Tuesday, 27 February 2018

NB says fraud amount can rise by

Rs 1,330 crore to Rs 12,700 crore | Ideal Stock

On February 14, the bank had reported unauthorised transactions worth approximately Rs 11,400 crore after it had detected some fraudulent transactions in its Brady House branch.

In yet another shocker to the country, Punjab National Bank has revealed that the quantum of the fraud it reported a couple of weeks ago could increase to Rs 12,700 crore, up from Rs 11,400 crore.
"In continuation to our filing with Stock Exchanges on 14.02.2018, we have to inform that quantum of reported unauthorized transactions can increase by USD 204.25 million (approx)," PNB said in a late night filing to the stock exchanges.
On February 14, the bank had reported unauthorised transactions worth USD 1.77 billion (approximately Rs 11,400 crore) after it had detected some fraudulent transactions in its Brady House, Mumbai branch.
The lender said that fradulent Letters of Undertaking (LOUs) were issued in an apparent connivance of PNB officials to favour diamond and jewellery businessmen Nirav Modi's and his uncle Mehul Choksi's group companies.
Based on these LOUs, other banks including State Bank of India, Axis Bank, Canara Bank and Allahabad Bank, among others, gave loans to the two group firms.
So far, the total dues, including the direct loans given by consortium of lenders previously, to both groups is estimated to be over Rs 21,000 crore.
The Enforcement Directorate (ED) and Central Bureau of Investigation (CBI) are already investigating the matter, while Modi and Choksi are said to have fled from the country to avoid being interrogated.

Wednesday, 21 February 2018

Jubilant Life Sciences Ltd. | Out Look

Jubilant Life Sciences Ltd 

(JUBILANT, 530019) Stock & Share Price Update With Analysis - February 21, 2018.

Closing Bell !

Updated at 4.07 PM As the trading hours came to an end Jubilant Life Sciences Ltd. was observed to be priced at Rs. 987.95 which was 53.8 points higher than the day's low and 9.85 points lower than the day's high while the day low was Rs. 934.15 and day high was Rs. 997.8 .
With this, 1,102,329 stocks were traded while the 5 day, 10day & 30 day average volumes were observed to be 407,995 , 839,717 , and 1,208,764 respectively.
The 5 day average volume fell 106775 stocks, 10 day average volume fell 155388 stocks and 30 day average volume rose 8226 stocks relative to the previous day' s values.
In the last 52 weeks the lowest price observed was Rs. 600.00 while the highest price was Rs. 1039.00 .
Updated at 03.01 PM Jubilant Life Sciences Ltd. was seen to be priced at Rs.981.5 with a change of 54(5.82%) points after opening at Rs.942.70 .
Also, the current price saw an increase of 38.8 points than today's opening price.
The traded volume was 760,300 stocks with the bid price being Rs.981.00 for 123 stocks and the ask price being Rs.981.40 for 100 stocks making the bid-ask spread to be -0.4 points.
Updated at 01.03 PM Jubilant Life Sciences Ltd. was observed to be priced at Rs. 955.3 which was an increase of 12.6 points from the day's opening price while a change of 27.8(3%) points was also observed from the previous trade.
A total of 303,885 stocks were being traded according to our recent check.
The bid-ask spread was Rs. -0.6 with bid price being Rs. 955.30 and ask price being Rs. 955.90 .
As compared to our previous check the volume of traded stocks fell by 56 stocks while the volume weighted average price went up 1.07 points.
Updated at 12.01 PM After managing to touch a high of Rs.958.70 and falling as low as Rs.934.15 through the day, one stock of Jubilant Life Sciences Ltd. was observed to be priced at Rs.953.9.
The total volume traded was 247,408 stocks with the volume weighted average price being Rs.948.99.
Making the bid-ask spread -0.5 points, the bid price was observed to be Rs.953.40 for 15 stocks and the ask price was Rs.953.90 for 9 stocks. 

Opening Bell !
Updated at 10.06 AM After closing at Rs. 927.50 yesterday, Jubilant Life Sciences Ltd. opened at Rs. 942.70 today.
Today's opening price was observed to have increased 12.7 points as compared to yesterday's opening price.
Also, prices touched a high of Rs. 950.00 and a low of Rs. 914.55 the previous day.
As seen on Feb 21, 09:57 A.M. one stock of Jubilant Life Sciences Ltd. was observed to be priced at Rs. 949 with a change of 21.5(2.32%) points from the previous trade.
The volume weighted average price (vwap) was observed to be Rs. 947.53 while the bid-ask spread was recorded to be -0.75 points.
With this Jubilant Life Sciences Ltd. also provided a price band of Rs. 742.00 - 1,113.00 for the day.
Updated at 9.08 AM Yesterday, Jubilant Life Sciences Ltd. stock closed at Rs. 927.50 while touching a maximum of Rs. 950.00 which was 20 points more than the opening price.
Also, the lowest price which was Rs. 914.55 went 15.45 points lower than the opening price.
The last volume that was traded was of 473,864 stocks and by the end of the day, the 5 day, 10 day & 30 day average volumes were 514,770 , 995,105 and 1,200,538 respectively.
Compared to the previous day the 5 day average volume fell 87082 stocks, 10 day average volume fell 65331 stocks and 30 day average volume fell 5963 stocks.

Arvind Ltd expects nearly | Ideal Stock

Arvind Ltd expects nearly all brands to turn profitable next year

Arvind Ltd earned Rs2,717.97 crore in total consolidated revenue in the fiscal third quarter that ended December, an increase of 15.8% on a year-ago basis

Bengaluru: Textile maker Arvind Ltd expects nearly all brands in its branded apparel business segment to turn profitable next year, company executives said on a conference call with analysts on Wednesday.
Over 35% of the company’s quarterly revenue comes from the sales of brands like Arrow, Flying Machine, Calvin Klein, Tommy Hilfiger, Aeropostale and Gap, among others. The branded apparel segment earned Rs957.64 crore in revenue in the quarter that ended 31 December, a year-on-year jump of 23.6%.
“We’ve had a very good quarter in improving profitability because the focus is now on that. It is not just the power brands which have given improved profitability. We’ve improved profits on Unlimited as well as specialty retail and some of the emerging brands,” J. Suresh, managing director and chief executive officer of Arvind Lifestyle Brands Ltd said on the call. Unlimited is the company’s family fashion chain of stores.
Arvind Ltd earned Rs2,717.97 crore in total consolidated revenue in the fiscal third quarter that ended December, an increase of 15.8% on a year-ago basis. Net profit rose 8.03% to Rs79.09 crore during the period, the company reported on Wednesday. Third quarter revenue at Arvind’s textile business segment, its mainstay, grew 9.41% to Rs1,534.43 crore.
“We will end the year with two to three brands being negative (two specialty and one emerging brand). But next year all brands will be positive in terms of profitability,” said Jayesh Shah, chief financial officer of Arvind. All emerging brands will turn close to break-even by Q4, Suresh added, without mentioning brand names.
The company has also worked with US-based casual wear brand, Gap, to start production of the label in India. Forty percent of the Gap products that Arvind sells in India will be produced within the country and the target is to take that to 80% by the end of this year, executives said.
Arvind has also got approval from the US brand to tailor some part of its locally produced Gap merchandise to Indian requirements, which it expects will give a big boost to improving store productivity.
As of 31 December, Arvind had 1,137 stores across brands, 93 Unlimited stores and 32 specialty retail stores.
The company now expects revenue in its branded apparel business to grow 15-17% for 2017-18. It expects revenue in the textile business segment to grow 6-7% and overall revenue growth of 11-12% for the year.

