24 Mar 2016

50.000 new 150cc bikes

In the corporate sector, Bajaj Auto is looking to sell 50,000 units of its new “V” bikes in the 150cc segment in the domestic market before pushing the brand into other segments. Tata Sky and Shemaroo Entertainment are cooperating to launch a new comedy channel. TCS is to provide hands-on computer science programmes for Boy Scouts of America using its goIT platform. FPI holdings in the stock of Kotak Mahindra Bank have fallen back below its foreign holdings limit so all restrictions on FPIs trading in the stock have been lifted. Axis Bank is realigning its work environment and culture with the burgeoning world of start-ups by introducing flexible rules and work environments. Lupin has had a USFDA inspection of its Goa manufacturing facility which drew nine observations on inadequacy and of and adherence to standard operating procedures. 

23 Mar 2016

Well-received Union Budget

Economic data included the disclosure of an IIP print showing a decline of 1.5% in January, the third successive monthly decline. Capital Goods numbers were weak, but the continuing decline is also attributable to the aftermath of severe flooding around Chennai in Tamil Nadu; a major manufacturing hub. Consumer Price Inflation produced a positive surprise in February, coming in at 5.1% compared to 5.7% the previous month after a sharp fall in food prices. Wholesale Price Inflation recorded its sixteenth successive month of contraction at -0.9%.The broadly well-received Union Budget and the sustained benign inflation environment has raised expectations of a further repo rate cur by the Reserve Bank of India by the next monetary policy review in the first week of April. This would put a floor under the equity market while providing a sharp boost to bank profitability from treasury gains on their substantial SLR holdings of government bonds.

22 Mar 2016

Business is chaining in #india

The FIPB cleared 16 FDI proposals worth $2bn, including landmark decisions in the Insurance and Banking sectors. Nippon Life’s proposal to increase its holding in Reliance Life to 49% was approved as was an application by Yes Bank to increase its foreign investment holding limit to 74% following the introduction of the new limit in November. The Lok Sabha has passed the Aadhar Bill, a money bill which institutionalizes the uniform identity process with statutory backing to be used for transmission of all subsidy and cash benefit payments. As a money bill, the instrument automatically becomes effective after fourteen days. On coming into effect, the Act will facilitate the elimination of the massive fraud which has characterised the whole benefits system for years. The Healthcare sector was hit by a government ban on the sale of almost 350 fixed dose compounds (proprietary over the counter medicines) over safety concerns. Several producers have taken to the courts to have the ban overturned. Overseas funds may now appoint domestic Indian managers without being treated as resident for tax purposes following the notification of new rules to come into effect on April 1st.

21 Mar 2016

Looking good!

The prospects for Indian equity markets look favourable in the short term as continued fiscal consolidation and monetary easing combined with public sector investment provide a basis for earnings recovery in the medium term.

Recovery in foreign buying

US equities advanced for a fifth successive week on the back of a sharp recovery in the price of oil though other major markets were more subdued. India has seen its third successive week of gains in equity markets, sustained by a strong recovery in foreign portfolio buying. Over the last two weeks, the Nifty gained 119 points to end 1.6% ahead at 7604 after trading in a range of 2,8%. Average daily trading volumes were a bit lower than the recent level at $2.9bn in spite of a sustained recovery in buying by foreign portfolio investors (FPIs) who bought a net $694mil as domestic institutions sold a net $704mil. In March alone so far, FPIs have bought a net $1.5bn of cash equity, reversing their pattern of the first two months of the year. Market breadth has been strong with advances outrunning declines by two to one; upside concentration was evident in banks and IT while Healthcare was a major detractor from index performance. Volatility was stable to soft, the India VIX edging slightly up from its opening of 18 then drifting down to a low of 15 before ending at 16 for a fall of two points. Nifty future closed at a premium of 1% to cash.

10 Mar 2016

India’ stock market bargain-basement

After the budget brought a strong relief rally, India’ stock market bargain-basement may have been cleared but the rally should be sustained by widespread expectation of more interest rate cuts. The next monetary policy review is later this month and the Budget included amendments to the RBI Act to clarify the operating framework. The primary objective is clear: “…price stability keeping in mind the growth objective...”

9 Mar 2016

Corporate news: #axis, #Mitsui, #TCS, #GEdigital

Away from the Budget, Axis bank increased its shareholding in Max Life Insurance, India’s largest life company by 4.99% to 5.99%; the other shareholders are Max Financial with 68% and Mitsui Sumitomo of Japan with 25%. The overseas property arm of Indian Hotels, Samsara Properties, sold $12mil of shares in its subsidiary Belmond to reduce debt. Lupin is to establish a manufacturing plant in Japan to boost its expansion plans in the country.. TCS has joined the GE Digital Alliance Programme to develop innovative digital solutions to boost productivity of mobile workforces by leveraging the GE cloud platform, Predix.  Bajaj Auto increased sales by 9% in January, in spite of a contraction in export sales; new model launches are helping to gain domestic market share.

8 Mar 2016

Expanding rail infrastructure

In advance of the Union Budget, as tradition holds, the budget for Indian Railways was promulgated, the key element of which was the sustained acceleration of infrastructure development: track-laying has reached to 7km a day from 4.3 km/d over the past 6 years. The target is 13km/d in the short term and 19km/d by 2019. Stronger economic indicators accompanied the budget aftermath, with core industry growth reaching 2.9% compared to 2.3% the year before as coal, cement and electricity output grew strongly. Against slowing numbers in Asia, India’s Manufacturing PMI index was a standout in February, holding at 51.1 compared to China’s which registered 49.

