Equity Research Report Ways2Capital 16 January 2017

Benchmark Index Nifty completed its weekly target of 8288 and made high of 8307. Nifty showed profit booking on last day of the week and was down by 0.36% on last Friday. On Friday

Benchmark Index Nifty completed its weekly target of 8288 and made high of 8307. Nifty showed profit booking on last day of the week and was down by 0.36% on last Friday. On Friday, Nifty Spot opened at 8283 and made a high of 8306, achieving its target of 8288. Nifty then corrected for the day to make a low of 8233 and finally closed at 8247.85. Nifty has risen by 173 points from a low of 8133 to 8306 in the month of January. This rally was however not participated by the FIIs who have sold 1903 cr since January 2. The Equity benchmark Nifty has opened in a flat note on Monday trading Session up by 16 points at 8259 level. Major event eyed for the month of January is US President elect, Donald Trump's, joining the President's office is due on 20th Jan. The global Indices have been showing strength on speculations around Trump's policies. The Nifty Spot opened at 8259 and made a high of 8263 on Tuesday trading Session. Nifty then remained under pressure for the day to make a low of 8228 and finally closed at 8236. Nifty Closed Almost Flat After Trading Most Of The Days In Negative Tone; But Closed The Week More Than 2% Higher Amid Hopes Of Better Q3 Earnings & Poll Prospect Of BJP In UP Despite Demonetization Woes And Concerns Of FII/Capital Market Taxation Issues on Friday trading Session. As of now The Significance levels of Nifty is 8460-8520 is up side side and 8360-8290 is Down side.
BANK NIFTY : - Bank Nifty rallied 3.50% this week made high of 18966 and closed at 18912. All three high weighted banks SBI , HDFC Bank and ICICI bank rallied 2.03%, 3.25% and 3.83% respectively. Bank Nifty is the major mover of Indian Stock Market and would breach levels of 19900 soon. Bank Nifty would outperform other sectors and traders should continue to hold long positions in Bank Nifty. Bank Nifty needs to breach levels of 19500 on closing basis for the next bull run. Bank Nifty has also see a doji pattern on Friday trading Session that is a sign of reversal. So If Bank Nifty breaches levels of 18800 on the downside than we would see some downtrend for next week trading Session. Banking sector in terms of profits though Current account and Saving account targets were met and huge deposits were seen but loan disbursement was not in that ratio that adds profitability to the banks. But next quarter is expected to reap the benefits. Overall, trade is to buy at dips for now. Technically, Banking sector is in positive momentum and if closed above 19200 levels, it can see levels of 19500-19800 in upcoming days. The support for Bank Nifty is at 18734-18610-18533 and the resistance to the up move is at 19110-19376-19440 levels for next trading Week.


International rating agency Moody's has maintained positive outlook on India and said beyond the short-term negative impact on growth, demonetisation has the potential to raise government revenues and provide some fiscal space to support growth if required. "We maintained a positive outlook on India’s (Baa3 positive) rating in November 2016 based on our expectation that economic and institutional reforms will support continued robust growth," the agency said in its latest report on Asia Pacific. It said measures including relaxation of foreign investment restrictions, passage of the Goods and Services Tax, and advancement of a workable bankruptcy code have potential to stimulate private sector investment, which could lead to stable, balanced growth and gradually lower the government debt burden.

Citigroup lowers India's growth forecast to 6.8 per cent for 2016-17 - Global brokerage Citigroup has lowered India's growth forecast to 6.8 per cent for this fiscal from 7.2 per cent earlier, as cash crunch has affected pick-up in consumption while uncertainty around demonetisation may further delay any recovery in private investments. "Almost two months after the demonetisation decision was announced, there are early indications of the negative shock to growth," Citigroup said in a research note. It further said that the pick-up in consumption growth (both rural and urban), which was likely in the last two quarters of 2016-17, has not materialised because of cash crunch. Moreover, investment growth was very sluggish even in the second quarter and the uncertainty around demonetisation could further delay any recovery in private investment. "This could drag down 2016-17 GDP growth to 6.8 per cent, versus our previous forecast of 7.2 per cent," Citigroup said.

