Equity Research Report Ways2Capital 10 october 2016

The Equity benchmark Nifty 50 opened Gap up on Monday at 8666 after closing at 8611 on Friday in the previous week

TECHNICAL TREND ( NIFTY - BANK NIFTY FUTURES )
NIFTY FIFTY : - The Equity benchmark Nifty 50 opened Gap up on Monday at 8666 after closing at 8611 on Friday in the previous week. Nifty Traded in a range of 110 points between 8745-8635. Nifty Witnessed a sharp rally from a low of 8562 to 8786 in last two trading session. On Tuesday Nifty traded in a small range of 45 points before the RBI policy was announced. Urjit Patel in his first Monetary Policy decision announced a 25 bps rate cut which was positively welcomed by the markets. Post policy announcement, Nifty made a low of 8767 to rise till 8813 before closing at 8802. The inherent strength in the Indian Markets, backed by strong fundamentals of the Indian companies, seems to continue with the next target of Nifty at 8994. Domestic market space is quite range bound and perhaps laggard as of now for last couple of sessions due to lack of conceptions regarding direction among trading participants ahead of earning season. Nifty 50 will continue to take support at 8705 – 8718 and consolidate till next week but may face stiff resistances around 8798, 8809 or 8826 – 8848. From this level Nifty has to sustain over 8705-8725 zone for further rally up to 8875-8900 in the Short Term. The Significant Support for Nifty is 8650-8620 and Resistance of 8768-8818.
BANK NIFTY : - The Bank Nifty opened in a positive note on Monday up by 110 points or 0.56 per cent at 19395. The PSU Banks traded in bullish trend on Tuesday trading session in response of rate cut by Reserve Bank of India and proposal to ease stressed Asset Norm. Upcoming Fundamentals will impact entire Market structure and pave the way for future market movements. Recent Price action of Bank Nifty is quite distinct from earlier retracements and corrections that occurred within the trend. September is a poor month for traders since many indices and stocks couldn’t breach beyond the tight consolidation. The tight consolidation is due to less participation and less liquidity. October seems interesting from the start as RBI policy and ongoing Global cues will entertain market participants. Investors should brace for more volatility in upcoming days. Market shows a shift in the behavior of recent Uptrend’s structure. Sharp selloff from 20,500 to 19,000 on the month of September is indicating the strength of selling pressure. It obviously shows a shift trend’s character. We need to see how buyers will react, if influx of selling pressure relaxes. Traders should focus on Price action in daily chart. The Dynamic Levels for Next week of Bank Nifty is 19560-19875 is down side and 20800-21756 is Up side.




NSE - WEEKLY NEWS LETTERS
? TOP NEWS OF THE WEEK
RBI unlikely to lower rates given the stiff inflation: Experts - The Reserve Bank of India will hold its monetary policy review today, with the newly formed Monetary Policy Committee fixing interest rates for the first time. With more supporting data on inflation yet to come, the MPC headed by RBI Governor, Urjit Patel is not likely to cut interest rates, at the first policy review of the newly constituted committee, as per reports. Since both Consumer Price Index and Wholesale Price Index have not yet turned benign, interest rate cut by the RBI in this meeting looks difficult, R P Marathe, Managing Director and Chief Executive, Bank of Maharashtra said. Additionally, Arun Tiwari, Chairman and Managing Director, Union Bank of India is also of the view that while the central bank will not give a rate cut in this meeting, measures pertaining to resolving non-performing assets could be unveiled at the policy meet on Tuesday, as per reports."The new governor should focus on growth that will create more jobs and strengthen the economy. Above average monsoon has helped stabilize food prices that were a cause of concern over the last two years. We expect the monetary policy to be forward looking and feel that a rate cut now will be well received and shall impact sentiments positively. This will infuse confidence in the system thereby providing a boost to not only the real estate sector, but the overall economy ahead of the crucial festive season,

It is imperative for banks to reduce interest rates as per RBI, which has not yet been seen. The combination of lower interest rates alongside the progressive measures taken by the government towards reforms has the potential to reinvigorate demand in all segments of the economy, With hopes hinged on RBI for a rate cut, losses in domestic equity market last week were reversed. The domestic stock market is factoring in at least 25 bps rate cut by RBI.

