Equity Research Report Ways2Capital 12 December 2016

The week ending 2nd Dec saw Nifty Open at 8088 and continue its buying momentum from the previous week

TECHNICAL TREND ( NIFTY - BANK NIFTY FUTURES )
NIFTY FIFTY : -The week ending 2nd Dec saw Nifty Open at 8088 and continue its buying momentum from the previous week. Nifty 50 made new highs for consecutively four day’s from Monday through Thursday. Indian benchmark Index Nifty opened gap down at 8165 on Friday. It made a high of 8190 and saw a sharp selloff of 95 points to make a low of 8095 in the last hour of Friday trading Session. The Nifty opened gap Up at 8088 on Monday. It made a high of 8141 and saw a sharp selloff of 85 points to make a low of 8056 in the last hour of trading Session. Domestic capital markets are under pressure in near term out of ongoing cash crunch. FIIs have been relentless sellers in the Indian Equity markets with a total selling worth Rs. 20574 Crore since Nov 1st, the largest selling spree for the year. Near term risks from cash crunch may tinker domestic demands well for running and next quarter as already start reflecting through several macro or micro factors. The rally may be primarily fuelled by short covering after gap up opening today following Positive Global cues and hopes of extension of ECB stimulus beyond March’17 till March’18 without any tapering. Reserve Bank of India stance of holding rate may have helped the domestic market quite significantly today. Indian market was expecting at least 0.25% rate cut by RBI. Technically Nifty sustaining below 8220-8155 zone, Nifty may further fall towards 8090-8040 & 7980-7900 area in the near term and up side The Nifty has to sustain over 8285-8335 area for further rally towards 8385-8425 & 8485-8545 Zone. The Significance levels for Nifty is 8155-8090 is down side and 8285-8340 is Up side.
BANK NIFTY : - The Bank Nifty opened in a flat note on Monday trading Session down by 2 points at 18245. The decision of the RBI governor, Urjit Patel and Monetary Policy Committee not to change the repo rate is welcomed, under the present circumstances when banks are flushed with gigantic amount of deposits to the extent of 11.40 lakh crore. Reducing repo rate now were have been counter- productive. The Reserve Bank of India to withdraw its guidelines with respect to maintaining 100% CRR on new deposits after demonetisation. The banks will have now access to these funds without maintaining CRR of 100%. Bank Nifty has to sustain over 18700-18775 area for further rally towards 18900-19050 & 19100-19300 zone. On the down side, Sustaining below 18600-18550 area, Bank Nifty may further fall towards 18400-18350 & 18200-18100 zone for the day.





NSE - WEEKLY NEWS LETTERS
? TOP NEWS OF THE WEEK

Income Disclosure Scheme bags Rs 67,382 crore unaccounted money - The government on Sunday revised upwards the amount of black money disclosed under Income Declaration Scheme to Rs. 67,382 crore, even as it did not take into account two high-value disclosures. "After final reconciliation, the revised figure of actual declarations received and taken on record was Rs. 67,382 crore which had been made by 71,726 declarants," the Finance Ministry said in a statement here on IDS 2016. "On Oct 1, 2016, it was announced that declarations totalling Rs. 65,250 crore were received from 64,275 declarants, subject to reconciliation," it said. The Income Tax Department did not take into consideration the Rs. 13,860 crore declaration made by Ahemdabad-based Maheshkumar Champaklal Shah, which was reported prominently, as well as another made from Mumbai. "Among the declarations received, there were two sets of declarations of high value which were not taken on record in the above figure because they were found to be suspicious in nature being filed by persons of small means," the statement said.


India takes pride of place, crosses $ 300 billion FDI milestone - India crossed the $300 billion foreign direct investment milestone between April 2000 and September 2016, firmly establishing its credentials as a safe investment destination in the world. Thirty three per cent of the FDI came through the Mauritius route, apparently because the investors wanted to take advantage of India's double taxation avoidance treaty with the island nation. India received $ 101.76 billion from Mauritius between April 2000 and September 2016. The cumulative FDI inflows during the period amounted to $ 310.26 billion. The inflows in the first half of the current financial year was $ 21.62 billion, according to data compiled by the Department of Industrial Policy and Promotion. The other big investors have been from Singapore, the US, UK and the Netherlands. Commenting on the $ 300 billion mark, industry bodies Ficci and CII have said that India is perceived as a safe and dynamic destination by global investors. Ficci said that the liberalisation of the FDI policy framework, major national development programmes such as Make in India, Digital India and Skill India, besides increasing competitiveness, have made India the preferred choice for investors globally.