HSBC Pegs GDP growth at 6.3% on note ban pains - Foreign brokerage HSBC today projected sharply lower growth numbers for the year at 6.3 per cent, way lower than the official CSO estimate of 7.1 per cent for 2016-17. The Central Statistical Organisation had over the weekend released GDP estimates wherein it had pegged growth at 7.1 per cent for 2016-17, lower than 7.6 per cent in the previous fiscal year. The CSO said it did not calculate the impact of the note ban on economic growth. The HSBC report, penned by its chief India economist Pranjul Bhandari noted that the GDP projection "is not of much significance because the CSO has used inputs used for until September/October, which is well before the November 8 demonetisation". This is surprising, said the report, as "CSO had access to some post-demonetisation data for banking, it chose to stick to data till October. As such the CSO estimate does not carry the full extent of the drag to activity inflicted by demonetisation". As per the report, taking into account cash elasticity of GDP, economy is likely to grow at 6.3 per cent in 2016-17

Global growth edges up to 2.7% despite weak investment: World Bank - Global economic growth is forecast to accelerate moderately to 2.7 % in 2017 after a post-crisis low last year as obstacles to activity recede among emerging market and developing economy commodity exporters, while domestic demand remains solid among emerging and developing commodity importers, the World Bank said. Growth in advanced economies is expected to edge up to 1.8% in 2017, the World Bank’s January 2017 Global Economic Prospects report said. Fiscal stimulus in major economies—particularly in the United States—could generate faster domestic and global growth than projected, although rising trade protection could have adverse effects. Growth in emerging market and developing economies as a whole should pick up to 4.2% this year from 3.4% in the year just ended amid modestly rising commodity prices. Nevertheless, the outlook is clouded by uncertainty about policy direction in major economies. A protracted period of uncertainty could prolong the slow growth in investment that is holding back low, middle, and high income countries. “After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon,” World Bank Group President Jim Yong Kim said
India may leave tax treaty with Netherlands unchanged - India is unlikely to amend its tax treaty with the Netherlands as it did with Mauritius, Singapore and Cyprus and this could shape the investment strategy of foreign portfolio investors and private equity funds investing in India, said three people in the know. “There were talks to amend the tax treaty between India and Netherlands for last two years. Recently, we were told that as the Netherlands is not used for tax planning, The current treaty can prevail,” one of the persons said. Senior officials from Netherlands also confirmed the development. The officials were talking on the sidelines of Vibrant Gujarat, the annual investment jamboree of the state government. FPIs will see their returns from India getting impacted as a result of the amended Singapore, Mauritius and Cyprus tax treaties, and are already looking to shift their base to European jurisdictions like France, Spain and the Netherlands. Industry trackers say status quo ante in the India Netherlands treaty could mean many FPIs could prefer the Dutch route. Dutch officials insisted that investors rooting their investment through the country are not doing it as a tax planning exercise. “There is a 25% tax on book profit and on interest,” said an official

RBI seeks to make India Inc's foreign debt cheaper - The Reserve Bank of India has suggested a uniform rate of withholding tax for overseas borrowings, irrespective of type and currency. If the government agrees, this could lower the cost of overseas borrowing for Indian companies. Simplifying the levy will improve the ability of Indian companies to raise money, given that funds are expected to flow back to the US as interest rates rise there, experts said. Interest paid to a non-resident on foreign currency borrowing or debt is currently subject to 5-20% withholding tax, with the standard rate being 10%. The 5% rate is applied to some priority sectors such as infrastructure. “It is for the government to decide on a uniform rate, whether it is to be at 5% or 20%. This is still being discussed,” said an official aware of the deliberations. The government provides exemptions on money raised through an infrastructure debt fund or loans raised through long-term bonds. In case of loans, a 5% withholding tax is applicable if it has been approved by the central government and the money is borrowed between July 2012 and June 2017.

Private Equity firms attend meet with Finance Minister on FDIs - Concerned over dipping foreign direct investments , the finance ministry has invited a group of private equity investors to discuss ways to achieve higher growth, greater foreign inflows and a targeted growth in employment and infrastructure. Led by global PE fund KKR’s India head Sanjay Nayar, the meeting was also attended by Carlyle’s India head Devinjit Singh, Multiples PE’s Renuka Ramnath, Sandeep Singhal of Nexus and Madhav Dhar of GTI Capital. Setting up a higher growth agenda and finding ways for private equity to play a role in it was discussed at the meeting. It was a very positive move from the government as it did not involve the usual pre-budget tax sops discussions,” said an executive present at the meeting.

The Indian economy is expected to grow 7.1% in 2016-17, the Central Statistics Office said.

Tax anti-avoidance rule GAAR will kick in from April 1, 2017.

Foreign investors pulled out more than US$ 3 billion of the so-called 'hot money' from the Indian capital markets in 2016, making it the worst period in last eight years in terms of foreign investments.