Private consumption set to get a 90 bps monsoon boost: CRISIL - The distribution of monsoon this season has been the best in the last three years, with only a third of the districts seeing deficiency compared with almost half in fiscal 2015 and 46% in 2014. Importantly, most of the deficient districts are either well-irrigated or not important agriculturally. As a result, CRISIL expects nominal agricultural GDP to rise by Rs. 1.49 trillion this fiscal, compared with Rs. 978 billion in fiscal 2016. This is despite a spike in farm output putting downward pressure on prices and farm incomes. Also, the rural markets, which account for 54% of private consumption, is already seeing some green shoots.
Says Dharmakirti Joshi, Chief Economist, CRISIL: “So this time around, India’s consumption story will have two legs instead of just the urban engine on which it has duked out the past two years. We see private consumption rising 90 basis points to 8.3% this fiscal compared with 7.4% in fiscal 2016.” After a slow start in June, rains caught up and has been recorded as ‘normal’, at just 3% below the long-period average. Not surprisingly, area coverage under kharif crops has risen to 1,060 lakh hectare compared with 1,052 lakh hectare last year. To be sure, there are pockets of stress, mainly in Gujarat and Karnataka, where some districts had their second or third consecutive deficient monsoon. CRISIL’s state-wise Deficient Rainfall Impact Parameter, or DRIP, scores show all states barring Gujarat, Tamil Nadu and Odisha are above-trend. Also, among crops, only groundnut has a below-trend DRIP score.

About 33% of the districts have seen deficient rains this year. But more than half of these have adequate irrigation cover. Plus many rain-deficient districts are agriculturally less relevant, contributing under 4% to kharif production and having less than 7% of overall sown area, underscoring limited impact. The share of Gujarat and Karnataka in all-India kharif production is less than 7% and that of their distressed districts just 1.7%. However, the stress to agricultural household incomes could be high as a quarter of the kharif production in Karnataka and about 33% in Gujarat comes from the distressed districts. Also, the kharif crop contributes about 66% of the total agriculture production in Karnataka and 55% in Gujarat.

Govt working on rollout of GST from next April: FM Arun Jaitley - The Union Finance Minister Arun Jaitley said that the Government is working on a target date of 1st April, 2017 for the roll out of the Goods and Services Tax in the country. He said that till 16th September, 2017, that is one year after the provisions of the Constitution 101st Amendment Act, 2016 being brought into force, the Constitution empowers the Central Government to levy excise duty on manufacturing; and service tax on the supply of services. The Finance Minister said that similarly the Constitution Amendment Act empowers the State Governments to levy sales tax or Value Added Tax on the sale of goods till that time i.e. 16th September, 2016. The Finance Minister Jaitley said that so far the Government is following the road map for implementation of GST as per the schedule. The Finance Minister Jaitley was making his Opening Remarks at the Fourth Meeting of the Parliamentary Consultative Committee attached to the Ministry of Finance held here today. The subject of today’s Meeting was the Goods and Services Tax.

The Finance Minister Jaitley further said that the First Meeting of the GST Council was held in a very cordial and constructive environment earlier this month and today, he hold the Second Meeting of the GST Council. In the GST regime, the GST Council has been created under Article 279A of the Constitution. The GST Council is a joint forum of the Centre and the States. The Council will take decisions on important issues like tax rates, exemption list and threshold limits etc.

