Equity Research Report Ways2Capital 15 May 2017

On last trading session of previous week, Nifty 50 opened at 9375, made an all-time high of 9377 and closed at 9285 after taking support of its weekly low of 9270.

On last trading session of previous week, Nifty 50 opened at 9375, made an all-time high of 9377 and closed at 9285 after taking support of its weekly low of 9270. Profit booking has been observed at higher levels since the US Jobs report and French Elections result were due. With both the events over, Nifty was continue to hover at higher levels. On Monday trading session benchmark index Nifty opened at 9311, made a high of 9339 and closed at 9314. The market started the week on a Positive note. Banks and Cement were the Sector which Supported Nifty to hold Above 9300. Sentiments were bullish with Finance Minister Arun Jaitley ruling out any surprise in the tax rate in the Goods and Services Tax that is proposed to be rolled out on July 1 and also Asserting that there will be no cascading in Goods and Commodities, Which can even see tax rates coming down a little. The markets were remained flat as the French election euphoria faded and a lack of fresh catalysts kept investors on the sidelines. Apart from mixed Q4 earnings, Indian market may also take some support from IMD’s forecast comments that monsoon may be above normal this year as threat of El-Nino is receding quite significantly. Time and Price Action Suggest that, Nifty need to sustain over 9400 area for the short term target of 9500-9550 area and mid-term target of 9655-9700 zone. otherwise market may correct to some extent towards 9300-9240 area in the Upcoming week.
BANK NIFTY : - Bank Nifty - Bank Nifty last trading session of previous week made an all time high of 22854 and thereafter made a low of 22514. The Index finally closed at 22605. Index started this week on positive note up by 74 points or 0.25 per cent. Bank Nifty made an all time high of 22978, but faced resistance at higher levels and closed at 22818. Axis bank was down by 2.08%and Yes bank down by 1.24%, were among the losers in the Banking Index. Now All eyes may be also on the Public Sector Banks, more details of NPA reforms/resolution mechanism. As of now Banks may have to permanently waive off around Rs. 2 trillion, which may be a significant amount for the Public Sector Banks and it may not be so easy to raise further capitals from the market. In reality, Reserve Bank of India is always empowered to enforce any steps for the banks for resolution of the Non-Performing Assets but the latest amendment may also ensure that, there will be no further investigation of any wrong doing by the banks from any Govt investigative agencies or other dept because it will be a Multilayer process, involving all the stakeholders. So there may be considerable delay in actual resolution even after the reorganization of the NPA and the buyers of the stressed assets may also be very difficult to find with an appropriate price tag. As long as the structural problems for the NPA are not addressed properly, then it may be a tough task for the Indian banks for an effective resolution. From This level. Bank Nifty need to sustain over 22600 area for further rally towards 22875-23100. On the flip side, sustaining below 22550 area, Bank Nifty may fall towards 22825-22700 area in the near term


NSE - WEEKLY NEWS LETTERS
? TOP NEWS OF THE WEEK

Reserve Bank of India and Indian Bank’s Association to select cases for Resolution of NPAs - The Indian economy will grow 7.5 per cent next year by virtue of consumption revival and higher infrastructure spending, says a report by the UN Economic and Social Commission for Asia and the Pacific. For 2017, India's economic growth is projected stable at 7.1 per cent before catapulting to 7.5 per cent going into the next year, the regional development arm of the the United Nations said. This forecast is "underpinned by higher private and public consumption and increased infrastructure spending," the report said. The International Monetary Fund last month projected the India's growth at 7.2 per cent in the fiscal 2017-18 and at 7.7 per cent for the next financial year.

India to grow at 7.7 per cent in 2018-19: IMF - India's growth is expected to rebound to 7.2 per cent in the 2017-18 fiscal and 7.7 per cent in 2018-19 after disruptions caused by demonetisation, the IMF said , while recommending the removal of long-standing structural bottlenecks to enhance market efficiency. The temporary disruptions caused by cash shortages accompanying the currency exchange initiative are expected to gradually dissipate in 2017 as cash shortages ease, the International Monetary Fund said in its regional economic outlook. Such disruptions would also be offset by tailwinds from a favourable monsoon season and continued progress in resolving supply-side bottlenecks, the IMF said. The investment recovery is expected to remain modest and uneven across sectors as deleveraging takes place and industrial capacity Utilisation picks up, it noted. "In India, growth is projected to rebound to 7.2 per cent in FY 2017-18 and further to 7.7 per cent in FY 2018-19," the IMF said.