Tuesday, 20 February 2018

'Watchdogs' missing from PSU bank boards | Ideal Stock

'Watchdogs' missing from PSU bank boards, including PNB

Even as banks are under the lens for compliance, it has emerged that all the 20 public sector banks including, Punjab National Bank (PNB), do not have a workman or an officer director on its board, a mandatory practice as per the Bank Nationalisation Act.

The post, which acts as a 'watchdog' on the Board and management decisions, has been lying vacant for at least last six months.
A workmen/officer director is a representative of the employees or the Unions to act as vigilantes or watchdogs to raise questions within the board on decisions that they find are not in the best interest of the bank, point at the government’s indecision on this front.
PNB's workman director's term ended in March 2016 and the post has been lying vacant since then.
As per the requirement, the central government may nominate any employee of a nationalised bank, who is a workman, to be a director of that bank.
“As per the Nationalisation Act, there must be a workman director on the Board for a three-year term. None of the 20 PSBs have a workman and an officer director as of now and there has not been a single appointment of these directors over the last three years. By not appointing them, the watchdogs have been removed from the system,” said CH Venkatachalam, general secretary, All-India Bank Employees’ Association (AIBEA).
Venkatachalam said he has raised this issue in at least three letters to the Finance Minister as well as one to the Prime Minister seeking intervention to make an appointment but none have got a response.
“We learn that all other formalities have also been completed but yet the appointments are withheld by the government,” he has pointed out in the letter.
This comes to light in the wake of the big banking scam of Rs 11,400 crore that hit Punjab National Bank which alleged in a letter to the stock exchanges that two of its bank officials were involved in issuing fraudulent Letter of Undertakings (LoUs) to diamond and jewellery importer Nirav Modi to seek loans beyond his means.
Questions are being raised over the lapses in the systems and processes followed by not just PNB but also other public sector banks, both during the approval of credit to an entity and also during subsequent audit and checks.
The bank unions have also flagged concerns in the case saying, “Attempts are being made to dilute the magnitude of the fraud as one bank one branch two employees fraud. Such huge frauds cannot be committed in a simple way that a branch official would give LoU for Rs 11,400 crore in a period of 6 or 7 years without no one knowing about it... It is very strange that EDs, MDs, CEOs, Chairman, Directors of the Banks are not covered by any Disciplinary and Conduct Regulations though they take very vital decisions.”
The Bank Nationalisation Act/Banking Companies (Acquisition and Transfer of Undertakings) Act provides for appointment of a workman employee representative and an officer employee representative as directors on the boards of all public sector banks.
According to a bank official, previously, workman/officer directors have raised red flags in the board meetings over lending and banking practices not meeting the required standards and it has been taken up by the Boards.”
For the past two years and more, the posts of Employee Representative Director and Officer Representative Director are not being filled up by the government.
AIBEA's data shows that the position of an employee director in Canara Bank has been lying vacant since April 2014. Three other banks -- Corporation Bank, Punjab & Sind Bank and Union Bank of India – have also not had a workman director since 2014.
At least 11 banks have such positions vacant since June 2016.
The union head says that not having such directors on the board also leads to gaps in the governance which is not watched over by any external member. Such directors are required to further point out this kind of a lacunae in the banks.
The letter to the Prime Minister states that, “While the Government under your leadership claims of good governance, quicker decisions, faster response, less bureaucratic, etc…It is a matter of concern that the posts of workman and officer directors in the banks that have fallen vacant from 2014, 2015 and 2016 still remain vacant with the result that there is no representation on the boards of all the banks representing the employees and officers.”

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Ideal Stock | Bharat Financial Inclusion Ltd.

Opening Bell !
Updated at 10.01 AM After closing at Rs. 992.80 yesterday, Bharat Financial Inclusion Ltd. opened at Rs. 985.00 today.The opening price of today was observed to have decreased 20 points as compared to the previous day's opening price.Also, the previous day observed a day high of Rs. 1005.00 and a day low of Rs. 978.70 .

As seen on Feb 20, 09:59 A.M. one stock of Bharat Financial Inclusion Ltd. was observed to be priced at Rs. 996.95 with a change of 4.15(0.42%) points from the previous trade.The volume weighted average price (vwap) was Rs.989.18 and the bid-ask spread was -0.05 points.With this Bharat Financial Inclusion Ltd. also provided a price band of Rs. 893.55 - 1,092.05 for the day.Updated at 9.04 AM Yesterday, Bharat Financial Inclusion Ltd. saw a high of Rs. 1005.00 which was 0 points more than the opening price after which it closed at a price of Rs. 992.80 .Also, the price went as low as Rs. 978.70 which was 26.3 points less than the opening price.By the end of the day 672,381 stocks were recorded to be traded with the 5 day average volume being 529,585 , the 10 day average volume being 628,382 and the 30 day average volume being 680,620 stocks.Compared to the previous day the 5 day average volume rose 78999 stocks, 10 day average volume fell 45293 stocks and 30 day average volume rose 7117 stocks.

Top stocks in focus today | Ideal Stock

Fortis Healthcare, UCO Bank, PNB, JSW Energy, Sun Pharma

M&M to make an additional investment of over Rs500cr for electric vehicles and electric components at its Chakan plant, Maharashtra.

Derive Investments bought 26.58 lakh shares or 0.5% equity at Rs144.5 each of Fortis Healthcare.
Sun Pharma unit's holding in Ranbaxy Malaysia to rise to 90.7%.
UCO Bank seeks shareholders’ nod to issue shares worth up to Rs6,510cr on a preferential basis to the government.
Vascon Engineers signs the pact with Lina Ashar Foundation to develop Pune land parcel.
Advanced Enzyme Board approves the additional investment of 300,000 ringgit in Malaysian unit.
Gayatri Projects announces the reorganization of its energy business.
Godawari Power & Ispat board approves amalgamation of Jagdamba Power & Alloys with self.
Martin Currie Global Emerging Markets Fund bought 71.33 lakh shares or 0.7% equity at Rs257.3 each of Vakrangee.
JSW Energy inks MoU with Maharashtra to make EVs.
Pratibha Industries says the lenders are advised to submit a resolution plan.

Monday, 19 February 2018

Sensex slips 200 pts | Ideal Stock

All sectoral indices in the red, PSU Bank dips 2%

Natco Pharma shares rallied as much as 6.4 percent after the Mekaguda facility received zero observations from the US health regulator.

"....announce successful completion of regulatory inspection from the United States Food and Drug Administration (USFDA) for its active Trade Support pharmaceutical ingredient (API) facility in Mekaguda Village, Hyderabad," the pharma company said in its filing.
The inspection by USFDA was conducted during the period February 12-16, 2018.

