Equity Research Report Ways2Capital 2 January 2017

The benchmark Index remained weak in the last five trading sessions with FII's turning out as net sellers in the market.

The benchmark Index remained weak in the last five trading sessions with FII's turning out as net sellers in the market. Nifty dropped almost 200 points from 8148 to 7953 in the course of the week's trading session. Indian benchmark Index opened gap down On Monday trading Session at 7965 down by 20 points or 0.25 percent as Prime Minister Modi gave ample hints of raising taxes in the capital markets, this will dent the sentiments as the market tries to recover from the demonetization set back. The markets in the December series saw heavy selling by FII's in the cas The Equity benchmark Nifty closed at 8000 levels last week, the Index tested levels of 7950 which is just 30 points shy of the previous month low of 7921 h and F&O segment. There was a possibility that Nifty could close at the lowest level in this clearing if it is unable to close above 7954. The Index is trading above an important gap level of 8160 and it could test the next target 8200-8280 if 8180 level is breached. Nifty January Series has started on a positive note. The benchmark index ended the December series with an upward bias as it closed above the 8100 mark. After making a low of 7894 early this week, Nifty bounced back convincingly and tested 8100 levels. The data for the Jan series shows that short positions have been squared off, so the market is likely to trade with a bullish bias. If Nifty stays above 8130 today, then the next target is 8278. On Technical chart, Nifty is in positive zone. We are into last trading Session of the calendar year 2016 and overall market would remain in a Positive territory. Market can see some profit booking but overall market is positive as of now and traders can go long at dips with strict stop loss of 7980 levels for Nifty on closing basis as market would enter into negative zone once Nifty closes below the levels of 7980-7960. The Crucial Levels for Nifty is 8220-8280 is Upside and 8130-7980 is Down side.
BANK NIFTY : - The Banking Shares Index Bank Nifty opened in a Negative Note on Monday trading Session Down by 59 points or 0.32 per cent at 17825. The banking sector continues to face "significant" level of stress as the asset quality has deteriorated further with the banks' Gross Non-Performing advances increasing to 9.1 per cent in September from 7.8 per cent in march, says the Reserve Bank of India. Bank Nifty Need to close below 18255 levels to enter into negative zone. Traders can initiate short positions only if Bank Nifty closes below 18255 levels. Bank Nifty has broken its major support level of 18250 and has traded below it for consecutively for 2 sessions. The Bank Nifty was also trading down below the gap level of previous month low of 17911 and closed on Thursday at 17700 with a possible price target of 17346. Bank Nifty has major support at 17986 and Resistance at 18329 above which next target is 18647. Sustaining above 18200 zone, Bank Nifty may further rebound towards 18350-18475 & 18550-18600 area and if it Sustaining below 17960 may drag the Bank Nifty toward 17656-17458 Level for next trading week sessions.


NSE - WEEKLY NEWS LETTERS
? TOP NEWS OF THE WEEK


Household owned majority of deposits in banks till March 2016: RBI - Majority of deposits in banks was held by the household sector at 61.5 per cent as on March 31, 2016, the Reserve Bank said today. This was followed by the Government sector which accounted for 12.8 per cent of total deposits. The private corporate sector came next with a contribution of 10.8 per cent. Total deposits as on March 31, 2016 was Rs. 98,41,290 crore, as against Rs. 89,72,710 crore till March 2015. "A majority (63.8 per cent) of the deposits was term deposits. The combined share of current and savings deposits, however, increased from 34.9 per cent in 2015 to 36.2 per cent in 2016," the RBI said. More than half (51.5 per cent) of the total deposits was raised by metropolitan branches followed by urban branches (22.8 per cent) and semi-urban branches (15.4 per cent). While term deposits dominated the total deposits in these branches, savings deposits dominated in rural branches. Public sector banks continued to maintain the largest share (70.6 per cent) in total deposits. Private sector banks had a share of 21.6 per cent in total deposits