Gold imports to dictate size of current account deficit in H2 of FY2017: ICRA - ICRABSE 2.41 % expects India's current account deficit to be curtailed under US$20 billion in FY2017, lower than the US$ 22 billion in FY2016. With the gold import bill in October-November 2016 estimated to be nearly as high as the previous six months, the current account deficit in H2 FY2017 would significantly exceed the level for H1 FY2017. Moreover, the demand for gold in the remainder of this year would influence the size of the deficit in H2 FY2017. Principal Economist, ICRA Limited, said: "If the recent amendments to the Income Tax Act dispel demand for holding of gold as well as jewellery, the gold import volumes may decline significantly in the coming months. Assuming that the volume of gold imports during December 2016-March 2017 reverts to the average of around 45 tonnes per month seen in April-November 2016, India’s current account deficit would be curtailed at around US$ 15 billion in FY2017." However, if the volume of gold imports in the last four months of FY2017 is elevated at an average of 70 tonnes per month, driven by continued wedding demand, India's current account deficit could be as high as nearly US$ 20 billion in FY2017," she added.

Nikkei services index slumps to 46.7; biggest monthly fall since November 2008 - India’s services sector contracted sharply in November as lack of cash following the shock demonetisation of Rs 500 and Rs. 1,000 notes disrupted demand, ending 16 months of expansion. The Nikkei India Services Business Activity Index slumped to 46.7 in November from 54.5 in October, falling below the crucial 50 mark that separates expansion from contraction, providing the first evidence of economic dislocation due to the currency switch. It’s the first time since June 2015 that the index has gone below 50. But sentiment is buoyant — business confidence is at a three-month high — with the survey’s respondents expecting a rebound once cash supplies stabilise and the government achieves its aim of tackling black money. The latest set of gloomy PMI figures for the Indian service sector shows that companies were heavily impacted by Rs. 500 and Rs. 1,000 notes ban,” said Pollyanna De Lima, economist at Markit and author of the report.

RBI lowers growth forecast to 7.1% - The Reserve Bank today cut the economy's expansion forecast for current fiscal to 7.1 per cent, from 7.6 per cent earlier, saying that short-term disruption in economic activity and demand compression arising out of demonetisation have led to downside risks to growth. It said that in the near term the risks could travel through "short-run disruptions in economic activity" in cash- intensive sectors such as retail trade, hotels and restaurants and transportation, and in the unorganised sector and aggregate demand compression associated with adverse wealth effects. Incorporating the expected loss of growth momentum in Q3 and waning effects in Q4 alongside the boost to consumption demand from higher agricultural output and the implementation of the 7th CPC award, GVA growth for 2016-17 is revised down from 7.6 per cent to 7.1 per cent, with evenly balanced risks," the RBI said in the fifth bi-monthly Monetary Policy Statement for the current fiscal.


? TOP ECONOMY NEWS
The Government has, on the recommendation of the Reserve Bank of India, decided to sharply up the ceiling for issue of securities under the Market Stabilisation Scheme to Rs. 6 trillion from Rs. 300 billion.

The Central Electricity Regulatory Commission has proposed a hike in transmission charges by 1.35 times, which could hurt the growing market for spot or short-term transaction of power.

Net withdrawal by FPIs from equities stood at Rs. 182.44 billion last month while the same from the debt market was Rs. 211.52 billion during the period under review, translating into the total outflow of Rs. 393.96 billion or USD 5.78 billion.

The Nikkei/ Markit Manufacturing Purchase Managers Index fell to 52.3 in November from 54.4 in October.

Aviation turbine fuel prices were cut by 3.7%, while subsidised LPG rate was hiked by Rs 2.07/cylinder, the seventh increase in cooking gas price in six months.

