Equity Research Report Ways2Capital 29 May 2017

In the last two days of trading session of last week, FII’s have build short positions for 108617 contract in Options segment.

In the last two days of trading session of last week, FII’s have build short positions for 108617 contract in Options segment. In cash segment both FII’s and DII’s remain net seller for 102 crore in last two trading sessions. Indian benchmark Index Nifty 50 erased early gains to end flat on Friday as Political turmoil deepens in Washington and the Brazilian political crisis raises concern ahead of the weekend. The Nifty Index traded above 9500 levels after the government finalized Goods and Services Tax rates for substantial items, clearing a major hurdle towards July 1 rollout of the country's biggest indirect reform to create one unified market. But the Index was not able to maintain its momentum and came down to 9400. Indian Market opened around 9480; gap up by 53 points following mixed global cues and GST & earnings optimism. Overnight, US market closed in positive primarily on the strength in oil & defence sectors, it made a high of 9499 and closed at 9438 after making a low of 9428. Selling pressure was witnessed after a gap up opening. Last week Nifty showed profit booking from its all time high level of 9533 and closed at 9428 after making a low of 9391. On Wednesday trading session the Indian market suddenly came into selling spree as soon as the report of Pak fighter jets hovering around LOC/Siachen flashed in the media. Also there was report that PAF has activated all its forward air force base and market swiftly fall to the day low of 9340 from around 9430 in a 90 point swing. On Friday trading session there was a 3rd anniversary (official) of Modinomics, Nifty has already rallied quite a lot on Thursday itself on the back of better June monsoon prediction by the Skymet, Index has to sustain over 9550 level for 9600-9680 mile stone. As per various experts, a complex GST, tepid private investments, huge banking NPA, unemployment may be some of the question marks in this 3rd year of anniversary despite some green shoots in the economy and stable democracy. Looking ahead, apart from ongoing Q4 results, Indian market may also give more focus on the GST as 1st July roll out day is now a reality as per the Government stake holders. But, the Govt should come clear as there are twin issues of IT system and awareness/lack of preparedness among tax payers/GST stake holders with barely four weeks left for the implementation. Time and Price action Suggest that Nifty need to Sustain over 9550 for Further Up move toward 9600-9640, On the other side sustaining below 9550 may drag the index towards 9480-9360.
BANK NIFTY : - Bank Nifty also opened in a Positive note on Monday trading session Up by 78 points or 0.34 per cent at 22874. Bank Nifty traded weak throughout the day. The Index made a high of 22918 and closed at 22653 after making a low 22638. As of Now Market may now focus more on the Fine prints of Non-Performing Assets ordinance/Latest Reserve Bank of India directive and Effect of Goods and Services Tax on the Economy. Bank Nifty traded weak for whole day on Wednesday trading session. The index made a high of 22673 and closed at 22536 after making a low 22470. Bank Nifty has closed below its 2 week low of 22578. Distressed state-run banks are looking to sell assets, especially non-core businesses, to shore up capital. And for many, the starting point is their holdings in various joint ventures in the insurance sector. The idea sounds good. But it has one big problem: Very few PSU banks are as lucky for that matter, when it comes to monetising investments in life insurance ventures, because most banks have remained marginal players in the insurance industry with negligible market share. The Bank Nifty to trade in Positive bias in next week trading sessions. The Crucial levels for Index is 23415-23569 is Up side and 23099-22937 is Down side.


GST may not raise revenues 'significantly' in next few years: Fitch Ratings - The Goods and Services Tax reform, being touted as India's biggest reform that will come into effect from July 1, may not boost revenues "significantly" in the next few years, but can work in the medium term, said global rating agency Fitch Ratings. We do not expect it will lead to significantly higher government revenues in the coming few years," Thomas Rookmaaker, Director, Sovereigns and Supranationals Group, Fitch Ratings, Said. He, however, pointed out that it may indirectly boost revenues in the medium term through higher GDP growth and more transparency. Acknowledging GST as "an important reform being implemented", Rookmaaker said it will facilitate trade within India and reduce transaction costs. As per the Fitch Report.