India needs a force | Ideal Stock

Global role model | ideal Stock

India needs a force to reach its $10 trillion potential and become a global role model

It took about 58 years for India’s GDP to grow to $1 trillion, but only eight years to reach $2 trillion (by 2016). At current growth rates, it will take about five years to reach $3 trillion, and only three years after that to add the next trillion. Becoming a $10-trillion economy is now within India’s planning horizons. Stock Market Support 

But the real prize is larger than a mere number. India also has an opportunity to build a more inclusive, sustainable and equitable society, one that is an example to the rest of the world. Achieving that goal, however, requires successfully tackling several key developmental obstacles that stand in the way A Potent CocktailOne such challenge is finding a path to sustainable urbanisation. India’s cities are home to 377 million people, a number that could reach 900 million by 2050. Meeting the infrastructure needs of India’s urban population while safeguarding the environment will require new, innovative models. A second challenge is addressing gender inequality and increasing women’s participation in the economy. Women today contribute less than a fifth of India’s GDP and make up just 24% of the workforce, compared to 40% globally. Without much stronger participation from them, India will continue to fall short of its economic potential. A third challenge is that too much of India’s population still lacks access to basic living essentials, education and healthcare. Major progress has been made on providing electricity and sanitation to households, but there is still much more to be done to raise India’s ‘ease of living’ index. On education, 61 million Indian children are not in school. On healthcare, India’s spend per-capita remains among the lowest in the world, with 60-70% paid by patients out-of-pocket.Finally, India needs to continue building its domestic energy sector to reduce its dependence on imports — currently covering 80% of its energy use. Primary energy demand is projected to grow by 3.5-4% a year through 2030. New approaches and sources of energy production will be needed to bridge this gap and strengthen India’s energy security in the years to come. To further address some of these challenges, three specific opportunities require collaboration across the private, public and social sectors: 1) Digital transformation: India has the second-largest internet subscriberbase in the world, with an estimated 431 million people connected. Buildingon this foundation and harnessing the next wave of digitisation represent an opportunity to make rapid and substantial improvements to standards of living, while jolting economic growth. Broadening internet access is the great equaliser and nearly every sector in India would benefit. For example, online agricultural marketplaces could be created covering 40-60% of all agricultural produce sold. Pilot projects have demonstrated that these marketplaces boost prices and farmers’ incomes by as much as 15%. In the industrial sector, digitisation of supply chains could improve inventory-handling efficiency by over 20%. Right Recipe, For StartersFinally, small and medium enterprises (SMEs) could be better served by the financial services sector through digital and data-driven credit evaluations. By 2025, these advances could close 60-80% of the credit gap that SMEs currently face. 2) Renewable energy: Innovation in renewables and energy storage has a dual benefit. First, it can help India cut its dependence on energy imports. Second, it will help tackle pollution problems, which threaten to make India’s cities unliveable. In the next three years, falling costs of energy storage and solar power could make power from solar-wind-battery hybrid plants cost the same as that from coal plants. Creating incentives for investment in these hybrid plants could grow renewables as a share of India’s energy mix by 300 GW or more by 2030. On electric vehicles, India could put in place economic incentives for consumers and manufacturers to drive faster adoption. 3) Gender parity: Increasing the role of women in India’s economy represents a $750-billion opportunity by 2025. Core to this aspiration is raising the female labour force participation rate by 10 percentage points — closer in line with Sri Lanka and Bangladesh, although still lower than in Indonesia or the Philippines. While there is no single silver bullet to close the gender gap, there are a few good places to start. These include expanding skills training and job placement programmes, increasing access to credit and markets for ‘micro-entrepreneurs’, and addressing gender disparities in internet access. Companies can also contribute by doubling down on initiatives to recruit, retain and promote more women, for instance, by offering more flexible working models and investing in capability building. More fundamentally, however, societal attitudes towards women in the workforce will also need to evolve. Seventy per cent of Indian respondents surveyed in the World Values Survey agreed with the statement that “when a woman works for pay, her children suffer”. There is no doubt that India is ready to take its place as a global economic powerhouse. Doing so will require new approaches and priorities that will allow the country to capture its full potential. And be a role model for the rest of the world, too. 

Saturday, 17 February 2018

PNB fraud raises too many

PNB fraud raises too many questions to rule out wider collusion

Punjab National BankBSE -2.10 % (PNBBSE -2.10 %) has pinned a $1.8 billion fraud, the biggest in India’s banking history, on two branch-level employees. That’s the kind of baloney only fools should believe. The duration and magnitude of the fraud raises too many questions to rule out wider collusion. 
It also rules in wilful negligence and a collapse of risk mitigation across the banking system. For a start, it seems several norms were flouted in crafting allegedly unlawful letters of undertaking (LoU) to the tune of thousands of crores for jeweller Nirav Modi. 
Two junior employees in a bank branch allegedly helped Modi along for more than six years. They avoided employee transfer norms that limit the amount of time any staffer can stay at one branch. So, they circumvented basic rules crafted to prevent borrower-lender cosy collusion. Then, it seems, the said branch employees were authorised to unilaterally issue LoUs well above what their pay grade would suggest — guarantees running into hundreds of crores. 

These letters were then accepted by several other banks who never crossverified anything, even accidentally, for years. Worse, the LoUs, by PNB’s own admission, flagrantly violated RBI’s limit of 90 days of credit by recasting that to a year. Yet, not a single overseas lending bank noticed this. There were 30 of them.
An LoU is a bank guarantee, a sort of gold promise the bank issues to customers, which they can use to get money from overseas banks. It’s something that should be accounted for somewhere, even if it is a non-funded item.
Strangely, it seems that the mandatory concurrent audit that matches transactions never picked up any irregularities, even though the money Modi borrowed should have reflected in PNB’s nostro account.
Which then brings us to the auditors of PNB, internal and external.
Is it possible that a branch that holds accounts for a list billionaire’s firm escapes close scrutiny? Modi was a Forbes rich-lister. By all means, the branch in question must have been doing enough high-value transactions for it to be in the spotlight. Not a single external auditor, four at any given point in time, found anything amiss while reconciling transactions and undertakings
It is also not clear if the branch was inspected by RBI, which ideally would have been drawn to accounts maintained by businesses of a certain risk category. In this particular case, the central bank, auditors and the senior-most management of PNB already had a giant red flag flapping in their face.
Afew years ago, PNB, along with a clutch of other banks, was had by Winsome Diamond Group, another jewellery firm that defaulted on letters of credit (LoCs) to the tune of Rs 6,800 crore. It turns out PNB had the largest exposure at Rs 1,800 crore.
Given all this, it would call for a very rich imagination to assume that PNB never tightened its internal controls and mechanism of guarantees and undertakings, especially to the jeweller community. And that no one — from public sector officials, the vigilance officer, to the bank regulator or even the board of directors — focused on tightening up the criteria for issuing LoCs or LoUs.
Finally, all those who believe that the fraud was pulled off by just two employees must ask what sort of business intelligence technology our banks use. In banking, all transactions are now reflected in real time and captured on a dashboard available to multiple gatekeepers. Besides, the transaction and bookkeeping software should be sophisticated enough to pick up irregular data that the human eye might miss.
PNB’s repeated misadventures must be seen as a failure not just of risk management processes, but also of the banking regulator’s role. The larger series of systemic failures, from Vijay Mallya’s well-chronicled default of loans, to that of Winsome Group, spotlights the indifference of the custodians of public money.
The Nirav Modi episode, including his undetected departure from India like several other alleged fraudsters before him, also sends out a damning message to a billion Indians. This message, a line from Oliver Goldsmith’s The Vicar of Wakefield, cuts across political parties: laws govern the poor, and the rich govern the law. 

Friday, 16 February 2018

Indian stocks likely to take a hit

US corporate tax

NEW DELHI: Fifteenth Finance Commission Chairman N K Singh today said the US corporate tax rate cut would have consequences for Indian stock market and the ripple effects are becoming visible. 

He said FII investment in domestic stock market is as high as USD 23 billion and even a small pull back on account of tax cut in the US would have implications on the markets here. 