India Inc's borrowings from overseas markets fell by 30.3% from a year ago to USD 1.47 billion in October 2016.

The Reserve Bank of India will cap banks' exposure to a single entity to 20% of a lender's capital base and to 25% limit to a group of connected entities.

The drugs technical advisory board recently recommended one-time licensing for manufacture and sales of drugs, with a rider that there be at least one annual inspection and in cases where risk is high, more.

India Inc raised a whopping Rs. 486.95 billion in November through private placement of corporate debt bonds, almost double from the year-ago period, for business expansion and propping up working capital requirements.

The Reserve Bank of India cut the economy's expansion forecast for the current financial year to 7.1%, from 7.6% earlier, saying that short-term disruption in economic activity and demand compression arising out of demonetisation have led to downside risks to growth.

The six-member monetary policy committee, headed by the Reserve Bank of India governor, unanimously decided to keep the policy rate unchanged at 6.25%.

Government sought the approval of the Lok Sabha for gross additional expenditure of Rs599.78bn as part of the second batch of supplementary demands for grants for the current financial year.

Almost 12 trillion demonetised Rs. 500 and Rs. 1000 notes have been deposited by the public since the November 8 announcement.

The Government has scrapped the 10% import duty on wheat with immediate effect on the face of an imminent shortage of the cereal this year.

Industry body Society of Indian Automobile Manufacturers said OEMs with production facilities across India would cut down production cycles to manage inventories in wake of poor sales post-demonetisation.


? TOP CORPORATE NEWS -
Dr. Reddy’s Laboratories Limited has launched Nystatin and Triamcinolone Acetonide Cream in the United States market.

Alembic Pharmaceuticals Limited has received approval from the US health regulator for Zolmitriptan orally disintegrating tablets, used for the treatment of migraine, in the American market.

State Bank of India said its saving accounts have swelled up by Rs1trn after demonetisation.

Cairn India Limited will invest Rs. 300 billion in the next three years to produce an additional 0.1mn barrels per day of oil and oil equivalent gas, primarily from its prolific Rajasthan fields.

Strides Shasun Limited has received Establishment Inspection Report from the US health regulator on closure of inspection of its R&D centre in Chennai.

Adani Enterprises Limited reached a milestone in its bid to build a controversial USD16bn coal project in northern Australia, winning approval for part of a rail link to service the planned mine.

ISS has asked minority shareholders to vote against Cyrus Mistry’s removal as director of Tata Consultancy Services, saying that neither the company nor its majority owner Tata Sons had provided compelling reasons for his removal.

Mangalore Refinery and Petrochemicals Limited is readying plans to invest Rs110bn to raise refining capacity to 25 mt instead of the previously planned 21mt.

State Bank of India is believed to be in the final stages of divesting part of its stake in its life insurance subsidiary.

Bharat Forge Limited has completed the acquisition of US-based Walker Forge Tennessee LLC and PMT Holdings Inc, USA for USD 14 million around Rs. 950 million.

Prajay Engineers Syndicate Limited announced its plans to develop 15,000 affordable homes by the year 2019 in Hyderabad and its surrounding locations where the company has developed a land bank.

Zydus Cadila said the patent Litigation relating to Allergan's Delzicol, used to treat ulcerative colitis, has been settled.

GHCL Limited, one of the major suppliers of caustic soda and soda ash, wants to now be known as a consumer products company too.

IL&FS Engineering and Construction Company Limited Services emerged as the lowest bidder for rural electrification and integrated power development works worth Rs. 6.78 billion in West Bengal.

Info Edge India Limited, has invested an additional Rs10mn in VCare Technologies, taking its total stake in the company to 14.77%.

Mahindra & Mahindra Limited said its board has approved the demerger of Mahindra Two Wheelers Ltd’s two-wheeler undertaking, which manufactures and sells two wheelers.

JM Financial Limited subsidiary has completed acquisition of 24.5% stake in India Home Loan on a preferential allotment basis.

Sudan is holding up extension to Oil & Natural Gas Corporation Limited Videsh's licence over an oil field as the government seeks higher royalties, tax and profit petroleum even as it delays paying nearly USD 300 million in oil dues.