Centre assessing capital needs of state-run banks - The government is carrying out a detailed assessment of the capital requirements of state-run lenders, a move that comes after some of the public sector banks reported significant losses in the last quarter of 2016-17. A senior finance ministry official said the government is in talks with all lenders and the new “turnaround agreement” it has signed with them is expected to significantly improve their performance. We are holding discussions and an assessment is being done on the steps the banks can take to raise capital, including sale of non-core assets,” said the official.

India Inc's foreign investment dips 44% to USD 3.15 billion in April - India Inc's investment in overseas ventures fell 44 per cent year-on-year to USD 3.15 billion in the first month of the current fiscal. In April 2016, Indian firms had invested USD 5.61 billion overseas. However, investments on month-on-month basis in April were higher than the March's USD 2.99 billion, showed the data from Reserve Bank. Of the total outward direct investments during the month, USD 1.43 billion was through equities. Rest USD 1.01 billion was in the form loans and USD 709.68 million as part of issuance of guarantee.

Q4 Gross Value Added growth in India to drop to 6.6%: D&B - Weak investment activity, as reflected in the slow output growth in capital goods and infrastructure, is likely to depress Indian gross value added growth to around 6.6 per cent in the fourth quarter ended March, US consultants Dun & Bradstreet said on Tuesday. "GVA in Q4 FY17 to remain subdued at 6.6 per cent year-on-year," D&B said in a report on the Indian economy. GVA, as opposed to gross domestic product, is regarded as a better reflection of productivity, as it excludes the indirect taxes. "Weak investment activity as reflected in the subdued capital goods and infrastructure/construction sector output growth is likely to restrain growth," D&B expects the Index of Industrial Production to remain weak and grow by only around 3-3.5 per cent during April 2017. "The transition to GST is also likely to create some disruption and impact the short-term sales volume across businesses," According to D&B, the excess liquidity in the banking system post-demonetisation along with elevated global commodity prices and increase in house rent allowance under the 7th Pay Commission would continue to provide upward pressure to prices."The traction in the capital goods sector remains elusive and the downtrend in the intermediate goods and consumer goods sector poses concern on the pace of revival of the IIP during the course of the year," said D&B Lead Economist Arun Singh.

GST will help lower food inflation by 2 per cent: Radhamohan Singh - India has said that the implementation of the Goods and Services Tax will benefit farmers and reduce food inflation, as grain and milk would remain exempted under the new regime that would put in place a single levy instead of multiple taxes. With the GST coming, inflation will come down by 2%,” federal farm minister Radhamohan Singh said in New Delhi. There has been no major increase in tax slabs for agriculture produce, and it was beneficial for both farmers and consumers, Singh said. Currently, both the tax-payer and the consumer were paying levies to both the state and the Centre on the sale of produce, leading to increase in the prices of commodities, Singh said.

Moody's makes Modi smile with China's first rating downgrade in 30 years - Has ratings firm Moody's Investors Services just given Prime Minister Narendra Modi a chance to drive the Indian economy faster? Moody's downgraded China's long-term local and foreign currency issuer ratings today by one notch to an A1 rating from AA3, citing expectations that the financial strength of the world's second biggest economy would erode in the coming years. "The downgrade reflects Moody's expectation that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows," Moody's said. Rating downgrade will raise borrowing costs for China.

India retains world's highest FDI recipient crown: Report - India retained its numero uno position as the world's top most greenfield FDI investment destination for the second consecutive year, attracting USD 62.3 billion in 2016, says a report. India has remained ahead of China and the US as far as FDI inflows were concerned in the last year, said the FDI Report 2017 compiled by fDi Intelligence, a division of The Financial Times Ltd. FDI by capital investment saw an increase of 2 per cent to USD 62.3 billion in 809 projects during 2016 in India. "India managed to keep the crown as the world's number one location for greenfield capital investment for the second year running - ahead of China and the US," the report said.