Remonetisation to expand tax base, says Arun Jaitley - Finance Minister Arun Jaitley said Remonetisation, following the world's largest note ban, has been substantially completed and the move will result in expansion of the tax base in the country. In November 2016, the government junked 500 and 1,000 rupee notes, which made up 86.4 per cent of the country's circulating currency. As demonetised currency was allowed to be deposited in bank accounts or exchanged for new currency, the government introduced new 2,000 and 500 rupee notes. "India was not a tax compliant society. A very large part of the economy was Cash-Centric. This problem needed to be addressed. It requires a lot of political courage to resolve the problem," he said at an Interactive Session on 'India's Business Environment: Reforms and The Prime Minister Narenda Modi on November 8 last year took the unprecedented decision to demonetise the high denomination currency, which was the largest currency replacement anywhere in the world. "Eighty six per cent of India's currency was replaced within a matter of few months. The remonetisation got substantially completed," he said.

The USD $ 1.3 trillion housing boom set to be India's next growth driver - In a country where slums sit cheek-by-jowl next to palatial luxury - including what’s been reported as the world’s most expensive private home India’s unhoused may soon become a more potent economic growth driver. Prime Minister Narendra Modi’s drive to bring homes to the country’s 1.3 billion people, rising incomes and the best affordability in two decades will unleash a $1.3 trillion wave of investment in housing over the next seven years, according to CLSA India Pvt. The firm expects 60 million new homes to be built between 2018 and 2024, creating about 2 million jobs annually and giving a tailwind of as much as 75 basis points to India’s gross domestic product. The volume of social and affordable housing will rise almost 70 percent to 10.5 million annually by 2024, exceeding the 33 percent increase in the premium market.

Government open to providing more funds for banks' recapitalisation: Arun Jaitley - Finance Minister Arun Jaitley has said the government is open to providing more funds for banks’ recapitalisation and paring its stake once their health improves. Where more funds are required from the government, we will be quite willing to look at that. But once the health of the banks improve, we have also announced that the government will be willing to bring down its equity in the banks to 52 per cent and that can be used for banks' recapitalisation,” said Jaitley, who is in Japan to attend some meetings. The government has allocated Rs.10,000 crore for recapitalisation of Non-Performing asset-laden public sector banks for 2017-18. It had given Rs. 25,000 crore for the purpose in 2015-16 and the same amount again in 2016-17. Another Rs.10,000 crore will be infused in 2018-19. Jaitley said the government is hopeful that the NPA problem, which is limited to a set of accounts, will get resolved after the promulgation of an ordinance.

NPA ordinance credit positive, but more steps needed: Moody's - The government's ordinance on bad loans resolution is credit positive, but does not address the key structural issues plaguing the banking sector, ratings agency Moody's said. Last week, the Government through an ordinance provided the Reserve Bank with greater powers to intervene in the Resolution of Non-Performing loans. Later, the RBI lowered the threshold for consensus required among lenders in Joint Lenders' Forum to approve resolution proposals. These measures improve the efficacy of NPL resolution mechanisms and are a credit positive. However, they do not address the lack of capital at the state-owned banks that has prevented them from writing down NPLs to realistic levels," the global ratings agency said in a statement.

April retail inflation seen easing to three-month low - Consumer inflation is expected to have eased to a three-month low in April, helped by smaller rises in food prices, but with a summer rebound in prospect the Reserve Bank of India is likely to keep interest rates on hold. The RBI's Monetary Policy Committee , which has a mid-term inflation target of 4 per cent, maintained its hawkish stance on inflation, with most members expressing concern over upside risks to core inflation. Consumer prices, the RBI's main policy target, likely rose 3.49 per cent in April, according to a Reuters poll of economists, compared with an increase of 3.81 per cent in March. Data on the consumer price index, wholesale price index and industrial output will be released around 1200 GMT Friday. Economists expect the central bank to keep its policy rate unchanged this year.