"I would see broadly 2018 would be an year of managing uncertainty and volatility. Uncertainty on account of exogenous events and uncertainty on account of endogenous events," he said here at Yes Bank's Annual Economic Conclave.
The first and foremost exogenous uncertainty, he said, is the change in the US economic management.
Observing that America has cut corporate tax rate from 30 per cent to 21 per cent, Singh said it would increase profitability of the big US firms and overseas investors may pull back from emerging economies particularly from India.
"The total FII investment in Indian stock market is as high as USD 23 billion and if a small significant part of it gets pulled back, on account of much significantly lower rate of corporate tax in the US, then you will have its consequences and the ripple effects in Indian stock markets which you have already begun to see," he added.
The other exogenous factor would be subdued exports, though it has started to pick up, and uncertainty of oil prices, which would have a bearing on current account deficit.
As regards the endogenous factors, the chairman said these include inflationary pressure because of hike in minimum support price, impact of oil prices and slippage in fiscal deficit.
Referring to fiscal deficit, he said the slippage was on account of structural reforms, especially implementation of the Goods and Services Tax.
He, however, underlined the need for setting up of an independent fiscal council, which is in operation in about 44 countries.
Singh did exude confidence that the government will manage uncertainties in a year of volatility as India is on the "path of overall macro economic stability and the principal contours of economic development".
"We are on much happier road than sometime ago and there are therefore reasons to be optimistic," he added.
Speaking at the event, NITI Aayog CEO Amitabh Kant said to push economic growth, there is a need to focus on transforming at least seven states and 150 districts.
Kant said more reforms are required in areas including mining, petroleum and natural gas and construction.
"Our personal belief is that beyond fiscal and monetary policy, we need to look at gross capital formation in Indian economy, which has come down. Let's be honest about it. It has come (down) from 36 per cent to 26 per cent and we need to take it back to 36 per cent," he added. 

Top stocks in focus on 16 February 2018

Top stocks in focus on 16 February 2018

NEW DELHI: Domestic market is likely to see a positive opening on Friday , tracking Nifty50 futures on the Singapore Stock 

Exchange (SGX Nifty) and cues from other Asian markets. Nifty futures on the Singapore Stock Exchange were trading 31 points, or 0.29 per cent, higher at 10,588, indicating a positive opening start for the Nifty50 in India. Here is a list of top stocks that are likely to be in focus in today's trading session. Ideal Stock Investment Advisor
Zee Learn: The company has acquired a controlling 44.5 per cent stake in MT Educare, a Mumbai-based company that runs the popular Mahesh Tutorials coaching classes, for about Rs 200 crore as the Subhash Chandra-controlled Zee Group looks to expand its footprint and make inroads into the government-supported skilling and vocational segment.
PNB: The RBI has directed Punjab National Bank to pay the entire Rs 11,300 crore owed to counterparty banks in the alleged fraud involving jeweller Nirav Modi, said two bankers aware of the development. Not doing so could lead to turmoil in the financial markets as the trust factor that’s integral to the functioning of the banking industry will be lost, they said.
Idea Cellular: The operator on Thursday raised around $535 million, or about Rs 3,500 crore, through a qualified institutional placement (QIP) with the price at Rs 82.50 per share at the closure of bids, a person close to the issue said. The share sale is part of Idea’s stated plans to raise Rs 6,750 crore to cut debt and free up cash ahead of its upcoming merger with Vodafone India.
Fortis Healthcare: The Supreme Court has paved the way for the sale of Fortis Healthcare shares pledged to lenders by former board members Malvinder and Shivinder Singh. The apex court, which had blocked the sale of all Fortis Healthcare shares owned by Fortis Healthcare Holding (FHHPL) on August 31, clarified on Thursday that the status of company shares encumbered on or before that date does not have to be maintained.
UltraTech Cement: India’s largest manufacturer of the primary building material believes that acquiring debt-laden Binani Cement in the ongoing spell of industry consolidation would not breach the monopoly watchdog’s threshold norms on market dominance.
Bharti Airtel: The company's Africa business is being valued at $6.6 billion even as the Sunil Mittal-led telco’s international holding company for Africa operations explores an initial public offer (IPO) to dilute a minority stake, analysts said.
India Grid Trust: The company has signed definitive agreements and acquired the following power transmission assets from Sterlite Power Grid Ventures in accordance with the approval given by unitholders in the general meeting held on 20 November 2017
S Kumars Nationwide: Markets regulator Sebi on Thursday imposed a total penalty of Rs 50 lakh on nine promoter entities of textile firm S Kumars Nationwide for disclosure lapses. During the inspection of the shareholding of S Kumars, Sebi observed that the nine entities had “failed to make disclosures regarding creation/ invocation/ release of certain pledge transactions and off market sale/ purchase of shares” of the company.
Som Distilleries & Breweries: Thwe company announced that the company will start its Maharashtra operations from 16 February 2018. The initial launch would start from Nagpur.
Future Consumer: The company has allotted 1,500 Senior, Secured, Non-Convertible Debentures ("NCDs") having face value of Rs. I 0,00,000/- each for cash at par to CDC Emerging Markets, an arm of CDC Group plc, UK's Development Finance Institution, on private placement basis, consequent to receipt of subscription money aggregating to Rs. 150 crore from the said allottee.
Chandni Textiles Engineering Industries: The company announced that the National Company Law Tribunal (NCLT) vide its order approved the Scheme of Arrangement and the Company received the certified copy of the order from NCLT on January21.
Salasar Techno Engineering: The Board of Salasar Techno Engineering approved a scheme of merger and arrangement between the company and Salasar Stainless, a wholly owned subsidiary of the company primarily engaged in manufacturing of stainless steel pipes and tubes and other related activities. 

Thursday, 15 February 2018

Nifty futures scrapped,

 SGX seeks Shenzhen-type linkage with GIFT

Singapore’s exchange may have a shot at keeping its lucrative India index futures, as long as it can meet the desire of Prime Minister Narendra Modi’s government to keep investor activity within the country’s borders. 

The bourse is discussing a trading link with the National Stock Exchange of India Ltd. that would make Singapore a gateway to the NSE’s derivatives market in Gujarat, Modi’s home state, said NSE Chief Executive Officer Vikram Limaye. An agreement would allow Singapore Exchange Ltd. to replace some of the business it’s set to lose after NSE canceled a licensing deal that allowed derivatives linked to the Nifty 50 Index to trade in the city-state.
“We had discussions earlier about a derivatives connect,” Limaye said in an interview on Wednesday. “That is a process that will resume and we will see how the discussion evolves. There is no reason why we cannot consider the proposal.”
Indian exchanges said on Feb. 9 that they were scrapping all overseas licensing deals and data feeds to foreign venues, the latest attempt to discourage offshore trading and promote the Gujarat International Finance Tec-City. The tax-free business hub created by Modi, a former chief minister of Gujarat, was designed to rival international financial centers.
Greater Urgency
A trading link between Singapore and Gujarat would broadly resemble the connection between Hong Kong and exchanges in Shanghai and Shenzhen, which provides access to China via the former British colony. The system means investors operate within the mainland’s capital controls and ensures all trading is on Chinese venues.
While talks have previously taken place, NSE’s Feb. 9 action created greater urgency for SGX officials to consider some sort of tie-up in India, according to people familiar with the matter. The link, in which buy and sell orders from SGX’s customers would be routed to NSE’s IFSC Ltd. exchange, would be tax-free and offer contracts in dollars, said Limaye
An SGX representative declined to comment. In a statement on Sunday, the exchange said it would work with NSE “toward solutions for global investors, including developing solutions from NSE’s IFSC.”
The decision to scrap India’s overseas licensing deals came days after the Singapore exchange launched Indian single-stock futures despite opposition from NSE, with whom it signed a pact in 2000.
“We were surprised by SGX going ahead,” Limaye said. “Our concerns were shared, that ‘please don’t do it or this will precipitate action.”’
SGX may seek to buy a stake in NSE’s IFSC exchange, either alongside a trading link or instead of one, according to the people familiar with its deliberations, who asked not to be named because talks are private. Limaye said there hadn’t been any discussions about a purchase. 