Growth may slowdown in Q4 of FY17; new WPI, IIP numbers may improve numbers: Icra - India’s economic growth may slow down to 7.1% in terms of the GDP or gross domestic product and 6.9% % in terms of GVA or gross value added during the fourth quarter of FY’17 ending March’17, according to ratings firm Icra. But the numbers could improve once the government incorporates the new WPI-wholesale price index and the IIP-Index of industrial production while calculating the growth numbers it said. Over a period of time the economy is also expected gain out of remonetisation. The growth will be driven by a strong growth in the service sector which accounts for a bulk of the economic output. “Our forecast of a 6.9% GVA expansion in Q4 FY2017 builds in a healthy 8.8% YoY growth in services, and moderate rise of 5.4% and 4.0%, respectively, in industry and agriculture, forestry and fishing,” said Aditi Nayar, principal economist, Icra.

The Indian Meteorological Department had earlier predicted that the monsoon will arrive on May 30, but the seasonal rainfall is likely to arrive a day earlier, reported a news agency. The conditions look favourable for the arrival of the monsoon beforehand, said Ministry of Earth Sciences Secretary M Rajeevan. "The date announced for the onset of the monsoon is May 30, but there is a possibility that it may hit Kerala a day before that," Rajeevan said.

Ashok Lavasa, Finance Secretary, Government of India, interacted with renowned US-based funds and global institutional investors with interests in the banking, financial services, and insurance sector at the day-long India Financial Conference held recently in New York City.

The Goods and Services Tax is likely to have minimal direct impact on the consumer price index basket, said a report by Morgan Stanley. This is because most of the tax rates for the items in the CPI basket are likely to be taxed at a lower rate under the GST as compared to the existing levy, it said.

Assocham, one of the apex trade associations of the country, has said that the GST roll-out from July 1 will be a challenge for the industry. The industry body has said that the government should act softly in terms of the penal provisions for a couple of quarters as it will help them to comply with the new tax regime. The GST law provides for as many as 21 kinds of penalties for various offences. Short payment will attract a penalty of 10% of the tax due subject to a minimum of Rs 10,000.

Telecom Regulatory Authority of India has stood firm on its opinion to the Department of Telecom for imposing penalties of Rs. 3,050 crore on Bharti Airtel, Idea Cellular and Vodafone India.
The TRAI while clearing its stand, stated that this was well within their powers to suggest the penalisation as the incumbents had violated the TRAI regulations and licence norms.

The goods and services tax on the economy class air travel has been finalised at 5%, which is 100 bps lower than the existing service tax rate. However, GST on business class air travel has been announced to be 12%, which is 3% more than the existing service tax rate.

Sun Pharmaceuticals Industries Limited, has announced the US FDA acceptance of the Biologics License Application for tildrakizumab. The FDA filing acceptance follows the acceptance of the regulatory filing of tildrakizumab by the European Medicines Agency in March 2017.

Public sector company, GAIL India Limited has come up with the investment plan of Rs. 30000 Crore for expansion, Out of Rs. 30000 Crore, Rs. 8000 Crore are likely to be used for coal gasification, Rs. 1500 Crore in city gas and Rs. 1000 Crore in breakwater water project, according to source.

Hindustan Construction Company Limited is trading lower by over 3% at Rs. 39.85 per share as of 0950 hours on Wednesday. The stock touched its intraday low of Rs 39.7 per share as of 0957 hours. The fall in the share price can be attributed to the news related to the company’s arm Lavasa Corporation Limited.

Tata Motors's Limited Q4FY17 consolidated results for the quarter came in mixed versus street estimates. Revenue for the quarter came in 6.8 % lower than the estimated figure of Rs. 82866 crore. EBITDA for the quarter came in 69.6 % higher than the estimate d figure of Rs. 9853 crore. And lastly, net profit for the quarter came in 25.6 % higher than the estimated figure of Rs. 3502 crore. Tata Motors consolidated revenue for the quarter came in at Rs. 77217 crore, registering 2.9% yoy decline.