Advent International and KKR & Co have made offers to buy the industrial valves unit of Larsen and Toubro Limited in a deal estimated at between USD 400 million and USD 500 million roughly around Rs. 30 billion.

Cipla Limited plan of developing a pump-delivered inhalable form of insulin has suffered a setback with an expert committee denying it permission to conduct trials on Indian patients. The panel has said the company’s preliminary data on safety and efficacy of the trial drug is insufficient.

Petronet LNG Limited is set to foray into retail sales of liquefied natural gas through fuel outlets across the country.

Lupin Limited has received tentative approval for its generic version of Diclofenac capsules, used in pain management of osteoarthritis, from US health regulator USFDA.

Inox Wind Limited has bagged 50 MW wind power project order from SJVN Ltd in Gujarat.

Future Consumer Limited has entered into a pact with LT Foods Limited and Genoa Rice Mills Private Ltd for sourcing, marketing and distribution of rice.

Suven Life Sciences Limited has been granted a patent in India for a drug used for the treatment of neuro-degenerative diseases.

PVR Limited has partnered with South Korea’s CJ 4DPLEX to add another 10 4DX screens to its network in major cities like Bengaluru and Mumbai.

Wonderla Holidays Limited has introduced two new high-thrill rides. The new rides – Equinox 360 & Flash Tower – will further boost Wonderla Kochi’s popularity, which has attracted more than 15 million visitor since inception.

The capacity of Coromandel International Limited fertiliser unit is being expanded from 700tpd to a 1,000 tpd and the public hearing for the purpose is being held on the factory premises at Sriharipuram.

A unit of Oil and Natural Gas Corp Limited is in early talks with Gazprom for supply of natural gas through a complex swap involving Russia, China and Myanmar.

State Bank of Travancore said it will raise up to Rs6bn through issuance of Basel-III-compliant additional tier-I bonds on private placement basis.

Sun Pharmaceuticals Industries Limited said the US health regulator has informed the company of more concerns found at its Halol manufacturing plant after a recent inspection.

Ashoka Buildcon Limited, through its power division, has won rural electrification projects worth Rs9.50bn in Bihar.

NTPC Limited has struck coal at its first coal mine.

Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corp signed a pact to build India's biggest oil refinery at a cost of USD 30 billion on the west coast.

The government has initiated a probe into Reliance Industries Limited and Oil and Natural Gas Corporation having knowledge as early as in 2003 of state-owned firm's natural gas flowing into adjoining fields of RIL in KG Basin.

Hindustan Zinc Limited said it is foraying into solar energy business and will set up 115MW of solar energy projects with an investment of Rs. 6.30 billion.

CERC has passed an order and granted relief measures to Tata Power in compensatory tariff case for force majeure event.

Adani Transmission Limited executed the share purchase agreement with Reliance Infrastructure Limited for 100% acquisition of the latter's Western Region System Strengthening Scheme's transmission assets.

The US Food and Drug Administration has issued form 483 with five observations against Divi's Laboratories' unit at Chippada Village in Visakhapatnam of Andhra Pradesh following an inspection, which concluded on December 6.

Tata Steel Limited made a 10-year commitment to a GBP1bn investment plan as part of its crucial talks with steelworkers’ unions to save thousands of jobs in the UK.

KKR and pension giant Canada Pension Plan Investment Board have emerged as the strongest contender to take over Bharti Infratel Limited, after the two week long deadline for exclusive talks with another Canadian financial powerhouse Brookfield Asset Management Inc. ended inconclusively last Friday.

Oil and Natural Gas Corporation is seeking a 15-year extension of its licence to operate an oil block in Sudan after the initial contract expired last month.

Cipla Limited has received final approval from the American health regulator to market Entecavir tablets used for treatment of Hepatitis B infection.

Bharti Airtel Limited unveiled unlimited voice calls and more 4G data under a new plan, to take on rival Reliance Jio that recently extended its free services.

Praj Industries Limited has signed agreements with Indian Oil Corporation and Bharat Petroleum Corporation Ltd to set up three bio- ethanol plants in Gujarat, Haryana and Odisha.

