tax regime has occurred. The PM has asked chief secretaries of all states to further boost efforts to increase registration under GST and to achieve a quantum jump in this regard within a month. The Prime Minister was chairing his 21st meeting of Pro-Active Governance and Timely Implementation, a monthly interaction with top officials of states through a video conference.
The Reserve Bank of India plans to issue a fresh list of defaulters to be referred to National Company Law Tribunal by the banks if their NPAs remain unresolved by mid-December, reported a leading news agency. Some of the prominent names on the list are Videocon Industries, JP Associates, Jayaswal Neco, Uttam Galva, Ruchi Soya, Unity Infra, Monnet Power, Shakti Bhoj, Nagarjuna Oil, Orchid Chem, East Coast Energy, Ushdev, Essar Projects, IVRCL, Visa Steel, Castex Technologies. The list which includes listed companies names around 35 to 40 companies, said the report.
Official data on GDP growth for Q1, April to June 2017 is scheduled to be released on August 31. The economy grew 7.9% in the first quarter of 2016-17. It had grown 7.1% in 2016-17. Many market experts are observing GDP growth at 6.5% for Q1FY18. GDP estimates and growth projections are vital inputs for policy makers including the Reserve Bank of India’s to derive its interest rate related decisions.
More than 36 lakh businesses have submitted their returns so far under the Goods and Services Tax regime for the month of July, reported a national news agency quoting a top tax official. Friday was the last day for filing the returns. Tax collected in the maiden filings under the GST regime, which kicked in on July 1, is still being compiled as the last date for filings under different rules was extended. The revenue department has estimated a collection of around Rs 65,000 crore from maiden GST.
Prime Minister Narendra Modi said that nearly 30 crore new families have got Jan Dhan accounts and the scheme has recorded deposits worth Rs 65,000 crore. With Jan Dhan Yojana completing three years, Prime Minister said on Monday that the NDA-led government has given ‘wings to millions of aspirations’ through the scheme that aims at acute financial inclusion, besides other social security schemes including Mudra Yojana and Stand-Up India programme.
✍ TOP CORPORATE NEWS -
GTPL Hathway announced that its wholly-owned subsidiary GTPL Broadband Private Ltd. has received a prestigious work order from Gujarat Informatics Limited, a Government of Gujarat company. The order was received for providing wi-fi services on services/rental module, including design, built and operations, and management for state-wide public wi-fi hotspots under the Gujarat State Urban Area Network . The order was received for an estimated amount of Rs 28.88 crore for five years.
Hero MotoCorp Ltd., the world’s largest two-wheeler manufacturer, reported on Friday a significant performance milestone by clocking its highest-ever sales for any single month. Riding on popular demand for its exciting range of two-wheelers, Hero MotoCorp sold 6,78,797 units of two-wheelers in August 2017, thereby registering a growth of 10% over the corresponding month last year when the company had sold 6,16,424 units.
Mahindra & Mahindra Limited, India’s leading SUV manufacturer has announced its auto sales performance for August 2017 which stood at 42,116 vehicles as compared to 40,591 vehicles during August 2016, representing a growth of 4%. The passenger vehicles segment sold 19,325 vehicles in August 2017 as against 18,246 vehicles in August 2016, posting a growth of 6%. The company’s domestic sales registered a growth of 7%, selling 39,534 vehicles in August 2017 as compared to 36,944 vehicles in August 2016.
Zydus Cadila informed that it has received the final approval from the USFDA to market Donepezil Hydrochloride tablets, in the strength of 23 mg. The drug is indicated for the treatment of dementia of the Alzheimer’s disease. The drug will be manufactured at the group’s formulations manufacturing facility at Moraiya Ahmedabad.
The total sales by Ashok Leyland registered a growth of 25% on YoY basis. It sold 13,634 units in August 2017 as compared to 10,897 units during the corresponding period last year. In the Medium and Heavy Commercial Vehicles segment, it posted a growth of 29%, selling 10,567 units as against 8,201 units in August 2016. It sold 3,067 units of Large Commercial Vehicles in August 2017 as compared to 2,696 units sold in August 2016, registering a growth of 14%.
The shares of Welspun Enterprises rose by over 3% intraday during Thursday’s trading session after the company informed that it has received the letter of award for Rs 1,161 crore project. The order was received from National Highways Authority of India for the six-laning of Aunta-Simaria section of NH-31 in the state of Bihar on Hybrid Annuity Model.
Auto sales data for the month of August 2017 has been coming out during the early trade on Friday. Maruti Suzuki India has also reported its August sales data. The company sold a total of 1,63,701 units in August 2017 growing 23.8% over the same period of the previous fiscal year. This includes 1,52,000 units in the domestic market and 11,701 units of exports. The company had sold a total of 1,32,211 units in August 2016.
