30 Apr 2015
February’s IIP number was surprisingly strong at 5% compared to expectations in the region of 3%. Capital and Consumer Goods were the positive surprises as rate cuts and supply-side reforms laid the groundwork of an acceleration of growth. The March CPI was 5.2% against expectations of 5.5%; fuel prices rose, while food prices continued to fall. The WPI index fell 2.2% as oil and manufacturing prices fell back. The full-year FY15 current account deficit will be 1.2% of GDP. The IMF is forecasting GDP growth in India at 7.5% in FY16, led by rising disposable incomes and investment. Continuing soft energy prices and further monetary easing will maintain growth at the same level in the following year. The transmission of monetary easing is improving as credit growth accelerated towards the end of the quarter. There may be some window-dressing in the numbers as well as some impact from the payment of spectrum allocation premiums but the underlying trend appears to be improving.
Posted by #richardneve at 4/30/2015
29 Apr 2015
Infosys is upgrading its core banking product line Finacle and boosting sales incentives in order to stimulate growth. Lupin will run into increased competitive pressure on its major product line in the US as Aurobindo gets ANDA approval for its SUPRAX biosimilar product. Nonetheless, Lupin expects 25 to 30 new ANDA approvals in the US in the current fiscal year. Meanwhile, the company has launched ZAXINE anti-bacterial tablets in the Canadian market under a licensing agreement. Kotak Mahindra Bank has applied to the Foreign Investment Promotion Board for an increase in its FII limit to 55%.
Posted by #richardneve at 4/29/2015
28 Apr 2015
TCS took the mantle of bellwether from Infosys, reporting a 12.4% increase in revenue and an 11.5% increase in profits. Infosys, when it eventually announced, reported revenues up by just 4.2% and profits ahead by 3.5%. The Indian IT sector is facing revenue headwinds in some markets and budgets are still be trimmed in key sectors. Agro Tech Foods reported sales down by 1.1% but profits ahead by 5.4% as it drives for margin expansion. HDFC Bank reliably reported 21% growth in net interest income and 21% growth in profits; credit quality is stable and network expansion proceeds. Supreme Industries reported sales ahead by 15.4% and profits by 75.2% as it sustained expansion of margins.
Finally, the FII MAT controversy has undermined market sentiment over the past two weeks. It has now been clarified by the Revenue Secretary that in most cases, India’s Double Taxation Avoidance Agreements will apply to FIIs affected by claims for back taxes. In the case of Himalayan Fund, our long-standing favourable treatment under the Dutch/Indian DTAA will continue and the Fund will not face retrospective MAT liability. There are some jurisdictions where the DTAAs will not provide relief, but those with The Netherlands, Mauritius and Singapore definitely will. The current market weakness offers a rare buying opportunity for long-term investors.
27 Apr 2015
Since our last commentary the Indian market has been under the cloud of a threat of the application of the Minimum Alternative Tax (MAT) being applied retroactively to FIIs over eight years past capital gains. Some clarification was eventually forthcoming but in the meantime, the Nifty had shed 475 points to 8305, down 5.4% after trading in a range of 6.9%. Despite the negative sentiment, however, FIIs ended the period with $2.4bn of net purchases of cash equity as domestic institutions joined the party with $560mil of net purchases. Average daily trading volumes went above the long-term trailing average to $3.9bn and rising steadily as buyers took advantage of the pullback. Early results in the IT sector disappointed, which dragged the overall market down, so advances were overwhelmed four to one by declines but selling volumes were heavily concentrated in the IT sector. Volatility also jumped, the India VIX climbing six points to 20 before closing at 19. The Nifty futures closed the period at a premium of 1.5% to cash.
Posted by #richardneve at 4/27/2015
17 Apr 2015
Next week, another holiday-shortened one, we expect to see fourth quarter results in the IT sector but also, Reliance Industries will announce and the market is looking to this one in particular for evidence of a turnaround in the investment cycle. Otherwise, the results are expected to be soft, though we would expect our Consumer, Pharmaceutical and Financial holdings to perform strongly.
Posted by #richardneve at 4/17/2015
15 Apr 2015
The government will shortly re-align the IIP data with the new data series for GDP which was introduce recently. India’s external reserves reached a new high of $343bn in early April; the RBI has been building up the reserves to provide protection against any future external financial shocks. Foreign inflows in the fiscal year ended March 31st amount to more than $16bn, somewhat less than the $19bn+ recorded in the comparable period a year earlier. Overall foreign inflows are expected to accelerate in the current year following the implementation of reform legislation on the insurance, mining and coal sectors.
Posted by #richardneve at 4/15/2015
14 Apr 2015
Moody’s has affirmed India’s rating at Baa3 while upgrading its outlook from 'stable' to 'positive'; this means a ratings upgrade is likely in the next twelve to eighteen months. This will be supported in terms of the fiscal balance by the disclosure that the winning bidders in the recent spectrum auction have paid the aggregate $3bn downpayment for their spectrum allocations. February’s IIP showed industrial output growing a 5% lick, much faster than expected and the highest number for three months. The big contributors were the Capital Goods and Consumer Goods sectors.
Posted by #richardneve at 4/14/2015
13 Apr 2015
Having announced a second 'between reviews' rate cut after the Budget, the proceeding of April’s bi-monthly RBI monetary policy review were restrained but the governor used the opportunity to point out that more cuts were not a 'given'. He is waiting for 'more convincing' inflation data now and highlighted poor transmission of the previous cuts as banks were lagging in passing on reduced lending rates. Some arm-twisting as followed, as major lenders have started to implement deposit and lending rate cuts. On the optimistic side, the RBI affirmed its GDP growth outlook at 7.8% for FY16 as recovery is slowly taking hold. Consumer demand remains muted but new research published in Mumbai suggests that private sector investment plans at an aggregate of $145bn at the end of March were running about 80% higher than the previous year.
The holiday-punctuated Easter period featured some FOMC minutes as well as a policy review by the RBI, on the heels of another repo rate cut. The Fed’s output was followed by soft employment numbers for March, which cooled the “taper tantrums” and boosted equity markets. In India, following the rate cut after the Budget, the markets slowly sloughed off a three-week downtrend, to bring a steady advance. April saw the Nifty add 437 points to close the week 5.3% ahead at 8778, which was the top of the trading range. Average daily trading volumes hit the twelve-month trailing average, at $3.7bn as FIIs (+$128mil) and domestic institutions (+$61mil) were both on the buyside in the cash equity market. Market breadth was very strong, with advancing stocks outrunning decliners by four to one. Selected stocks were heavily traded: consumer goods and some banks, for example but generally it was a broad-based rally. Volatility stayed relatively low with the India VIX trading mostly to the downside of its opening, closing a point down on the week at 14. Index futures closed at a modest premium of just 1% to cash.
12 Apr 2015
Amongst the portfolio holdings of Himalayan Fund NV, Pidilite plans to invest more than $15mil in Nina Waterproofing Systems, taking its shareholding up to 70%. Bajaj Auto reported March unit sales dropped by 22% compared to t year earlier period: the market had been well prepared for the news, so the stock responded positively. ICICI Bank will be the first to introduce voice recognition security procedures for its electronic banking services.
Posted by #richardneve at 4/12/2015