“It is vitally important to defend the prospects for increasing trade integration,’’ he, said. “Turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.” To support growth in the near term, the central banks in advanced economies should maintain easy monetary policies, the IMF said. But monetary policy alone won’t restore vigor to economies dogged by slowing productivity growth and aging populations, according to the new report. Where possible, governments should spend more on education, technology, and infrastructure to expand productive capacity while taking steps to alleviate inequality. Many countries also need to counteract waning potential growth through structural reforms to boost labor force participation, better match skills to jobs, and reduce barriers to market entry. The world economy will expand 3.1 percent this year, the IMF said, unchanged from its July projection. Next year, growth will increase slightly to 3.4 percent on the back of recoveries in major emerging market nations, including Russia and Brazil.

Centre softens on bad loans, asks PSBs to handhold top borrowers - The government has asked state-run lenders to identify top borrowers and hand-hold them if they are facing trouble over repayments, marking a significant softening of stance on bad loans. The move is aimed at sprucing up credit growth and driving investments amid realisation that the crackdown on Non-Performing Assets is hurting investments, officials said. Promoters who have viable projects will get support for both existing and new projects, a senior finance ministry official told .“In the first phase, banks will identify top 50-100 borrowers and look at their exposure and existing accounts,” the official said on condition of anonymity. In genuine cases, banks will take extra steps to support borrowers through measures like increasing their cash credit limit, the official said. “The banking regulator is on board,” he said. The issue was discussed at the quarterly performance review of public sector banks held last month, the official said. In his first monetary policy review on Tuesday, Reserve Bank of India governor Urjit Patel also hinted at a more accommodative stance on dealing with bad loans. “We have to deal the issue with firmness but also with pragmatism so that the economy does not feel any lack of credit,” Patel said, adding that RBI will move at various levels to deal with the situation and work with both banks and government.

IMF Sees subdued global growth, warns economic stagnation could fuel protectionist calls - Global economic growth will remain subdued this year following a slowdown in the United States and Britain’s vote to leave the European Union, the IMF said in its October 2016 World Economic Outlook. “Taken as a whole, the world economy has moved sideways,” said IMF chief economist and economic counselor, Maurice Obstfeld. “We have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world,” he said.
The report highlighted the precarious nature of the recovery eight years after the global financial crisis. It raised the specter that persistent stagnation, particularly in advanced economies, could further fuel populist calls for restrictions on trade and immigration. Obstfeld said such restrictions would hamper productivity, growth, and innovation.

Private equity real estate investments down by 30 per cent during Jan-Sep: Report - Private equity investments in real estate have declined 30% from a year ago to 48 transactions worth nearly $ 2.5 billion in the first nine months of 2016. During the same period in 2015, the investment stood at $ 4.2 billion across 69 transactions, according to Venture Intelligence. Private Equity-Real Estate firms made 20 investments--having an announced value of $ 1.01 billion across 16 deals--during the quarter ended Sep 2016. The volume of investments was up about 25% from the 16 investments worth $ 579 million in the immediate previous quarter. However, compared to the same period in the previous year which had witnessed 23 investments amounting to $ 2,170 million, the volume of Investments was down about 13%. The predominant focus of investors continued to be on the residential segment in the main metros which accounted for 17 of the 20 investments, while commercial segment attracted three investments, Venture Intelligence said in a release.


? TOP ECONOMY NEWS
The price of petrol was hiked by 14p/l and that of diesel by 10p/l, following increase in commission paid to dealers.

The Reserve Bank of India cut repo rate by 25 bps to 6.25%. Reverse repo rate under the LAF stands adjusted to 5.75%, and the marginal standing facility rate and the Bank Rate to 6.75%. All six members of the monetary policy committee voted in favour of cutting repo rate.

The Center and the Maharashtra government have arrived at a consensus on the development of a mega refinery and petrochemical complex in the Konkan region.

India and Singapore vowed to “expedite” the second review of the Comprehensive Economic Cooperation Agreement in an effort to boost two-way trade during a bilateral meeting between Prime Minster Narendra Modi and his Singaporean counterpart Lee Hsien Loong.

Private equity investments declined 50% during the September 2016 quarter to USD 3.2 billion across 125 deals compared to USD 6.5 billion across 224 transactions in the year-ago quarter.

