16 May 2017

Novartis sells to Torrent Pharma

Kotak Mahindra Bank has bought out Old Mutual of the UK from its minority position in their life assurance joint venture for a consideration of USD 200mil.The leading private sector bank has announced   a qualified institutional placement of 62mil shares at 913 Rupees a share to raise an expected USD 1bn in new capital. Nestle will try to reduce its dependence in India on the Maggi brand by introducing some of its 2000 globally branded products. Lupin has received USFDA approval to market its generic Olmestan Medoxomil blood pressure lowering drug in the US market. Following an inspection of its Aurangabad facility in Maharashthra Lupin was served a 483 letter with eight observations. Torrent Pharma has acquired two popular women’s’ healthcare brands for the Indian market from Switzerland’s Novartis AG.

Infosys hiring 10,000 technicians

Tacking into policy headwinds in the US, Infosys announced that it would be hiring an additional 10,000 US national technicians and opening four new technical centres, starting with Indiana in August. Meanwhile the company has started its annual performance appraisal process in India, which could see hundreds of underperformers losing their jobs. 

15 May 2017

HCL Technologies as bright spot

Results announcements included Agro Tech Foods which reported sales just 4.1% up and profits ahead by just 1.1% as demonetization effects came into play. Shemaroo Entertainment saw sales down by 4.1% and profits don by 16.4% as advertising revenues were cut back sharply due to the currency withdrawal. One bright spot was HCL Technologies which distinctly for its sector reported a robust 12.7% revenue growth and a 20.9% advance in profits. Earnings guidance from HCLT was also strong.

Annual Report, Euronext / London Stock Exchange

Himalayan Fund’s 2016 annual report is available for download from the Fund’s website: www.himalayanfund.nl.

Domestic liquidity sustaining force in Indian equity

India’s telecom subscriber base had grown to 1.18bn at the end of February. April’s Nikkei Purchasing Managers showed continued expansion. The Manufacturing Index was 52.5 slightly up from March and the Services Index was 50.2, down from 51.5 in March, but expanding nonetheless. Mutual fund managers bought USD 1.6bn of equities in April compared with a total of USD 6.3bn for the whole of the year ended March 31st. This is further evidence that domestic liquidity is becoming a sustaining force in Indian equity markets and the timing suggest strongly that demonetization has made a strong contribution. April’s mutual fund inflows of USD 1.5bn were largely driven by burgeoning sales of regular savings plans. This augurs well for the ability of Indian markets to withstand the effects of volatile global liquidity.

Low volatility and record highs

Global equity markets have been experiencing very low volatility while major markets have been hovering around record highs. US economic data continue to be a dominant influence and this week we saw mild inflation data and lower than expected retail sales numbers. Soft figures are considered too late to influence Fed policy, however, so markets are ready for another rate rise in June. In India the Nifty closed 97 points up at 9401 for a 1% advance after trading in a range of 1.9%, including a high of 9450. Average daily trading volume was USD 4.7bn, still well above the trailing average of $3.8bn a day. Foreign portfolio investors were small net buyers, of $38mil, while domestic institutions sustained their steady buying, adding USD 155mil. The India VIX traded in a narrow range again, from just below 11 to just over 12 before ending at 11, for no change. Market breadth was narrow, with advances just ahead of declines and points’ contributions to index movement widely spread. Once again, Nifty futures closed at a slight premium of just 0.4% to cash.

4 May 2017

GST will make markets volatile

Indian equities have appreciated to 2.7% of global market capitalization, compared to a trailing six-year average of 2.1%; rapid growth in aggregate capitalization suggests the market will continue to be supported by inflows from ETFs and index funds. A study by the US Federal Reserve estimates that the introduction of nationwide GST will boost GDP by up to 4.2% over time as lower taxes on manufactures boost output and reduce the cost of products. The introduction of GST on July 1st will probably lead to some destocking in June, an increase in working capital, a boost to market share for larger companies and an increase in compliance costs.

3 May 2017

HCL, Singapore Exchange, Andhra Pradesh: all good news

In corporate news, HCL Techno has signed a memo of understanding with the government of Andhra Pradesh to establish a campus in the Vijayawada-Amarati region. The company has negotiated a five-year extension to its IT services engagement with the Singapore Exchange. HCL also announced the acquisition of US based Urban Fulfillment Services for a consideration of up to $30ml. Lupin’s Goa plant as undergone a USFDA inspection for the third time in fifteen months. The latest F483 letter raised three observations which are mostly procedural but Goa produces 63% of Lupin’s US sales. The company has received USFDA approval for its generic version of Novartis’ TOBI inhalation solutions as well as for a generic version of Wellbutrin XL tablets which have US market sales volume of $755mil a year. The stream of approvals continued with approval for two generic treatments for HIV-1. Aurobindo Pharma also received a F483 letter for its Hyderabad facility; this one had six observations. At the same time, the company got USFDA approval to market two generic extended release tablets. Staying in the Health sector, Torrent Pharma is close to finalizing a deal to acquire Novartis’ women’s healthcare portfolio in India.