Wednesday, 14 February 2018

Malaysia's Palm Oil stocks

Malaysia's Palm Oil stocks

Malaysia's Palm Oil stocks fall 6.75% in January

Malaysia's Palm Oil stocks at the end of January 2018 fell 6.75% to 2.55 million tonnes from 2.73 million tonnes recorded in December last year, the Malaysian Palm Oil Board (MPOB) said in its latest report.
The report said Crude Palm Oil (CPO) stocks decreased 5.72% to 1.57 million tonnes during the month under review from 1.67 tonnes registered a month earlier.
Stocks of processed Palm Oil reduced 8.37% to 973,965 tonnes from 1.06 million previously.
On production, MPOB said, CPO output declined 13.495 to 1.59 million tonnes in January from 1.83 million tonnes recorded in December 2017.
Palm kernel output was 10.03% lower at 418,422 tonnes in January versus December's production of 465,062 tonnes, it said.
It added that exports rose 6.01% to 1.51 million tonnes in January from 1.43 million tonnes recorded in December.
Exports of oleochemicals declined 3.52 per cent to 255,21 tonnes, during the month under review, from 264,532 tonnes recorded in December.
Palm kernel oil exports contracted 40.03% to 72,296 tonnes in January from 120,563 tonnes recorded in the previous month and that of palm kernel cake eased 1.72% to 217,817 tonnes from 221,622 tonnes, previously, it added.

Tuesday, 13 February 2018

Asian stocks pull further off 2-month lows as Wall Street bounces

Global Markets

TOKYO (Reuters) - Asian stocks pulled further away from two-month lows on Tuesday, lifted by Wall Street’s extended rebound from last week’s steep fall, but investors remained cautious ahead of U.S. inflation data later in the week.MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1 percent after sliding to its lowest level since Dec. 11 on Friday.

Australian stocks rose 0.5 percent and South Korea’s KOSPI climbed 1 percent. Japan’s Nikkei added 1 percent.
The Shanghai Composite Index was 1.2 percent higher, buoyed by global gains and suggestions of possible Chinese government support.
An affiliate of China’s securities regulator on Monday encouraged major shareholders of domestically-listed firms to increase their holdings after last week’s global selloff mauled Chinese stocks.
Wall Street’s three major indexes rose for the second day on Monday as investors regained some confidence after U.S. equities had their biggest weekly drop in two years.
Still, caution lingered in the broader markets following the U.S.-led tumble in riskier assets last week and ahead of U.S. inflation data on Wednesday. A stronger-than-expected reading on price pressures could trigger a fresh wave of selling.
“It is hard at this stage to tell if the U.S. markets have bottomed out, considering that bets against the dollar still remain significant,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.
“On the other hand, attempts by investors to pull money out of the emerging markets during last week’s turmoil appeared to have been unexpectedly limited, so that is an encouraging sign.”
The dollar index against a basket of six major currencies extended modest losses suffered overnight and dipped 0.1 percent to 90.119. The index edged back from a two-week high of 90.567 scaled late last week, when it had benefited as a safe haven in the wake of the global market selloff.
The greenback was steady at 108.680 yen. The euro was flat at $1.2293.
The South African rand dipped 0.5 percent on the day to 11.97 per dollar after news that the country’s ruling party African National Congress had opted to remove President Jacob Zuma as head of state.
The rand had risen 2 percent over the past two days, helped by hopes that Zuma would step down, but it gave back some of those gains as the latest news was seen prolonging the political standoff.
The Australian dollar was steady at $0.7864 after rising about 0.6 percent overnight on the back of higher commodity prices and improvement in broader risk sentiment.
Copper prices also bounced further away from two-month lows as more stable global markets encouraged investors to return to commodities.
Copper on the London Metal Exchange extended an overnight rally to trade 0.8 percent higher at $6,885.50 per tonne.
The dollar’s pullback from two-week highs also helped commodities. A lower greenback favours non-U.S. buyers by reducing the price of dollar-denominated commodities.
Brent crude rose 0.7 percent to $62.99 per barrel.
Spot gold was a shade higher at $1.323.06 an ounce.

Thursday, 8 February 2018

Nifty50 Monetary Policy Committee

The Nifty50 which started higher failed to keep the momentum going on Wednesday after the Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 6 percent but highlighted its cautious view on rising inflation.

The Nifty50, which opened with a gap on the higher side at 10,607, rose marginally higher to hit an intraday high of 10,614. The bulls soon took over D-Street and pushed the index below 10,500 levels in the last 1 hour of the trading session. The Nifty closed 21 points lower at 10,476.
According to Pivot charts, the key support level is placed at 10,410.73, followed by 10,344.77. If the index starts to move higher, key resistance levels to watch out are 10,578.33 and 10,679.97.
The Nifty Bank closed at 25,670, down 0.55 percent. Important Pivot level, which will act as crucial support for the index, is placed at 25,459.27, followed by 25,248.53. On the upside, key resistance levels are placed at 25,979.57, followed by 26,289.13.
US markets end lower after week's wild start
US stocks ran out of steam on Wednesday after an early surge, in a sign that investors are still spooked by the market’s recent retreat and wary more fallout is to come.
The Dow Jones Industrial Average fell 19.42 points, or 0.08 percent, to 24,893.35, the S&P 500 lost 13.48 points, or 0.50 percent, to 2,681.66 and the Nasdaq Composite dropped 63.90 points, or 0.9 percent, to 7,051.98, Reuters reported.
Markets in Asia climb despite softer US lead
Most Asian indexes climbed early on Thursday after last session's rally stalled late in the trading day. The Nikkei 225 jumped 0.74 percent after closing barely in positive territory in the last session while the Kospi gained 0.85 percent after finishing in negative territory on Wednesday, CNBC reported.
SGX Nifty
Trends on SGX Nifty indicate a positive opening for the broader index in India, a rise of 47 points or 0.45 percent. Nifty futures were trading around 10,498-level on the Singaporean Exchange.
Growth to accelerate, but inflation threat looms: RBI
Inflation outlook clouded by several uncertainties on the upside, including higher minimum support price for farmers, and a higher than expected fiscal deficit figure for 2017-18 as well as 2018-19. December quarter average inflation at 4.6 percent, and March quarter estimated at 5.1 percent. This is higher than the 4.3-4.7 percent range for the second half of this fiscal, projected in the previous RBI policy.
Economy is on recovery path, including early signs of a revival of investment activity. Global demand improving, which should help strengthen domestic investment activity.
DoT to seek Cabinet nod on new telecom policy by April: Telecom Secretary
The telecom ministry said it hopes to place the proposed New Telecom Policy before the Cabinet for approval by April. Terming M2M as being a fast-evolving area, the Telecom Secretary said that taking a license heavy approach for it may not be appropriate as it may restrain the growth of the new age technology.
BSE asks MF investors to submit PAN, Aadhaar by March
BSE on Wednesday asked mutual fund investors to submit PAN and Aadhaar by March 31, 2018, failing which their folios would be closed. For new mutual fund's accounts opened from February 15, this year onwards, investors are required to submit their PAN and Aadhaar number, at the time of opening such folio itself, without which no new account would be opened.
Govt amends IBC for better realization of stressed assets
The government has amended regulations under the Insolvency and Bankruptcy Code to introduce the concept of fair value and ensure better realizations for assets undergoing resolution.
Lenders are in the middle of finalizing resolution plans for 11 of the 12 accounts that were referred to the National Company Law Tribunal for early insolvency proceedings, following the Reserve Bank of India’s directive in June 2017, Mint reported.
DBT payments cross Rs 1 lakh cr in ’17-18
Payments made by the government into people's bank accounts through Direct Benefit Transfer (DBT) have crossed Rs 1 lakh crore in this financial year. The government is expected to announce soon that it has saved almost Rs 75,000 crore through DBT since 2014.
DBT payout figure stood at Rs 1,00,144 crore on Wednesday, up from Rs 74,707 crore in 2016-17 and Rs 7,367 crore in 2013-14, when the UPA was in power. A senior government official said that the final DBT payout for 2017-18 could reach Rs 1.2 lakh crore, a 60 percent increase over the previous year, Economic Times reported.
Rupee falls for 5th day to hit 2-month low
The rupee failed to hold onto its early gains and fell back to end at a fresh two-month low of 64.28 after the Reserve Bank sounded a more hawkish tone amid upside risks on inflation.