With a view to boosting innovation and promoting job creation, the Reserve Bank of India said start-ups can raise external commercial borrowings of up to USD 3 million in a financial year.
The government has managed to rake in Rs. 210 billion through stake sales and buybacks in April-September this year, the highest-ever first half disinvestment revenue for any year by a good margin, thus, raising expectations for the rest of 2016-17.

After growing at the fastest clip in 13 months in August, the widely-tracked Nikkei Purchasing Managers’ Index showed a reading of 52.1 in September, declining marginally from 52.6 in August 2016.

India’s largest-ever spectrum auction kicked off with major telecom operators placing bids worth Rs. 535.31 billion across bands, even as the premium 700 Mhz and 900 Mhz frequencies did not find any buyer.

Union Power Minister said so far Rs. 1.67 trillion worth of bonds have been issued under the Ujjwal Distribution Assurance Yojana and it is now hot property and in demand.

The Government reduced the prices for domestically produced gas to USD 2.50/mmbtu for the period October-March 2017 period on gross calorific value basis. It was earlier priced at USD 3.06 /mmbtu.

Petrol price was hiked by 36 p/l, the third increase in two months, but that of diesel was cut by 7p/l in line with international trends.

Fiscal deficit in the first five months of the current fiscal stood at Rs. 4.08 trillion, which was 76.4% of Budget estimates for 2016-17.

India’s largest-ever spectrum auction kicked off with major telecom operators placing bids worth Rs. 535.31 billion across bands, even as the premium 700 Mhz and 900 Mhz frequencies did not find any buyer


? TOP CORPORATE NEWS -
Jain Irrigation Systems Limited has secured orders aggregating Rs. 2.84 billion under the AMRUT (Atal Mission for Rejuvenation and Urban Transformation) scheme.

Zee Entertaining Enterprises Limited has revived talks with Reliance Broadcast Network to acquire the latter’s radio and television business.

Bharat Heavy Electricals Limited has bagged two renovation and modernisation orders of hydropower plants worth Rs. 4.30 billion, including one from NHPC.

Anil Ambani-led Reliance Group and Rafale maker Dassault Aviation announced a joint venture that will be a "key player" in execution of offset contract worth about Rs. 220 billion as part of the fighter jet deal.

Larsen and Toubro Limited has bagged orders worth Rs. 60.24 billion across various business segments.

Gayatri Projects Limited has bagged Rs. 9.26 billion highway road construction contract in the state of Bihar. The contract involves four-laning of Gaya-Hisua-Rajgir-Nalanda-Bhiarsharif section of NH-82.

NTPC Limited paid a total dividend amounting to Rs. 27.62 billion at the rate of 33.50 % of its paid-up capital for the financial year 2015-16. The dividend payment is 4th highest among Public Sector Undertakings.

Mahindra CIE Automotive Limited is amongst the handful of companies who have shown interest in buying business assets of Amtek Auto Limited.

RBL Bank Limited has acquired 9.99% stake in Utkarsh Microfinance in a bid to reach out to consumers in unbanked areas. RBL has also entered into a memorandum of understanding to extend its product portfolio to Utkarsh customers.

Vedanta Limited would invest around USD 250-300 million in expanding Hindustan Zinc’s capacity. The company also said for other businesses the focus would be utilising the existing facilities, instead of going for green field ones.

Edelweiss Asset Reconstruction Company has acquired loans worth Rs. 10 billion extended by Axis Bank Limited to Essar Steel as part of aggregating credit exposure to the ailing steel company.

Transocean said the Reliance Industries Limited has terminated the contract for its 'Discoverer India' ultra-deepwater drillship, effective December 2016.

Bharat Electronics Limited said its Rs. 21.71 billion equity shares buyback offer will open on October 6.

Shilpa Medicare Limited has received US health regulator’s nod to sell Azacitidine injection, used in the treatment of myelodysplastic syndrome, in the US market.