India's forex reserves fall $ 2.4 billion to reach one of the lowest levels since May - India’s foreign exchange reserves dipped $ 2.4 billion to settle at $ 360.6 billion, one of the lowest levels since May of this year, as market sources said that the Reserve Bank of India could be selling dollars heavily in order to arrest the slide in the value of Rupee. A combination of factors may have triggered the fall,” said Ashutosh Khajuria, executive director, Federal Bank. “The last leg of FCNR(B) redemptions has put pressure on the Rupee to an extent while RBI’s routine intervention may also have led to an erosion of the reserves. While one of the steepest falls in the last few months in RBI’s dollar reserves was seen in early October due to FCNR(B) outflows starting off, a strengthening dollar and consistent outflow of foreign portfolio investors from the country has also created some pressure on the Rupee lately. “The RBI had definitely intervened when Rupee had hit 68.8 few days back and even now the value of the currency has been held steady at around 68 due to heavy selling of dollars,” said market sources.

Demonetisation: India's GVA growth to be at 6.6 per cent in 2016-17, says rating agency ICRA's - India's gross value added growth is likely to be at 6.6 per cent in 2016-17 as economic activity will take more time to normalise following the government's move to demonetise high-value notes, Icra has said. "Although currency liquidity is likely to improve significantly by the end of January 2017, economic activity may take longer to normalise, based on which we have revised our forecast for GVA growth in 2016-17 to 6.6 per cent," the domestic rating agency said in a report. It said the pace of revival of economic activity in the fourth quarter of the current financial year is likely to take a cue from how quickly currency in circulation gets replenished and digital transactions become more widespread. Between November 10 and December 19, banknotes of Rs. 5.9 trillion were issued to the public through the banking system, as indicated by the Reserve Bank, equivalent to an estimated 38 per cent of the value of currency that ceased to be legal tender.

Government reviews capital needs of banks - The government is reassessing the capital needs of state-run banks after some lenders and the Reserve Bank of India raised concerns over stressed assets turning non-performing if demonetisation impacts demand for long. “There were accounts that were already under stress. Banks say they may be further impacted due to the demonetisation drive,”a senior government official said, requesting anonymity. “If they move in the non-performing category—from substandard to doubtful—provisioning will increase, which will further impact banks’ capital.” The official said banks are also worried as demonetisation has led to a surge in their deposits but they cannot deploy this money because of low credit growth. This means they will have bear more of the interest burden, which will ultimately impact their profitability. The Narendra Modi-led government had on November 8 demonetised old Rs 500 and Rs 1,000 notes. The two notes accounted for about 85% of the cash in circulation. But a finance ministry official said the exercise to assess capital needs was routine and one cannot draw a direct link with demonetisation.

Union Budget 2017 likely to be taxpayer-friendly - The post-demonetisation Budget is likely to be citizen- and taxpayer-friendly and will aim to push growth. This was the central message that emanated from an interaction between Prime Minister Narendra Modi and a group of economists organised by the NITI Aayog on Tuesday. The consultations saw the PM remark that while people in general were not tax evaders, they did want taxes better utilised and accounted for. "Tax simplification figured quite a lot... on direct taxation, corporate and personal income tax, reducing exemptions, bringing down the tax rate and aligning tax system to make India competitive with international destinations," NITI Aayog vice-chairman Arvind Panagariya said. A source said the Modi government's third Budget may offer incentives and packages to boost consumption and accelerate economic growth, a concern after reports that demonetisation had suppressed demand and reduced discretionary spending.

RBI extends grace period for NPA classification by 30 days - The Reserve Bank of India on Wednesday further extended the grace period for banks, non-banking finance companies and microfinance companies to classify bad loans by 30 days in the case of agriculture and term loans of up to Rs. 1crore. The central bank had on November 21 had asked lenders to provide additional 60 days to small ticket borrowers to pay instalments due between November 1 and December 31 in view of the cash crunch following the demonetisation drive. “Permit all regulated entities to defer the down grade of an account that was standard as on November 1, 2016, but would have become NPA for any reason during the period November 1, 2016 to December 31, 2016, by 90 days from the date of such downgrade,” the RBI circular said on Wednesday.