Earlier, the Indian currency opened higher at 64.12 as compared to Tuesday's close of 64.24 at the Interbank Foreign Exchange (forex) market on fresh bouts of dollar selling by exporters and banks.
Cabinet approves auction of 60 oil and gas fields
The Union Cabinet approved offering of 60 oil and gas fields of ONGC and Oil India Ltd, among others in the second auction of Discovered Small Field round.
Out of the 60 fields, 22 were discovered by Oil and Natural Gas Corp (ONGC), 5 belong to Oil India Ltd and 12 are relinquished fields/discoveries from blocks offered in bids rounds under New Exploration Licensing Policy since 1999, an official statement said.
Galaxy Surfactants to make market debut today
Galaxy Surfactants will make its stock market debut on Thursday after concluding its initial public offer last week. It was subscribed 20 times during January 29-31. ICICI Securities, Edelweiss Financial Services and J M Financial Institutional Securities managed the company's issue.
Mutual funds add Rs 1.06 lakh crore in January
Assets under management for the mutual fund industry rose by Rs 1.06 lakh crore, touching Rs 22.41 lakh crore for the month of January reports industry body AMFI.
Balanced funds saw some moderation in inflows, seeing flows of Rs 7665 crore as compared to Rs 9756 crore in December 2017, as investors turned cautious with valuations soaring, Economic Times reported.
220 companies likely to report Q3 results today
As many as 220 companies are scheduled to report results for the quarter ended December later today which include names like ACC, ABB India, Andhra Bank, Bharat Forge, BHEL, Cadila Healthcare, CESC, LT Foods, Future Consumer, Glenmark Pharma and JBF Industries among others.

Wednesday, 7 February 2018

Alpha Nifty 50

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Nifty Look Out

Today Nifty Look Out 

Nifty Open with 10,583.55 The 50-share NSE  Nifty recovered sharply from lows for the second consecutive day in a row on Tuesday suggesting accumulation by market participants at lower levels. The index formed a bullish candle on the intraday charts as the closing level was higher than the opening level.

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Tuesday, 6 February 2018

Oil giant BP

Oil giant BP sees annual profits soar to £4.4bn

Annual profits at BP have more than doubled in the space of a year - rocketing to £4.4bn in 2017 on the back of higher oil prices.

The British energy company has been buoyed by a recovery in the crude oil market, helping profits rise dramatically from the £1.9bn recorded in 2016.

BP is the latest oil major to benefit from climbing prices, with Tuesday's results marking one of the strongest years in the company's recent history.

Last month, Brent crude hit $70 (£50) per barrel - its highest level in more than three years.

Bob Dudley, the group chief executive of BP, said: "This has been a really, really good year and it sets us off very well to enter into 2018.

"We enter the second year of our five-year plan with real momentum, increasingly confident that we can continue to deliver growth across our business, improving cash flows and returns for shareholders out to 2021 and beyond."

BP's earnings were also given a boost after seven new projects came on line during 2017 - with oil and gas production in the fourth quarter rising by 18% to the equivalent of 2.58 million barrels of oil a day.

For the full year, production costs per barrel tumbled by 16% to $7.11 (£5.09), with BP's output reaching its highest level since the year of the Gulf of Mexico oil spill.

The company is still suffering financial ramifications from the disaster, incurring $3.18bn (£2.28bn) of Gulf-related costs in 2017. In total, BP has now paid more than $65bn (£46.5bn) in fines and compensation to businesses.

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Mayhem on Dalal Street as Sensex

The brutal sell-off in the Indian equity market was largely on the back of the US market giving way with the S&P 500 and Dow Industrials indices slumping more than 4 percent, as the Dow notched its biggest intraday decline in history with a nearly 1,600-point drop and Wall Street erased its gains for the year.

It was mayhem, a disastrous Tuesday for the Indian markets. The Sensex tanked over 1000 points in the morning trade while the Nifty nose-dived 300 points.
The brutal sell-off in the Indian equity market was largely on the back of the US market giving way with the S&P 500 and Dow Industrials indices slumping more than 4 percent, as the Dow notched its biggest intraday decline in history with a nearly 1,600-point drop and Wall Street erased its gains for the year.
All sectoral indices were trading lower by at least 2 percent with Nifty realty slumping over 4 percent dragged by stocks like DLF, Indiabulls Real Estate and HDIL, each tanking over 5 percent. Unitech, Sobha and Delta Corp were the other losers.
Bank Nifty dipped 3.2 percent led by Axis Bank and Canara Bank, falling over 4 percent each while SBI, PNB, Yes Bank and IndusInd Bank were the other top losers.
The top Nifty losers included names like Tata Motors which fell 7.11 percent followed by Axis Bank and Indiabulls Housing Finance, each shedding over 4.5 percent. UPL and Yes Bank were the other losers.
The top Sensex losers were Vakrangee which tanked 10 percent while Adani Power and Dilip Buildcon were down over 7 percent each.
The top Sensex gainers included Religare Enterprises which added 3.16 percent followed by Astral Poly Technik which added 2 percent.
139 stocks hit new 52-week low on NSE including Allahabad Bank,  Castrol India, Exide Industries, Fortis, IDFC twins, India Cements, LIC Housing Finance, PTC India Financial, Tata Motors, Union Bank and Suzlon Energy.
On the BSE, 158 stocks hit fresh 52-week low including names like Srei Infra, Tata Motors, Fortis Healthcare and Cosmo Films among others.
The market breadth was in favour of the declines on Tuesday morning with 84 stocks advancing while 1545 stocks declined and 381 stocks remained unchanged. On the BSE, 173 stocks advanced while 1947 stocks declined and 67 remained unchanged.
In an interview to CNBC-TV18, Sanjay Mookim of BofAML said that the pace of the decline in the market is astounding. He expects earnings growth in FY19 to be better than H2FY18 while he has a Sensex target of 32,000 by end of 2018.
When markets are underperforming, low PE stocks will perform well, he said, adding that this is not the time to buy midcaps.
Sanjay Mookim further added that divestment number looks relatively high if only it is done through secondary markets. Dynamics of Indian market and earnings environment are secondary to global markets.

Monday, 5 February 2018

Market Live: Ideal Stock

Vakrangee, Inox Wind, HCC, IFCI, Westlife Development, Union Bank of India, Gujarat Gas, Future Consumer and Jain Irrigation were down 2-10 percent.

PC Jeweller rallied more than 20 percent in early trade on huge buying, after the stock hit hard in previous session.

On Friday, the stock fell close to 60 percent intraday but recovered later to close with a loss of 24.40 percent post management positive comments and clarified on relation with Vakrangee that has been facing some issues.
9:15 am Market Check: Benchmark indices opened the week sharply lower on Monday, with the Sensex falling more than 500 points, tracking weakness across the globe.