Indian Oil Corporation Limited plans to invest Rs. 180 billion to raise capacity of its Panipat refinery in Haryana to 25 MT by 2020, larger than previously planned.

Larsen & Toubro Limited has synchronised first 660 MW unit of the 1,320 MW thermal power project at Chhabra in Rajasthan.

Indian Oil Corporation Limited is planning to lay a 2,000 KM pipeline to carry liquefied petroleum gas LPG from its Kandla import terminal on the west coast to Gorakhpur in the deep east to cater to growing demand for cooking gas in the country.

Wockhardt Limited said the US FDA had excluded Ceftriazone Sodium from import alert issued earlier against its active pharmaceutical ingredient manufacturing facility at Ankleshwar.


? TOP BANKING AND FINANCIAL NEWS OF THE WEEK
Shares of ABG Shipyard rose 9.2% after the company announced that the private lender, ICICI Bank Limited, acquired 11% stake in the company by converting its debt into equity. Lenders now have 49% stake in the company and are actively scouting for an investor to sell their stake. Other lenders such as State Bank of India and Punjab National Bank have 7% stake each by converting debt into equity. After the company failed to repay their dues and infuse capital into the company to sustain its operations, lenders appointed investment banker Rothschild to find a buyer for their 49% stake. The company has outstanding loans of Rs 16400 crore.

Transmission of interest rate cuts by banks has not been up to the mark despite the 150 basis points rate cut by the Reserve Bank of India since January 2015 but the central bank hopes the recent cuts in small savings rates will lead to lower deposit rates and ultimately will reduce borrowing rates, Governor Urjit Patel said on Tuesday. One basis point is 0.01 percentage point. The RBI has introduced the new marginal cost of lending rate methodology for setting interest rates since April, which takes into account the cost of funds by banks both from deposits as well as market borrowings. Patel said it is hoped that the new methodology will lead to a better regime. “I agree that the transmission to bank borrowers has been less than what anyone of us would have liked it to be. And we are hoping that over the next quarter or two, also keeping in mind that the government has also reduced the small savings rate the MCLR calculation itself will throw up more transmission, In its biannual monetary policy report released along with the policy on Tuesday, the RBI said fixed rates on savings account deposits, sticky small savings rates, stressed asset quality of banks and sluggish demand for bank credit are impeding transmission of interest rates.

ICICI Bank Limited has cut its marginal cost of funds based lending rate by 5 basis points effective from October 1, just hours after the RBI reduced its benchmark repo rate by 25 basis points to 6.25%. One year lending rate of the bank is now 9.05% while the one month and three month rate is identical at 8.85%. The new MCLR regime, which was implemented from the current fiscal year, applies to all new borrowers and is closely linked to bank deposits rates. All new floating rate loans are now linked to MCLR. The key difference between MCLR and the previous base rate regime is that the new rates are divided into different baskets corresponding to bank deposits.

In a good news for consumers ahead of Diwali, bankers promised to swiftly pass on the 0.25 per cent rate cut effected by the Reserve Bank to borrowers, a move that would lower home, auto and corporate loans. For the busy season of the financial year, a cut in repo rate by 25 basis point is indeed a welcome sign. With MCLR already stabilised, the pass through of this cut is expected to be quite swift," said Dena Bank CMD Ashwani Kumar who is also chairman of Indian Banks' Association. SBI Chairperson Arundhati Bhattacharya said: "With benign inflation trajectory going forward, RBI's policy stance is expected to remain accommodative. Banks will continue to transmit rates based on evolving liquidity scenario." ICICI Bank Managing Director and CEO Chanda Kochhar said rate cut will boost investment as well as consumption.

The Reserve Bank of India may tweak its policy of infusing cash into the banking system if there is an increase in overseas investments in India, Governor Urjit Patel suggested at a closed-door conference call with researchers. The central bank has added cash in the system by conducting open market operations through government bond purchases in the recent past, helping to pass on the benefit of earlier rate cuts to borrowers.


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