Income Tax Department has been asked to scrutinise details and send notices to depositors of Rs 3-4 trillion on which tax could have been evaded.

The government plans to launch a second tranche of the CPSE ETF to raise as much as Rs 60 billion as a part of the 2016-17 disinvestment programme. The first tranche of the CPSE ETF was launched during 2013-14 to raise Rs. 30 billion.

India's telecom subscriber base crossed the 1.1 billion mark in October, registering highest customer addition of around 29 million in a month, driven by Reliance Jio.

The World Bank decelerated India’s growth for 2016-17 fiscal to a “still robust” 7% from its previous estimate of 7.6% due to demonetisation, but asserted that the country would regain

momentum in the following years with 7.6% and 7.8% growth.

Finance Minister reiterated that the Centre is still aiming to roll out the Goods and Services Tax regime from April 1 if all pending issues are sorted out.

Merchandise exports grew 5.72% year-on-year to USD 23.88 billion last month, while imports rose 0.46% year-on-year to USD 34.25 billion.

India's trade deficit narrowed to USD 10.37 billion in December from provisional USD 13 billion a month ago.

The Securities and Exchange Board of India announced reduction of 25% in the fee payable by brokers and also decided to amend regulations to enable the market participants to make payments to the regulator through digital mode.

India’s foreign exchange reserves declined by USD1.142 billion in the week ended January 7 to USD359.2bn. In the preceding week, the reserves had increased by USD 625.5 million.

The government is considering a proposal to increase foreign direct investment limit in print media sector to 49% from 26% at present.

India has imposed anti-dumping duties on colour-coated or pre-painted flat products of alloy or non-alloy steel imported into the country.

SpiceJet is expected to order at least 92 Boeing Co 737 jetliners, as it looks to bolster its presence in the world's fastest growing aerospace market.

Suzlon Group has announced its maiden order win of 105 MW wind power project from Hyderabad-based Axis Energy Group.

Following the approval from the USFDA for its generic version of Bendamustine Hydrochloride powder for injection, 25mg/vial and 100mg/vial (singe-dose vial), Natco Pharma will launch the drug on November 1, 2019 or earlier in the US market.

Piramal Enterprises has received board approval to enter into the housing finance market.

BEML announced the Ministry of Defence, had communicated 'in-principle' approval of the Cabinet Committee on Economic Affairs for strategic disinvestment of 26% equity shares in BEML out of Government of India's shareholding of 54.03%. The said shareholding would be sold to the strategic buyer(s) to be identified by the Government of India by following due procedure.

Aurobindo Pharma announced the acquisition of Generis Farmacêutica, which operates in Portugal, from Magnum Capital Partners for an all-cash deal of EUR 135 million Rs. 9.69 billion.

PVR Limited has informed Bombay Stock Exchange and the National Stock Exchange of India that the Delhi High Court has approved merger of two of its subsidiary companies with it, effective from April 1, 2015.

Pokarna Limited has announced Pokarna Engineered Stone Ltd, its wholly-owned subsidiary, has partnered Swedish home furnishing products retailer IKEA in India, to serve as its exclusive quartz surfaces supplier and installation partner.

Jaiprakash Power Ventures has sought its shareholders' nod, through postal and electronic ballot, to convert part of its outstanding debt of Rs30.58bn into 3.06bn equity shares.

Divis Laboratories has filed a detailed response within the permitted time to the observations made by the US health regulator after inspection of the drug firm’s manufacturing plant at Visakhapatnam in Andhra Pradesh.

Oil and Natural Gas Corporation Limited is close to finalising ways to complete its USD 800 million projects stuck midway after the contractor, Singapore’s Swiber Holdings Limited, collapsed last year following an oil slump.

A set of critical observations issued by Portuguese drug regulator on Granules India Limited Gagillapur unit near Hyderabad that manufactures pharmaceutical formulation intermediates and finished dosages.

Aurobindo Pharma has received final approval from the US health regulator for its Levetiracetam in Sodium Chloride injection used for the treatment of seizures with epilepsy.

The Centre is seeking a higher dividend on the back of Indian Oil Corporation, HPCL and BPCL reporting much higher profits in the first half of this fiscal, as well as improved earnings per share.

The government has clarified that the consumers will not bear any extra burden on their auto fuel bills.

Gujarat State Petroleum Corporation will buy entire output at a predetermined price from the KG Basin gas field that it has agreed to sell to Oil and Natural Gas Corp for $ 1 billion, a key provision that addressed gas pricing concerns of India’s largest crude producer and helped seal the deal.