7 Mar 2016

Urban consumption still strong

After two poor monsoons expenditure provisions were heavily directed towards the farming community with support for agriculture and expansion of rural employment programmes. Rural consumption has been weak by comparison to urban so the government is determined to spread consumer demand evenly through the economy and sustain this key demand driver. The fiscal prudence was read by the market as laying the groundwork for further monetary easing so the yield on government bonds retreated by fifteen basis points.

No change capital tax regime

The overall thrust of the budget was policy stability as the target for the fiscal deficit was held at 3.5%. Contrary to earlier rumours, there was no change to the capital tax regime, where the holding period to benefit from long-term capital gains treatment was unchanged at one year. Also, there was no increase in Service Tax as had also been heavily trailed. In continuance of the recent attack on black money held abroad, a voluntary reporting regime will be introduced, with proceeds taxed at 45%.  Other provisions include confirmation of a $4bn commitment to recapitalization of PSU banks, suffering heavily from the RBI’s new bad debt provisioning rules. PSU enterprise stake sales will be accelerated when market conditions allow and cigarette duty was raised by 10-15%, considered as a bit of a let-off for ITC.

6 Mar 2016

Advances outran declines

Global markets had a steady week, mostly in the black, as investors took on risk for the first time in weeks. India had the added excitement of the presentation of the Union Budget at the start of the week after a lead-in almost devoid of the customary leaking. The Nifty was strong on the day and upward momentum was sustained through the week as mature reflection showed it was a “…balanced and pragmatic…” budget. The Nifty added 455 points for the week, closing 6.5% to the good at 7485 after trading in a range of 10%. Net buying was sustained through the week by both foreign portfolio investors and domestic institutions pushing the average daily trading volume in the cash market well above the recent trailing average to $3.6bn. FPIs bought a net $313mil and domestic institutions a net $101mil, driving excellent market breadth as advances outran declines by 9 to one. In the immediate aftermath of the budget, however, there was notable concentration in selected counters, such as ITC, Reliance and some banks which were perceived to be beneficiaries. Volatility subsided from recent levels: the India VIX opened at its high for the week of 22 before dropping back down into the teens to close at 18 for a fall of four points. The strength of the rally overtook the futures market, though, where the three-month contract ended up at a premium of less than 0.5% to cash.

3 Mar 2016

Lupin is moving forward in #generics

Lupin is increasing investment in specialty generics and biosimilar development; it has 225 ANDA filings of which nearly 100 are due for approval, with a pipeline of ten biosimilars pending. US market sales growth is projected at 30% per annum. Following the acquisition of Gavis, the company will divest two generic products to meet the FTC terms for allowing the acquisition. Meanwhile, the company is also increasing its commitment to the Japanese market.

Element Financial selects #TCS

TCS has been chosen by Element Financial of Canada, one of North America’s largest fleet management businesses, to enhance and develop its fleet management platform for mobile, web and tablet devices. HCL Tech and Symantec are expanding their cooperation to help enterprises with cloud security, cyber threats and forensic solutions to protect against targeted attacks. The Capital Region is adding 2000 CNG powered buses to its urban transport fleet, encouraging growth in private car conversions and expanding the odd-even days plan in moves which are likely to boost sales growth for Indraprashtha Gas by as much as 10% per annum. The company is planning to seek licenses to operate in urban areas in other states. 

2 Mar 2016

E-commerce new fronteer in India

ICICI Bank has seized some 275 acres of development land worth about $250mil belonging to Jaiprakash Associates to help reduce its bad debt exposure. Following the award of a payments bank license to Airtel M Commerce Services by the RBI, Kotak Mahindra Bank announced that it had subscribed for a 19.9% stake in the mobile banking services unit of Bharti Airtel. E-commerce statistics show that Indians spent $48bn on internet purchases in 2015, a 68% increase on the previous year.

Tough times for corporates

Nestle lost 35% market share in instant noodles last year. As its Maggi brand suffered a major recall in the face of regulatory inspection problems. The company has re-launched the products with an aggressive marketing push, yet will find it hard to recover its previous market share of nearly 80% as competitors took advantage of the recall. Pidilite has taken price cuts of 4-8% in its Construction Chemicals products which account for 20% of sales. In the absence of apparent competitive pressures, this looks like an aggressive push for market share, taking advantage of lower raw materials costs. Supreme Industries will find it difficult to match its medium term sales objectives, also because of the sharp falls in input costs for its plastics products. The company is still expecting compound growth rates in volume sales to be better than 14%.

1 Mar 2016

Investment in national #highways in India

The Transport ministry is seeking Cabinet approval to sell more than 100 operational toll-road projects to sovereign wealth and pension funds to raise some $7.7bn. The National Highways Authority of India is to raise $500mil in funding for future projects by issuing tax-free bonds. 

#india: GDP 7,3%+

The pre-Budget economic survey was published, showing GDP growth at 7.3% and, prospectively in the range of 7-7.75% next year with the potential to improve further to 8%. The fiscal deficit is expected to hit the budget target of 3.9%. Global commodity prices should allow inflation to remain benign, with CPI in the 4.5-5% range, especially given a decent monsoon, as the El Nino effect is forecast to be neutral. This should allow further monetary easing, supported by sustained fiscal consolidation. The key risks are seen as being continued global economic weakness and the possibility of a sharp recovery in commodity prices, especially oil.