? TOP ECONOMY NEWS
Armed with additional legislative powers, the RBI will soon start identifying cases for resolution of non-performing assets in consultation with IBA for necessary action, a senior government official said. The government will not get into individual cases as it has already given authorisation to the banking regulator RBI to resolve NPA cases through the ordinance passed last week, the finance ministry official said.

India's move to strengthen the hand of its central bank will help it push reluctant lenders towards write downs and errant borrowers into insolvency, bankers said, but the country is far from drawing a line under its $150 billion of sour debts. India's bad loan problem is choking off new credit and dampening economic growth, and the government of Prime Minister Narendra Modi knows it needs to act.

The government will release on Friday the new series of Index of Industrial Production as well as Wholesale Price Index, with 2011-12 as the base year, so as to map economic activities more accurately. The monthly WPI for April under the new series will be released on May 12 instead of May 15, the Commerce Ministry said in a statement.

Aimed at generating more jobs in a technology-driven environment which is replacing the labour at a swift pace, the government is set to roll out a new manufacturing policy by September, said the Commerce & Industry Minister Nirmala Sitharaman, reported a national news agency. “India’s manufacturing policy will soon be overhauled with the objective of creating more jobs in an environment where technology is rapidly replacing labour,” said the Minister.

Six months after the announcement of demonetisation by Prime Minister Narendra Modi, the RBI has declined to share details of the note ban process, saying it would be detrimental to the country's economic interests. Replying to an RTI query, the central bank said disclosing such details may impede future economic or fiscal policies of Government of India.The Reserve Bank of India was asked to provide a copy of the minutes of the meetings held in its office during which the decision to demonetise Rs. 500 and Rs. 1,000 notes was taken.

India is likely to witness above average monsoon rainfall this year as doubts over the El Nino weather situation has settled down in the past few weeks due to which higher farm output seems positive, mentioned a national news portal. We assessed 96% based on the climatological conditions up to March. Now, conditions are becoming favourable for an improvement over our April 18 estimate" said K.J. Ramesh director general of the India Meteorological Department while speaking to a news agency.

The foreign institutional investors started pumping in huge liquidity in the Thursday’s trading session. It can be attributed as the reason for the strong upward rally of Nifty, Sensex and Midcap stocks. The strong positivity floating in the market may attract more FII inflow and push the markets to new highs. The domestic institutional investors enjoyed the high levels of markets and booked their profits on Thursday.

The Reserve Bank today extended the last date for companies undertaking billing business under the Bharat Bill Payment System by seven months to December 31, 2017. This extension is in view of the difficulties expressed by various entities in meeting the deadline," it added.
India can clock a GDP growth of over 7.5 per cent in the fiscal 2017-18 and the country's macro-economic fundamentals, including fiscal deficit and inflation, are all "very sound", according to Finance Secretary Ashok Lavasa.

The Indian Meteorological Department has forecasted above average rainfall for June to September monsoon season which is vital for the country's farmland as concerns over the El Nino weather condition are very less. The stocks of Indian companies which are dependent on monsoon have been trading on a positive note since then, mentioned a national news.


? TOP CORPORATE NEWS -
Bharti Airtel Limited Q4FY17 consolidated results for the quarter came in mixed versus street estimates. Revenue for the quarter came in 3.1 % lower than the estimated figure of Rs 22647 Cr. EBITDA for the quarter came in 1.1% higher than the estimated figure of Rs 7775 Cr. And lastly, net profit for the quarter came in 10.6% higher than the estimated figure of Rs 425 Cr.

Capitalising on parent company Volkswagen’s partnership with Tata Motors, Czech based Skoda is set to strengthen its presence in the compact vehicles segment with Tata Motors. The company is seeking to make a comeback in the high volume small car segment, with the launch of mini-SUV and entry-level Sedan. The vehicles to be manufactured in joint product strategy with Tata Motors, are likely to hit the roads in 2019.

India’s leading financing enterprise, Bajaj Finance Limited is likely to raise funds worth USD 150 million or Rs. 1000 crore from a member of the World Bank Group, International Finance Corporation. In an announcement, IFC confirmed that it will subscribe to Bajaj Finance’s non-convertible debentures in order to on-lend to micro, small and medium enterprises.