Government's direct tax kitty swells to Rs 5.57 lakh crore between April and December - Government's direct tax kitty has swelled to Rs. 5.57 lakh crore between April 1 and December 19, thereby achieving 65 per cent of budget estimates. The mop up from indirect tax, which comprises customs, excise and service tax, in April-November period jumped 26.2 per cent to Rs. 7.53 lakh crore. Belying fears of slowdown in industrial activity post demonetisation, the indirect tax collection in November alone grew 23.1 per cent to Rs. 67,358 crore. Finance Minister Arun Jaitley said, irrespective of what critics had predicted, figures revealed that till November 30, there is a significant increase in indirect taxes. "We have also tried to check the figures for the month of November which could have been adversely impacted on account of the currency replacement compared to the November of 2015. On year-to-year basis, in November 2016, for all the three indirect taxes, the collection is much high," he said.
After government's nudge, banks set to slash interest rates in next few days - Nudged by the government, banks are poised to slash interest rates in the next few days as they move in lockstep with the administration to lift the spirits of borrowers following the dislocation caused by demonetisation and the 50 days sought by Prime Minister Narendra Modi come to an end. Bankers said the reduction in lending rates could be accompanied by a steeper cut in deposit rates. Large commercial banks currently pay about 7 per cent for one-year deposits and charge 8.9 per cent for loans of the same tenor. A senior bank official said the government has sought to persuade banks to lower rates on the grounds that the cost of deposits had dropped due to demonetisation and the benefits should be passed on to customers to boost consumption. "Investment sentiments are low and the government is under tremendous pressure from the Opposition to showcase that the demonetisation exercise has paid off. Secondly, the common man is hoping that after going through agony for 50 days, he should get the benefits of demonetisation," said a senior bank official. "Therefore, the government is in dialogue with banks on measures that can be taken to boost investments."


? TOP ECONOMY NEWS
Finance Minister Arun Jaitley rejected possibilities of any hike in long-term capital gains tax on market participation.

The Goods and Services Tax Council, comprising the Union finance minister and state representatives, mainly their finance ministers, cleared most of the draft model GST Bill.

Power consumers are likely to gain to the extent of Rs. 693.10 billion from the reduction in electricity tariff enabled by the auction of nine coal blocks to power sector firms so far.

The government received Rs. 348 billion from the sale of minority stakes in an array of state-owned firms this year even as it prepared the ground for the first strategic sale of public sector undertakings in over 12 years.

Betting big on capital markets for raising funds, Indian companies have garnered an estimated Rs. 6.3 trillion from the marketplace in 2016, with debt instruments being the most favoured route to raise money for their business needs amid volatile trends in equities.

Foreign investors have pulled out a massive USD 3.5 billion from the capital market this month so far following rate hike by the US Federal Reserve.

Over Rs. 360 billion were saved in last two years for providing diverse payment and various wages straightway to the beneficiaries under the Direct Benefit Transfer scheme.

For the first time in the past five years, venture capital investments have seen a drop -- of around 29% -- in 2016.

Government's direct tax kitty has swelled to Rs. 5.57 trillion between April 1 and December 19, thereby achieving 65% of budget estimates.

The government is expected to raise Rs. 1 trillion of additional taxes under the Income Disclosure Scheme II , which in turn will help in containing the 2017-18 fiscal deficit.

FIPB approved six investment proposals, including that of Sanofi Synthelabo India, Star Den Media Services and Idea Cellular Infrastructure Services, envisaging foreign investment of Rs. 12 billion.


? TOP CORPORATE NEWS -
Tata Steel Limited has signed an agreement to acquire Brahmani River Pellets Ltd for Rs. 9 billion in cash.

Reliance infrastructure Limited has exited India Energy Exchange, selling its stake in the country's largest power trading platform, for Rs. 1.03 billion.

Camlin Fine Sciences Limited said it is acquiring 51% stake in Ningbo Wanglong Flavors and Fragrances Company Limited.

ONGC Limited will pay over USD 1.2 billion for buying GSPC's entire 80% stake in KG-basin natural gas block, which is struggling to start commercial production despite trial outputs starting nearly two-and-half years back.