JSW Cement is close to buying out the entire promoters' stake, including that of ACC Limited which owns 12.65 % equity in the Shiva Cement.

BHEL has bagged a Rs. 960 million order from Power Grid Corporation of India for augmentation of three extra high voltage sub-stations on a turnkey basis in Karnataka.

ABB India Limited won a $ 640 million contract for a 1,830-km (1,137-mile) power link in India to connect thermal and wind power plants with the country's growing urban areas.

JSW Energy Limited awaited long-term power purchase agreement with the Karnataka government has fallen through, forcing the company to look for short-term options.

US health regulator issued ‘’zero” 483 observations for the Hikal’s facility located at Bangalore.

New York Life International Holdings , a subsidiary of New York Life Insurance, will pick a 22.5% stake in Max Ventures and Industries for a consideration of Rs. 1.21billion.

Welspun Group said it would invest Rs. 40 billion on three large textile projects in Gujarat.

BISPL, an indirect subsidiary of BPCL, plans to raise USD 600 million long term funds from the international debt capital market.

The Suzlon Group has announced it has bagged 226.8 MW order from a leading independent power producer to be installed in Andhra Pradesh.

Lupin Limited has received final approval from the US health regulator to market its Desoximetasone cream, used for treatment of skin disease, in the American market.

MRF Limited said it will invest around Rs. 45 billion in a phased manner over a period of ten years to set up a manufacturing unit in Gujarat.

Royal Orchid Hotels has acquired Amartara Hospitality by buying additional 24.9% stake in it.

Biocon Limited and its US partner Mylan said the US Food and Drug Administration has accepted the biologics licence application for its biosimilar drug to treat breast cancers. An FDA would help the drug enter the lucrative US market.

IL&FS Transportation Networks in a joint venture with PJSC Kyivmetrobud has bagged the Rs. 3.71 billion Chennai Metro Rail Ltd contract for design validation and construction of underground stations.

NTPC board has approved an investment of Rs10.53bn for Dulanga coal mining project with rated production of 7mtpa.

The Delhi High Court directed Cairn India Limited to commence arbitration on an ongoing dispute with Videocon Industries Limited, Oil and Natural Gas Corporation and Ravva Oil, regarding the refund of payments made by Cairn on behalf of Videocon for the operation of the Ravva oilfield in the Krishna Godavari basin, within two weeks.

Private sector banks, including multinationals, are seeking to prevent wrongdoing by employees and keeping them under scrutiny after multiple reports of alleged fraud by employees following the November 8 demonetisation announcement that cancelled Rs. 500 and Rs. 1,000 notes.

Public sector lender Allahabad Bank slashed its benchmark lending rate by 0.85 per cent in line with market competition. The bank has reduced marginal cost of funds based lending rate by 0.85 per cent to 8.60 per cent for 1 year tenor, Allahabad Bank said in a statement.

Private sector Axis Bank Limited became the third lender in the country to announce usage of block chain solutions for its operations, after its peers ICICI Bank and Yes Bank.

Profits of Indian banks will continue to be hit by deteriorating asset quality in the next couple of years resulting in depressed return on equity, a report by global credit rating agency Moody’s together with its Indian affiliate ICRA said on Monday. Though the pace of asset quality deterioration will slow, it will still remain a key challenge for banks in the next 18 months, Moody’s and ICRA said.

Banking sector asset growth has slowed down in the past few years as bankers have turned cautious on asset quality concerns. But among various bank groups, private sector banks have managed to earn better returns on assets and equity compared to their public sector peers. private sector banks have been more successful in raising low-cost funds, that is demand deposits in their current and savings accounts, or CASA. Private banks’ CASA has gone up by close to 20 per cent in the last two years, while that of public sector banks rose by less than 10 per cent. Besides, they have been more successful in deploying the funds in more profitable lending activities.

The public sector banks will by March 2019 need equity worth Rs 1.7 lakh crore, which can turn out to be higher on an increased credit growth, a recent Assocham-Crisil joint study has revealed. "The public sector banks need equity of Rs 1.7 lakh crore by March 2019, which is a tall order considering that banks have so far contributed to nearly half of the debt funding needed in the infrastructure space," noted the study.

State Bank of India will take the lead among state-run lenders to launch branch less banking. The latest launch from the lender - SBI Digi Bank will have a financial superstore, a market place and end to end digitisation for all products and services.

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