Havells India Limited, a leading fast moving electrical goods company on Monday informed of successfully completing the acquisition of consumer durable business division of Lloyd Electric and Engineering Limited. The company has carried out the acquisition at an enterprise value of Rs. 1600 crores on a debt free, cash free basis, as per exchange filing.

Union Bank of India NII for the current quarter came in at Rs. 2387 crore up 14.5% Y-o-Y.
Gross Non-Performing Asset for the quarter stood at 11.17% as against 8.7% in corresponding quarter of last year. Gross NPA during the quarter stood at Rs 33712.28 crore as against Rs. 24170.89 crore in corresponding quarter of last year. capital adequacy ratio for the period was 11.79%. Provision for the period jumped by 56.2% y-o-y to Rs. 2,444. The company reported a 12.6% y-o-y increase in net profit to reach at Rs 108 crore.


ABB India Limited standalone revenue for the quarter came in at Rs. 2169 crore, registering 8.2% y-o-y increase. This was primarily driven by 12.9% y-o-y growth in the revenue of Power Grids business. EBITDA for the quarter stood flat at Rs. 171 crore versus Rs. 173 crore in corresponding quarter of last year, with a corresponding margin contraction of 75 bps. EBITDA margin for the quarter stood at 7.9%. The PAT for the quarter came in at Rs. 88.2 crore, yoy increase of 3.2%. This was due to decline in finance cost by 24.3% yoy.

The state-owned Oil and Natural Gas Corporation overseas arm, ONGC Videsh Limited, has registered a record output of 12.57 million tonnes of crude oil and equivalent gas from its assets overseas in 2016-17.

Bharti Infratel Limited consolidated revenue for the quarter came in at Rs. 3520 crore, registering 10.6% y-o-y increase. EBITDA for the quarter rose by 7.9% y-o-y to Rs. 1585 crore with a corresponding margin contraction of 114 bps. EBITDA margin for the quarter stood at 45%. The PAT for the quarter came in at Rs. 597 crore, y-o-y decline of 16.9%. Looking at full year numbers, we see that revenue for FY17 increased 8.9% yoy to Rs. 13,424 crore and EBITDA rose 9.1% yoy to Rs. 5942 crore. The company reported net profit of Rs. 2747 crore, up by 22.2% yoy.

Natco Pharma Limited, on Monday, 08 May 2017, announced that it has launched a generic version of sofosbuvir 400 mg / velpatasvir 100 mg fixed dose combination in India. Sofosbuvir 400 mg / velpatasvir 100 mg fixed dose combination is sold by Gilead Sciences, Inc. globally, under the brand name Epclusa, which is the first all-oral, pan-genotypic, single tablet regimen for the treatment of adults with genotype 1-6 chronic hepatitis C virus infection, said Natco Pharma in its exchange filing on Monday.

Ramky Infrastructure Limited has been awarded a project worth Rs. 336.60 Crores in the State of Jharkhand by the National Highway Authority of India on EPC Contract, said Ramky Infra in its BSE filing on Monday, 08 May 2017.

Tata Chemicals Limited on Wednesday in its filing said that on May 9, the company has signed a business transfer agreement with Unnati Inorganics Private Limited to acquire their undertaking precipitated silica operation, on a slump basis.

Jubilant Industries Limited in its filing to the exchanges said that the National Green Tribunal has allowed two units of the group to resume operations at Gajraula, Uttar Pradesh after they complied with its directions.

Cadila Healthcare Limited, on Wednesday, 10 May 2017, in its exchange filing announced that the United States Court of Appeals for the Federal Circuit has affirmed the judgement in favour of its US subsidiary, Zydus Pharmaceuticals Inc., holding that its proposed generic version of Lialda (mesalamine) does not infringe US patent No 6,773,720.

HCL Technologies Limited, an Indian multinational IT services company, during early morning hours of Thursday, announced a buyback programme of Rs. 3500 crore.