Welspun Enterprises Limited is looking to divest its entire 15.49% stake in Welspun Energy.

Cipla Limited respiratory portfolio received a boost with the UK drug regulator approving its key asthma inhaler. The inhaler will be launched within the next few weeks.

Balrampur Chini Mills has got environment clearance for expansion of its Babhnan unit of distillery and Co—generation power in Uttar Pradesh, entailing Rs. 720 million investment.

Sun Pharma subsidiary has invested USD 13 million about Rs. 880 million in the US-based scPharmaceuticals Inc.

Alkem Labs’ Daman manufacturing plant has obtained the Establishment Inspection Report from US health regulator USFDA.

ICICI Bank Limited has launched a mobile application for merchants that allows consolidation of all modes of payments, including digital wallets, Unified Payments Interface, QR code, and credit & debit cards. The app, eazypay, which is designed for business, allows multiple users to connect to the same account. This makes it possible to be used for cash-on-delivery payments.

Wipro Limited has agreed to pay a civil money penalty worth USD 5 million to the US Securities and Exchange Commission to resolve a six-year-old investigation on account of embezzlement of funds by an employee.

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

Lupin Limited has received tentative approval from the US health regulator to sell Olmesartan medoximil tablets, used for treating high blood pressure, in the American market.

NTPC Limited has commissioned the Unit-1 of 800 MW of Kudgi Super Thermal Power Project on December 25.

L&T Construction, the construction arm of L&T Limited, has won orders worth Rs. 30.39 billion across its various business segments.

The board of directors of Gayatri Projects Limited, at a meeting held Dec 26, 2016, has approved sub-division of nominal value of the company's equity shares of Rs. 10 each to Rs. 2/share.

Panacea Biotec Limited has launched fully-liquid tetravalent vaccine easyfour-TT used for primary immunisation and as booster dose for diphtheria, tetanus, pertussis and Hib.

Jet Airways Limited announced the deployment of higher seating capacity aircraft on two domestic and an equal number of international routes from early next year amid growing passenger demand.

India Inc raised USD 488.49 million via External Commercial Borrowings and Rupee Denominated Bonds in November 2016.


Glenmark Pharmaceuticals has received final approval from the US health regulator USFDA for the sale of Tretinoin capsules, used in the treatment of leukemia.

JSW Energy said its board has given nod to raise funds up to Rs. 7.50 billion through issuance of redeemable non-convertible debentures by way of private placement.

ITC Ltd has raised the prices of two of its bestselling brands -- Gold Flake and Navy Cut.

Biocon Limited and Mylan said that the results of the HERITAGE study have been published in the Journal of the American Medical Association.

L&T Metro Rail Hyderabad Limited has thus far incurred a cumulative expenditure of Rs141.72bn on the elevated rail project.

Zydus Discovery DMCC, a research subsidiary of Cadila Healthcare, has been pulled up by the US FDA for misbranding Saroglitazar, its drug used in India to treat diabetic dyslipidemia and hypertriglyceridemia, in a promotional YouTube video.

ICICI Bank Limited , which had attempted to auction the asset with a built-up area of 41,000/sq ft twice before, expects to raise Rs. 2.40 billion from selling it off.

Hinduja Group flagship Ashok Leyland has launched Oyster staff bus in Saudi Arabia, the third product from India's second largest commercial vehicle manufacturer in the kingdom in six months.

State Bank of India rejected reports that Rs. 13 billion cash have been deposited in its various branches in Arunachal Pradesh after demonetisation saying no such deposits were found after minutely verifying the relevant records.

Zydus Cadila announced that its wholly-owned subsidiary, Zydus Healthcare Limited, has acquired six brands from American pharma player MSD and its subsidiaries in India.

Zydus Pharmaceuticals USA Inc is recalling over 16 thousand bottles of Bupropion Hydrochloride tablets manufactured by Cadila Healthcare Limited on account of failure to meet the desired dissolution specifications.

JK Tyre & Industries said its board has given approval to raise up to Rs. 10 billion by issuing securities.

JMC Projects (India) Limited said it has bagged new construction projects worth over Rs. 14.57 billion.