The 30-share BSE Sensex was down 527.75 points or 1.50 percent at 34,539 and the 50-share NSE Nifty fell 166.40 points or 1.55 percent to 10,594.20.
About five shares declined for every share rising on the BSE.
Vakrangee, Inox Wind, HCC, IFCI, Westlife Development, Union Bank of India, Gujarat Gas, Future Consumer and Jain Irrigation were down 2-10 percent.

Friday, 2 February 2018

Disappointment For Investors

Udayan Mukherjee decodes Budget 2018

The Budget has taken India’s middle class out of equation and is a disappointment for investors, senior journalist and market expert Udayan Mukherjee told Santosh Nair, analysing an event that has been dubbed ‘election Budget’.

Q: What is the overall takeaway from the Budget? Has Arun Jaitley managed to do the tightrope walk between fiscal prudence and populism?

My sense is that this is an election Budget. There is not too much in it for either the middle class or the investing class or indeed corporate India. It is very squarely targeted at the farming community and rural India. The Budget speech started with that and it set the tone for what the Budget will be all about. It was pretty much all about rural India, big schemes for them and all that talk about all the stuff which addressed investing India or corporate India or middle class India actually came in the last fifteen minutes which is when the markets started going down because the first blow was that there was nothing for the salaried class. And he said that barring the standard deduction of Rs 40,000, there was not much more. So the middle class went out of the equation.Then came the blow on the fiscal deficit. The market was prepared for some slippage, but 3.3 percent for next year is a slippage which is more than what the street had pencilled in and therefore it was mildly disappointing and the bond yields started going up then. And then came the long-term capital gains tax of 10 percent which, though they feared it, most people thought would not come and it did come about. So the combination of those three things will make this a Budget which was not very palatable for middle class or for corporate India or for investors, but for farmers and for rural India, it would go down as a very good Budget.Q: So a lot of announcements for the farming community. What kind of impact do you see this having? Some feel that if you fix the rural problems, automatically there is a trickle up effect whereby the larger companies and the economy as a whole benefits, but there is also then the problem of food inflation. So what is your overall view on this?
A: I think it needed to be done because the rural distress has been around for quite a while now and is not getting better. Just this morning, one of the big companies of India, Dabur, which has a big presence in the rural sector, actually mentioned that for the last three quarters, things have actually not been improving for rural India. So that gave you a sense that however much we dice and slice the numbers, there was a big problem with rural India and farmers were not feeling good. You could see shades of that in the Gujarat elections as well.

Now I do not think Narendra Modi could have faced another national election with the kind of mood that exists in rural India right now. So farm waivers aside, something had to be done. So the big step out there is the minimum (India’s Best SEBI Registered Investment Advisorsupport price (MSP) hike to 1.5 times production costs for all Kharif crops.