The Hero Motocorp Limited Standalone revenue for the quarter came in at Rs. 6915 crore, registering 7.9 % Y-o-Y decline. EBITDA for the quarter fell by 19.5 % Y-o-Y to Rs. 957 crore with a corresponding margin contraction of 200 bps. EBITDA margin for the quarter stood at 13.8 %. This Margin contraction was aided by 169 % Y-o-Y increase In Inventory. The Profit After Tax for the quarter came in at Rs. 717.7 crore Y-o-Y decline of 13.8 %.

Larsen & Toubro has entered into a contract with the Ministry of Defence for the supply of 100 units of 155mm/ 52 calibre tracked self-propelled gun systems to the Indian Army. L&T in its exchange filing on Friday said that the contract is valued at about Rs 4500 Crore and it is the largest order placed by the Defence Ministry on an Indian Private Company.

Siemens Limited is trading 1417 and may go up side till 1459.. at standalone revenue for the quarter came in at Rs. 2929 crore, registering 5.2% yoy increase. EBITDA for the quarter fell by 13.4% yoy to Rs. 279 crore with a corresponding margin contraction of 205 bps. EBITDA margin for the quarter stood at 9.5%. This margin contraction was led by 27.7% yoy increase in cost of material consumed. Adjusted PAT for the quarter came in at Rs. 175 crore, yoy decline of 6.9%.

Biocon Limited on Wednesday said it has received US FDA observations on Form 483 for its Bengaluru facility. According to a Biocon spokesperson the observations on Form 483 is a standard outcome of any audit. A leading news portal reported that the company has already responded to US FDA on all observations of the recent audit within stipulated timelines.


Zee Entertainment Enterprises Limited consolidated revenue for the quarter came in at Rs. 1583 crore, registering 1.5% yoy increase. This was driven by increase in volume growth of subscription revenue, advertising revenue and domestic advertising revenue by 10%, 9.2% and 8.1% yoy respectively.

IL&FS Engineering and Construction Company on Friday announced that it has received Letter of Intents amounting to Rs 559.35 crore.
Asian Paints Limited on Thursday reported 10.14% rise in consolidated net profit at Rs 479.61 crore for the quarter ended March 31, 2017, against Rs 435.47 crore in the corresponding quarter last year. Total income of the company jumped 9.39% on a year-on-year basis to Rs 4,486.34 crore for the quarter under review. It had posted total income of Rs 4,101.41 crore in the same quarter last year.



? TOP BANKING AND FINANCIAL NEWS OF THE WEEK
The government will dilute its stake in state-run banks to 52 per cent once the health of the lenders improve and the money will be used to inject capital in them, Finance Minister Arun Jaitley said. He hoped for a resolution to the burgeoning bad loan problem following the government empowering the Reserve Bank of India to order lenders initiate insolvency proceedings against defaulters and create committees to advise banks on recovering Non-Performing loans.

Hopeful of resolving the problem of stressed assets of banks with the newly promulgated ordinance that permits the central bank to recover bad loans, finance minister Arun Jaitley on Monday said the government will now wait for a few months for results to show.

The government's all out war against Non-Performing Asset will help in cleaning balance sheets of state- owned banks and expedite fund raising via markets to meet the global Basel III capital adequacy norms, an official said. "As NPAs get resolved, the balance sheets of the public sector banks will get better, improving the valuation of their stocks," a senior Finance Ministry official said.


The IDBI Bank Limited has been put under the scanner by the Reserve Bank of India. The apex bank also initiated a Prompt Corrective Action against it. The move that will place various restrictions on the lender including on fresh loans and dividend distribution. This is to inform that RBI has initiated Prompt Corrective Action for IDBI Bank in view of high net NPA and negative return on assets IDBI bank said in its Exchange filing post market hours on Tuesday.

The new ordinance that empowers RBI to nudge banks to deal with stressed assets will improve transparency and provide higher assurance when dealing with bad loans, said Arundhati Bhattacharya, chairman, State Bank of India .

Banks can initiate loan recovery proceedings without waiting for an account to be formally classified as non-performing, as the latest amendments to banking rules allow for faster resolution of their bad debt problem, a senior government official said.

The Ministry of Finance should be able to infuse $ 27 billion of capital into PSU banks by 2019 without breaching its fiscal deficit target, says a Bank of America Merrill Lynch report. According to the global financial services major, PSU bank capital risks are overdone and government is fully incentivised to address their asset quality to support recovery.



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