India Inc raised a whopping Rs. 386.45 billion in November through private placement of corporate debt bonds, a surge of 57% from the year-ago level, for business expansion and propping up working capital requirements.

Rajesh Exports has won a Rs. 9.29 billion export order from the United Arab Emirates.

Tata Steel Limited Special Economic Zone Ltd has sought more time from the Government for setting up a multi—product SEZ in Odisha.

Lupin Limited has received tentative approval from the US health regulator to market its Balasalazide Disodium tablets, used for the treatment of ulcerative colitis, in the American market.

Bharat Heavy Electricals Limited has successfully commissioned another 600mw coal-based thermal power plant in Telangana.

Reliance Industries Limited has announced the successful commissioning of the first phase of the paraxylene plant at its Jamnagar petrochemicals complex in Gujarat with capacity of 2.2mn tpa.



? TOP BANKING AND FINANCIAL NEWS OF THE WEEK
Plastic transactions have jumped around 25 per cent per month since November 8 in the wake of demonetisation and the government's aggressive push — led by Prime Minister Narendra Modi — for a predominantly cashless society. While card payments grew the most in organised retail, even small roadside merchants appeared to be shifting to digital payments.

State Bank of India, the country's largest lender, and a few other banks are expected to announce a cut in lending rates effective early January, said people with knowledge of the matter. That could give consumption a much-needed boost, having slumped in the wake of demonetisation as people are unwilling to spend on non-essential items amid a currency shortage.

Non-banking finance company Au Financiers today said it has received final approval of the Reserve Bank to start operations as small finance bank. "The company has now received final licence from Reserve Bank to establish and operate Small Finance Bank in India," the Jaipur-based NBFC said in a statement.

Bankers are back to dealing with the problem that worried them the most prior to November 8 — recovery of loans — which had taken a back seat since the demonetisation announcement. At a recent meeting led by State Bank of India, top bankers decided to send out a strong signal to defaulting companies that they would face stern action if they don't cooperate with recovery.

state Bank of India has rejected reports that Rs. 1,300 crore cash have been deposited in its various branches in Arunachal Pradesh after demonetisation saying no such deposits were found after minutely verifying the relevant records.

Based on initial estimates that as much as Rs. 4 lakh crore of undisclosed funds may have flown into bank accounts post-demonetisation, the tax department is gearing up to serve notices on those who cannot explain the source of the money. Data with the income tax department shows that till December 17, cash deposits of Rs. 80 lakh or more added up to nearly Rs 4 lakh crore, which flowed into 1.14 lakh bank accounts.

An internal government review based on feedback from banks suggests that the supply of currency from the Reserve Bank of India may not be adequate following demonetisation, officials said. The government is working with RBI and banks to try and remedy the situation as the end of the 50 days sought by Prime Minister Narendra Modi for the restoration of normalcy approaches.

The banking sector continues to face "significant" level of stress as the asset quality has deteriorated further with the banks' gross non-performing advances increasing to 9.1 per cent in September from 7.8 per cent in March, says the RBI. "The gross non-performing advances ratio of Scheduled Commercial Banks increased to 9.1 per cent from 7.8 per cent between March and September 2016, pushing the overall stressed advances ratio to 12.3 per cent from 11.5 per cent," the Financial Stability Report released by the RBI said today.

India's banking sector continues to face "significant" levels of stress but the financial system remains stable overall after moves to enhance transparency, Reserve Bank of India Governor Urjit Patel said in the twice-yearly Financial Stability Report. The report noted the gross non-performing advances ratio of commercial banks - a measure of stress in the sector - had increased to 9.1 percent in September from 7.8 percent in March, pushing the overall stressed assets ratio to 12.3 percent from 11.5 percent.

Armed with information about Rs. 7 lakh crore deposits made by some 60 lakh individuals and companies, the government today warned of hauling up anyone unable to show legal means saying mere depositing in bank does not convert black money into white. Top officials said while the government will not hound any genuine depositor, it will not hesitate to litigate at any forum to catch any black money holder trying to convert illegal wealth into white.

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