Aditya Birla Capital, a financial services arm of AV Birla Group, listed on the bourses in Friday’s trade. The stock listed on NSE at Rs 237.5 per share and at Rs 248.15 per share on BSE. There is strong selling pressure seen in the stock, with 45,55,532 shares on the sell side while zero on the buy side
The shares of RPP Infra Projects soared by nearly 2% during Thursday’s trading session after the company announced that it has bagged an order valued Rs 38.9 crore.
Tata Elxsi and V-Nova, a leading provider of video compression solutions, announced a partnership that enables operators to deploy V-Nova PERSEUS technology at an accelerated pace, the company said in a filing to the bourses on Wednesday.
HCL Infosystems Limited has informed that the board of directors of the company in its meeting held on August 29, 2017 has considered and approved the recommendations of its Capital Raising Committee to go for a rights issue of shares to existing shareholders of the company as a mode of raising equity capital aggregating up to Rs 500 crores.
The shares of Larsen & Toubro soared by over 2% intraday during Monday’s trading session after the company reported that its construction arm has secured orders worth Rs 1,975 crore across its various segment.The power transmission and distribution business have bagged orders valued at Rs 1,331 crore in the domestic and international markets. The orders have been secured across the Middle East for turnkey construction of various 132/11kV and 33/11kV substations and 132kV cable feeders. These primary electrical power substations and associated HV cable feeders are crucial elements in providing integrated infrastructure for spurring industrial growth.
✍ TOP BANKING AND FINANCIAL NEWS OF THE WEEK
Public lender Canara Bank has reduced interest rate on savings bank accounts by 50 basis points to 3.5 per cent on deposits of up to Rs.S 50 lakh. However, the bank will continue to pay 4 per cent interest on deposits of above Rs 50 lakh. "The bank has decided to revise the rate of interest on savings bank deposits with effect from today," Canara Bank said in a regulatory filing.
The government will likely impose a temporary halt on the selection of state-run bank chiefs as it looks to push lenders toward consolidation. It may also review the performance of bank managing directors with those who don’t score too well being asked to improve or quit, said a finance ministry official, who did not want to be named. Consolidation won’t mean people losing their jobs.
Non-food bank credit growth of schedule commercials banks slowed to 5.3 per cent in July as compared with a rise of 8.3 per cent in the same month last year, the RBI data showed. Credit to agriculture and allied activities moderated to 6.8 per cent in July 2017, lower than the increase of 13.4 per cent in July last year. Personal loans rose by 15 per cent in the month, lower than the increase of 18.8 per cent in the year-ago period.
The government may be forced to put its state-run bank consolidation push on the back burner since at least a dozen of them are staring at a big hole in the balance sheet this fiscal year after RBI told them to get cracking on resolving as many as 50 bad loan accounts or initiate bankruptcy proceedings against them by December end.
The government has exempted consolidation among public sector banks from the scrutiny of competition authority. The exemption will cover all cases of reconstitution, transfer of the whole or any part of nationalised banks and will be available for a period of 10 years. In a gazette notification, the provisions of Sections 5 and 6 of the Competition Act, 2002 will not apply in these cases.
It was in the budget speech on February 28, 2005 that consolidation of Indian banking industry was probably put forth for the first time by someone who mattered in the government. The then finance minister P Chidambaram, in a different context of acquiring size to match global banks, signalled the government is keen on state-run banks' merger. More than a decade after, this month, Prime Minister Narendra Modi’s Cabinet has given a go ahead to banks to come up with plans by themselves to consolidate the 21 entities based on the needs of individual banks. As matters stand, government has said it wouldn't force the hands of banks.
The Reserve Bank of India has directed banks to refer as many as 50 dud accounts to bankruptcy court if they are unable to find a resolution for them in about three months, in the second such list that the regulator has sent out in its renewed campaign to clean up the country's overwhelming bad corporate debt problem. The move will not only put pressure on promoters to come up with workable recast strategies but also pinch banks even more as they will have to make higher provisions on loans of companies referred to the insolvency process.
Bankruptcy proceedings could soon be initiated against more companies, in addition to the 12 firms that are already undergoing insolvency proceedings. About 30-40 companies could feature in this list. According to an ET Now report, the RBI is finalising a second list for the NCLT. The list, ET Now claimed quoting sources, is supposed to be out by next month. The debt level, ET Now further said, runs from Rs 3,000 crore to Rs 50,000 crore.
Public sector banks have taken loan recovery action under Sarfaesi law against 5,954 wilful defaulters owing about Rs 70,000 crore to the lenders. At the end of March 31, 2017, 21 banks together have taken action against 5,954 wilful defaulter under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, as per data collated by the Finance Ministry.
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