NCC Limited standalone revenue for the quarter came in at Rs. 2139 crore, registering 12.8% y-o-y decline. EBITDA for the quarter fell by 16.8% y-o-y to Rs. 174 crore with a corresponding margin contraction of 40 bps. EBITDA margin for the quarter stood at 8.1%. The PAT for the quarter came in at Rs. 63.7 crore, y-o-y decline of 26.1%. Looking at the full year numbers, we see that revenue for FY17 declined 5.2% yoy to Rs. 7892 crore and EBITDA for the period decreased 7.1% y-o-y to Rs. 685 crore. Company reported net profit of Rs.226 crore, down 6.1% y-o-y.

The Suzlon Energy recently reported its Q4FY17 earnings wherein the consolidated revenue for the quarter came in at Rs. 4992.6 crore, registering 55.1% yoy increase. This was primarily driven by 44% yoy increase in revenues from wind turbine generator business.

Jindal Steel & Power Limited reported a consolidated net loss of Rs. 98 crores for the quarter ended March 31, 2017, as against a consolidated net loss of Rs. 637 crores for the same quarter in the previous year, as per exchange filling.

Sun Pharmaceuticals Industries Limited on Tuesday declined around 8% in the morning session after its overseas arm Taro Pharmaceuticals Industries Ltd reported weak earnings in the March quarter, reported.

Bharat Heavy Electricals Limited, has commenced its operations at its 1,980-super critical thermal power plant in Uttar Pradesh, reported a leading business channel on Tuesday.

Suven Life Sciences Limited initiated their NCESUVN-911, a potent, selective, brain penetrant and orally active, novel chemical entity intended for the treatment of major depressive disorder has initiated Phase 1 development and first dosing under US IND 133850 SUVN-911 a neuronal nicotinic alpha-4-beta-2 receptor, a unique class of protein is expressed at high level in brain. It regulates vital biological functions that are impaired in Major Depressive Disorders.

Bayer CropScience Limited reported a net loss of Rs 36.1 crore for the quarter ended March 31, 2017, as against a net profit of Rs. 19.4 crore for the same quarter in the previous year, as per Exchange filing.

Software services player HCL Technologies Limited has informed the bourses that the company will buy back its shares at Rs. 1000 apiece, a 17% premium over the current market price. In a regulatory filing, the company has informed that it proposes an offer for buyback of equity shares of face value of Rs. 2 each for cash at a price Rs. 1000 per equity share on a proportionate basis through tender offer. The buyback offer price is about 17% higher than the current market price of the stock at Rs 852.35.

Dish TV India Limited consolidated revenue for the quarter came in at Rs. 709 crore, registering 11.4% y-o-y decline. This was mainly driven by 15.7% y-o-y decrease in revenue from DTH segment. EBITDA for the quarter fell by 26.8% y-o-y to Rs. 191 crore with a corresponding margin contraction of 574 bps. EBITDA margin for the quarter stood at 26.9%. This margin contraction was supported by 20% y-o-y increase in employee benefit expenses. The net loss for the quarter came in at Rs. 28.3 crore v/s net profit of Rs. 483 crore in the same quarter last year.

Lupin Limited consolidated revenue for the quarter came in at Rs. 4162 crore, registering 1.3% y-o-y increase. EBITDA for the quarter fell by 43.7% y-o-y to Rs. 690 crore with a corresponding margin contraction of 1327 bps. EBITDA margin for the quarter stood at 16.6%. This margin contraction was driven by increase in other expenses and employee benefit expenses by 30% yoy and 24% yoy respectively. The PAT for the quarter came in at Rs. 380 crore, yoy decline of 49.2%. Looking at the full year numbers, we see that revenue jumped by 24% to reach Rs.17119.8 crore while EBITDA rose by 29% to 4118.6 crore. Company reported net profit of Rs.2557.4 crore, up 13% y-o-y.

Amar Raja Batteries Limited standalone revenue for the quarter came in at Rs. 1359 crore, registering 17.7% yoy increase. EBITDA for the quarter fell by 2% yoy to Rs. 199.3 crore with a corresponding margin contraction of 294 bps. EBITDA margin for the quarter stood at 14.7%.The margin contraction was driven by increase in raw material expenses by 31% yoy to Rs.934 crore in Q4FY17. The PAT for the quarter came in at Rs. 99.1 crore, y-o-y decline of 9.6%. Looking at the full year numbers, we see that revenue jumped by 15% to reach Rs.5366 crore while EBITDA rose by 3% to 899.04 crore. The company reported net profit of Rs.478 crore, down 3% yoy.