For a growth turnaround to happen, we will probably have to wait for Kharif now which is many months away. Assuming that farmers actually do get 1.5 times production costs for the Kharif crop, you will see some kind of a growth rebound. But I think the more important thing is that the announcement has been made. I do not think this project has been adequately funded yet though -- because the DEA secretary stopped short of giving us a number for the entire allocation. Many of these schemes which has happened for the farming community have actually not… the funding has not been specifically cleared in the Budget statement. So we will have to see how the funding comes about. So eventually when the Kharif happens, maybe we will see some kind of growth impetus coming into rural India.More immediately, the problem is that talk of MSP coming about at 1.5 times is going to stoke the bond yield because people will already start talking about inflationary pressures. On top of that, there has been fiscal slippage. So, a combination of these things will probably mean that the era of lower interest rates is over for good and the next move from the RBI will probably be on the way up and therefore, all expectations of a growth rebound have to be seen in the light of the fact that the cost of capital will go up in 2018.Q: Strangely the market seemed to take the long-term capital gains tax (LTCG) blow in its stride. You saw the Sensex fall by about 400 points and then come back very quickly. So has this announcement been digested?
A: There are two points I would make out here. One is that the government actually understands the stock market very well. So I think the Finance Ministry knew that when they make that capital gains announcement, the market would fall once, it would tank. And we will not ever get to see the numbers, but there is support today for the stock market from many government agencies. I think LIC, SBI, many of these players would certainly have been instructed to support the market somewhat today. It cannot beyond a point, but at least on the day of the Budget, you could play some kind of a salvage or rescue operation. Coupled with the fact that a lot of people sold before the Budget anticipating the long-term capital gains tax, the last two days, the midcap and smallcaps have actually taken it on the chin. They have been falling quite a bit.So it is possible that some people who sold before the Budget might be covering up their positions now or buying afresh the stocks that they sold before the Budget. So I think it is a combination of a bit of short-covering, some bit of optimism because of the rural piece that we spoke about and a lot of rescue operation from the state-owned agencies which is why the index managed to stage an intraday rebound.Q: Also, there is a general feeling that investors are not really better off selling today. It does not really matter. That is probably one of the reasons that you saw the market hold up.
A: Yes, because the damage has been done. Now for subsequent investments that you make, you will pay long-term capital gains tax whenever you sell if it is more than one year. For people who are holding stocks earlier, it does not matter if you sell today or you sell one week later because till January 31, your profits are protected. After that any incremental profit will attract the LTCG tax. So, any selling that we saw at the announcement was actually a knee-jerk sentiment sell off that disgust, that LTCG has come in. Beyond that, people figured out that now, we will have to deal with it.So, it is an important question you ask because it will determine whether mutual funds continue to get the kind of inflows that they have been getting for the last year, year and a half, because that is one of the main reasons our stock market has been holding so high. If the space of inflows goes down for a few months because of a feeling that it is not such an attractive asset class as it used to be then it has ramifications for the stock market. So let us not judge the public sentiment reaction just by today's performance. Let us wait for a week, 10 days to see how the market digests this one.Q: You mentioned the midcap stocks just a short while back. Now, has the picture changed? We have seen these stocks coming under a bit of selling pressure for the last few days now.
A: My sense is it is partly because of a couple of reasons. One is that there is a general understanding now that midcap valuations and smallcap valuations have run way ahead of fundamentals. Now they could have gone up even more, but partly what has happened is that largecap earnings have started recovering. In the last one year what has been happening is that the Sensex and Nifty earnings have not been going up. So the street essentially had the view that if largecaps are not seeing earnings growth, we might as well buy midcaps where there is more growth and there was demonstrable growth in many of the midcap companies. Therefore their valuations went to a significant premium to their largecap peers.Now, two things are happening, a realisation that midcap valuations have gone up to very significant premium, in many cases trading at 35-40 times when their largecap peers are at 20 P/E. So there is a little bit of an adjustment because of that. Also, in January, 2018, what has happened is that foreign institutional investment (FII) money has started coming back. In January, we have seen USD 1.5 billion of inflows. FII money usually goes into largecaps. On the other hand, domestic inflows into the market has slowed down a bit and therefore, midcaps have started to ease off a little bit and FII-fuelled buying of largecaps has driven largecaps higher. So we are seeing this rotation in January on account of all these factors, the valuations premium, the earnings coming back to largecaps, FII money coming back versus domestic institutional investment (DII) money in January.Q: So what is the signal that we are getting from the bond market? Is the equity market ignoring that?
A: It is the big question for 2018. Where will bond yields go up, not just locally, but also internationally? The biggest risk for 2018 for the equity market in India and the US and elsewhere is from the bond market. If US growth is picking up, globally growth is picking up. If that means that central banks there, start to think of winding down asset purchases at a more accelerated pace, if that means that interest rates and the bond yields start to go up in the western world, if the dynamics that we are discussing out here, the fiscal slippage, the inflation going up, that means that Indian bond yields go up. They are already at 7.5 percent plus, last I checked. If that goes up to 7.75 or something like that, then you are having a situation where cost of capital is going up which is never good for equities. The markets digested it so far but if this continues in the US, US bond yield is very important to us and if the local bond yields continue to go up, at some point the equity market will run into trouble.Q: Speaking of rising interest rates, just a couple of days back SBI increased rates on bulk deposits and again, is the mood for equities itself changing slowly because rising interest rate is never good news for the stock market?
A: It is, so that is what I said that the bond yield is a very important factor. Now we will see whether lending rates start to go up because so far we have seen a big jump in the deposit rate. Usually that leads to a jump in the lending rate as well. So we will have to see if banks pre-empting any kind of a RBI move actually and because of the bond yields having gone up start to tighten interest rates in the local market, which at some point will have to be calculated by or have to be factored in by the equity market as well.Now, two things can counter this. One is that even if bond yields go up, if there is a dramatic turnaround in the earnings growth picture, if in the next couple of quarters the market feed starts to feel sanguine, that we are going to get 20 percent plus earnings growth in FY19 then I think we may have a situation, fuelled by local liquidity and with the hope of earnings growth recovering that the market might choose to ignore the initial rise in interest rate. It is a material factor, but it can be glossed over if the market continues to move well.So, I think there are few risks. One is of course, interest rates going up. The other is capital gains tax which has come in. the third is the global angle. If all three come together at the same time, you could have a meaningful correction in the stock prices. I do not know whether the trend will change, but a 10 percent kind of correction which we have not had for the last 14 months or so, is entirely a possibility.Q: So a bit of disappointment for corporate India as well, the much expected reduction in corporate tax rate did not really come through although there has been some relief for small and medium enterprises. So what is your view on this? Will this really help the situation at the ground level if the smaller companies are given more incentives?
A: It may on the margin, but it seems like the way the Finance Minister put it that it will work now for 99 percent of companies, up to the threshold of Rs 250 crore revenue, but in actual terms it leaves out all the big companies of India which probably make up for 90 percent of the total corporate tax generated or 75 percent of the tax generated. So the government has still not kept its promise which it made to corporate India that the tax for all companies will come down to a level of 25 percent.Now, whether the government given its very constrained fiscal situation is in a position to do that over the next year or two, we will have to see. But I doubt very much that will be the case, because already it is a lot of pressure because the government is announcing so many schemes. Where will the money come from? You cannot go on announcing new schemes for rural India and at the same time, keep leaking tax revenues. So I do not see this reduction for the large companies at least coming in. I think corporate India will be quite disappointed today, but it is not a big deal in that sense because companies will pay the same tax as they paid last year. In the kind of situation that rural India finds itself in, do they need the money more than corporate India? The answer would have to be yes.So on balance, the government has done the right thing, particularly because it has an election coming up in the next few months which is another point which a lot of the political commentators will try to understand today or grapple with today is the kind of focus that we have seen on rural India in the Budget, is the Modi government signalling that we are probably going to have elections in the fag-end of 2018 calendar? Could this be the poll bugle to say that we are moving toward simultaneous polls between general elections and Madhya Pradesh and Rajasthan polls in November-December, 2018? It could very well be the case given the complete focus on rural India to the exclusion of everything else today.Q: Now third quarter numbers were slightly better than what most analysts were expecting, but then there was also the base effect to that and if you read the economic survey, it has clearly mentioned that pick up in private sector investment, that still it will take some time. So overall, what is your outlook on the earnings pickup? Do you see that happening any time in the foreseeable future?
A: This quarter has actually not been bad. Particularly for some sectors -- like Larsen and Toubro's (L&T) numbers were quite good which is encouraging after a long time because that is a sector which has been languishing and it is such an important wind vane for the investment or capex cycle that we speak of. So, there have been disappointments in this quarter as well, ICICI Bank, United Spirits, some of the cement companies, some of the telecom companies have not done very well. But there is some recovery in earnings in this quarter aided largely by the base, but overall, there is some kind of a demand push also after many months of very lacklustre kind of an earnings momentum. Now whether this continues going forward, we will have to see because one quarter on the demonetisation base does not tell you conclusively that we have turned the corner with earnings.So I would like to see the January-March quarter and most importantly, the April-June quarter. If the April-June quarter is a good one, the first quarter of FY19, that would be very encouraging because then the demonetisation base had started to wear out and if in that quarter we do get a good number, a 20 percent kind of a growth number, then the street will be very happy. But these are the two most important things, locally speaking. Globally we are having a massive bull rally, we are participating in that, but locally it is earnings and the cost of capital which is the bond yield and interest rates, these two, the confluence of these two will determine what stock performance is like this year.Q: The government has been trying to do various things to fix the bad loans problem of public sector banks. What is the general view? Will the recent measures really help the public sector banks overcome the bad loan problems and have their balance sheets up and running in the foreseeable future?
A: I hope so. My mild disappointment stems from the fact that the weaker banks got majority of the capital in the bank recap, the first tranche of Rs 80,000 crore. I would have thought that SBI could have been given Rs 20,000 crore. They got only Rs 8,000 odd crore. So you wanted growth capital in the PSU banking hands. All they got is band aid capital or a large part of that is band aid capital. Now I do not see the UCO Banks and the IDBI Banks of the world actually playing a major role in the loan recovery process that you were alluding to. I think that will have to come from SBI, Bank of Baroda, maybe Punjab National Bank and Vijaya Bank. These are the stronger banks and they did not get a lot of growth capital. So, credit growth is improving. It has gone up to 11 percent from 5 percent.I think they will also be aided by the base, but there will be some recovery in credit growth, but not the amount that one was looking at earlier, so I think the bulk of the credit growth acceleration will still have to be driven by private banks, by non-banking finance companies (NBFC), so we will have to see how this plays out. But for PSU banks, I still think that longer term, we will still have the same problems from the weaker banks. They have got some capital which they will fix their balance sheet, maybe get some resolution deals done, but longer term, not too much in their DNA will change. So five years down the line, your bet is as good as mine on whether they will run up with similar problems they had in the past.Q: You mentioned a short while back that you should not judge the Budget by just today's market reaction. So near-term, what is the outlook on the market?
A: It depends a lot on the global outlook because so far this year, India has underperformed most of the other big emerging markets. Brazil, China, Russia, everybody is doing much better than us partly because of oil, but also because of other reasons. So one was hoping that if the Budget is out of the way without too much damage, India might play catch up with some of the other emerging markets. It seems to me a bit unlikely that that will happen now with the long-term capital gains tax and with the fiscal deficit slippage.So India might amble along, but if the global market rally continues, it would be very unlikely that India, in absolutely terms, actually falls a lot. We might not go up as much as some of the other markets, but I do not think we will have a massive crash in our market. However, for any reason the US bond yield going up or China problems coming to the fore, if we have a global correction, chances of India underperforming in that global correction have just gone up a lot. So, if global markets fall 3-4 percent, it is quite conceivable that India falls 7-9 percent because the mood has got affected a little bit after today.So I do not know what happens today in the market or tomorrow, but over the next few days, all domestic investors will have to ask themselves this question about their net expected returns from the stock market adjusted for long-term capital gains tax now and whether they are feeling a little less bullish than they felt before the Budget. And if the answer to that is yes, you might have a period of consolidation, maybe even a correction. It will not be a bad thing, because already many midcaps have corrected 20-25 percent in the last one week. So even if largecaps let off a little bit of steam, I do not think it is a big deal. But today's Budget, on the margin has probably created more disappointment for stock investors rather than any kind of enthusiasm.