Larsen & Toubro Limited continues with its annual hiring programme despite undertaking the biggest corporate layoff recently.

Aimed at matching Rel Jio tariff rates, Idea Cellular Limited announced two schemes to provide free calls to its pre-paid customer bundles with limited mobile internet service.



? TOP BANKING AND FINANCIAL NEWS OF THE WEEK
Banks are so busy trying to cope with the cash crunch caused by demonetisation that the critical task of going after bad loans is falling by the wayside. Not only that, lenders are worried that the concomitant slump in asset values means that collateral is depreciating, making things worse. Earnings in December quarter could therefore look even worse than they’ve been in the past few quarters, not due to a rise in defaults but because decisions are pending on debt restructuring and the conversion of loans into equity. Balance sheets have suffered ever since the Reserve Bank of India last year started pushing banks to recognise bad loans, provision for them and set their house in order. Lenders have to decide on debt recasts to the tune of more than Rs. 1 lakh crore, including those of Essar Steel, Bhushan Steel, ABG Shipyard and scores of others as officials struggle to meet customers’ need for cash, said three people with knowledge of the matter.

The RBI today told the Delhi High Court that the cap on free-of-charge withdrawals from ATMs by banking customers was a "policy decision" and the court should not interfere in it. The Reserve Bank of India counsel also raised the issue of "maintainability" of the petition which has sought directions to allow banking customers to make unlimited number of transactions free of any charges on their own bank ATMs. "It is a policy decision. Why should the court interfere in it? They are challenging the circular of the RBI. I am challenging the maintainability of this plea," the RBI counsel told a bench of Chief Justice G Rohini and Justice Sangita Dhingra Sehgal.

Yes Bank Limited has partnered cab aggregator Ola to set up mobile ATMs across 30 locations in the country that will allow people to withdraw up to Rs 2,000 per card. The Point of Sale enabled ATMs will be stationed in Ola cabs from where customers of any bank can withdraw the amount, Yes Bank said. The service will be available in over 30 locations across 10 cities including Mumbai, Delhi, Bangalore, Chennai, Pune, Kolkata, Chandigarh, Ahmedabad, Hyderabad and Jaipur. "This partnership is being done with an aim to ease the process of cash withdrawals for citizens across the country and provide seamless service to the customers with additional mobile infrastructure powered by Ola", said the bank in a release.

For the first time, the income-tax department will use big data analytical tools to go through personal bank deposits to segregate black money holders from genuine tax-payers, two people in the know have said. While the government has used big data analytical tools for corporate tax reporting in some cases in the past, this is the first time that it will use analytics on such a large scale to sieve through personal taxes. “It’s practically impossible for tax officials to go through all the data obtained from banks and compare it with other tax-related data. Analytics is being used to look at discrepancies. This would then be scrutinised by experienced tax officials,” a person close to the development said.

In a bid to speed up small value online transactions, the RBI today relaxed norms for additional factor of authentication for payments up to Rs 2,000. Relaxing the norms for AFA requirement for transactions up to Rs 2,000 for online card not present transactions, the RBI said only authorised card networks will provide such payment authentication solutions with participation of card issuing and acquiring banks. "The relaxation for AFA under such solutions shall be applicable for card not present transactions for a maximum value of Rs. 2,000 per transaction across all merchant categories. Banks and card networks are free to facilitate their customers to set lower per transaction limits," RBI said.

Two large commercial banks, Bank of India and Bank of Baroda have lowered lending rates by 5 to 20 basis points while country’s largest bank, State Bank of India has said that the bank will pass the benefit of lower rates if RBI removes incremental cash reserve ratio- slice of deposits that banks that does not earn any interest and is parked with RBI-imposed on banks.

While appreciating the Reserve Bank's move to withdraw the incremental 100 per cent cash reserve ratio from the weekend, bankers were today disappointed by the decision to keep the key rates unchanged. With enough liquidity in the system, lending and deposit rates are likely to fall further. In the fifth bi-monthly monetary policy today, the RBI and the MPC unanimously left the repo rate unchanged at 6.25 per cent, contrary to expectation of at least 25 bps reduction.


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