Kaveri Seed Company standalone revenue for the quarter came in at Rs. 40.3 crore, registering 2% yoy decline. EBITDA loss for the quarter stood at Rs. 27.2 crore as compared to EBITDA loss of Rs. 6.5 crore in corresponding quarter of last year. Net loss for the quarter swell to Rs. 87.2 crore as against the net loss of Rs. 10.4 crore in same quarter of last year. Looking at full year numbers, we see that revenue for FY17 decreased 5.4% yoy to Rs. 705 crore while EBITDA for the period declined 25.6% yoy. Company reported net profit of Rs. 77 crore, down by 53.9% yoy.

The finance ministry has written to all banks to keep a tight watch on cash deposits as seizure of large hauls of old and new currency notes and gold continues, suggesting connivance of banks in money laundering. It has directed state-run banks and the Indian Bankers Association to ensure that deposits of new and old currency notes are properly reflected in the customers’ counterfoils and bank records. There have been concerns that deposits in new or valid currency may have be shown as deposits in the demonetised Rs. 500 and Rs. 1000 notes and the legal currency diverted for laundering.

To avoid any malpractices, the government today asked all public sector banks to strictly maintain record of deposits made through both old Rs. 500/1,000 notes and other valid currencies. In a letter written to chief executive officers of public sector banks, the Finance Ministry asked that "maintenance of records regarding deposit of Specified Bank Note and Non-SBN, as the case may be, is essential both in the bank record as well as the customers record.

With more and more instances of money laundering and fraudulent currency exchange surfacing, RBI today warned of stern action against wrongdoers and asked banks to carry out a thorough central data checking, while it suspended a "junior functionary" who is being investigated. "We have issued elaborate instructions to all banks to do the central data checking and wherever they find any inconsistency, it should be pursued further through their internal audit mechanism," said deputy governor of RBI, S S Mundra, speaking to a select group of reporters here.

The office of the banking ombudsman received 1.02 lakh consumer complaints in FY16, up 21% during the year. The Banking Ombudsman Scheme aims to provide a quick and cost-free resolution mechanism for complaints relating to deficiency of banking services of common bank customers who otherwise find it difficult or cost-prohibitive to approach any other forum such as courts. The maximum rise in complaints were against private sector banks, which rose 36.5%.

The Supreme Court today expressed concern over lack of infrastructure, manpower and other facilities at Debt Recovery Tribunals and their appellate bodies and said lakhs of crores of rupees are non-performing assets as the recovery mechanism is not up to the mark. The bench headed by Chief Justice T S Thakur also said that it may ask the National Law School and IIM at Bangalore to jointly conduct a study as to what "ails" these quasi- judicial bodies -- DRTs and Debt Recovery Appellate Tribunals, meant for recovering bad loans of financial institutions.

The broader banking system in India will continue to be capital constrained and it will require an additional capital of up to Rs 1.2 lakh crore or USD 18 billion over next three years, says a report. In order to thrive in a resource-constrained world, banks will need to have a razor-sharp focus on managing their capital and their risk-return profiles, said the report by management consulting firm Oliver Wyman.

Small finance banks funding mix will be different and complex after their transition from non-banking finance companies and microfinance institutions and they are likely to need Rs. 60,000 crore of non-equity funding by the financial year 2019-2020, according to a report. The current funding mix for MFIs includes bank debt, other borrowings and equity, with bank debt being the largest proportion in the mix. Scheduled Commercial Banks prefer funding MFIs because these advances qualify as priority sector lending for them.

The Reserve Bank of India has ordered banks to investigate instances of unusual patterns in cash management at branches and currency chests — a move aimed to prevent unauthorised exchange of scrapped notes for new notes. The banking regulator has asked banks to immediately bring to their notice any such malpractice found at their bank and also track the complete trail if cash movement is in large quantity.

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