29 Jun 2017

Less smokers in India

The Global Adult Tobacco Survey shows that tobacco consumption in India fell by 6% between 2010 and 2016. The Youth segment (15-24 years) declined by 33% and the Juvenile segment (less than 15 years) by 54%. The biggest impact will have been on ITC which has been expanding its FMCG and leisure business segments. The company is now looking to drive the market share of its Savlon antiseptic towards $100mil in value. Lupin has received USFDA approval to market its generic Oxycodone Hydrochloride painkiller. The company has also launched its Buproprion Hydrochloride extended release tablets for the treatment of major depressive disorders. TCS is collaborating with Intel to design infrastructure reference architecture which will allow customers to rollout Internet of Things, Cloud and AI services. Bajaj Auto has cut the prices of motorcycles to shift stock and to adjust prices to a lower level of taxes which will apply under GST.

28 Jun 2017

Stronger banking regulations

The RBI has initiated action to resolve non-performing loan issues at public sector banks by disclosing that it was moving the banks to take insolvency action against twelve borrowers representing 25% of NPLs. The cabinet has agreed to introduce a Financial Resolution and Deposit Insurance Bill to provide a comprehensive framework for dealing with bankruptcy of banks, insurance companies and other financial companies. The Finance Ministry is encouraging public sector banks with appropriate resources to consider acquiring smaller banks.

27 Jun 2017

Inflation on the way down

A new data series for the Index of Industrial Production (IIP) showed growth of 3.1% in April compared to 3.8% in March. The figure was depressed by seasonal weakness in Capital Goods, which contracted by 1.3%. Numbers may be subdued in the current quarter because of traders discounting heavily to move stock before they have to adjust for GST on July 1st. This may offset any benefit from remonetization, but the combination of remonetization, restocking and rising consumer confidence from a good monsoon may deliver a sharp recovery in Q2FY18. Inflation figures for May showed a sharp fall as CPI came in at 2.2%, mostly driven by a decline of 1.1% in food prices; fuel and power prices rose. Core CPI rose by 4.1% but the below target figures were not enough to prompt any policy rate reduction by the RBI. In fact the MPC minutes showed quite strong resistance. Net Income Tax receipts for FY18 up to June 15 are showing an increase of more than 26% to almost $16bn.

Mixed picture on equities markets

Equities have been mixed over the past couple of weeks as investors reflected on how far markets have outpaced economic policy and data. Indian markets have seen two weeks of mixed trading, a bit flat-footed as investors wait to see the impact of GST adoption on July 1st. The Nifty 50 gave up 93 points to end 1% down at 9575 after trading in a range of just 1.2%. Average daily trading volumes dropped back a little towards the trailing average at $4.2bn as FPIs sold a net $281mil in cash equity and domestic institutions were net buyers of $401mil. Volatility was low as the India VIX again traded in the 9 to 12 range but eventually closed two points down at 9. Breadth was narrow, with declines ahead of advances by 6 to 4. The immediate outlook seems to be for continued range trading as index futures closed at a premium of just 0.7%.

Good monsoon, inspiring perspective

The monsoon is progressing well with good rainfall and spatial coverage. As a result, kharif sowing is ahead of last year. Consumer sentiment is rising, especially in urban areas. The government will go soft on small businesses struggling to adapt during the early phases of GST adoption. PM Modi has set off to meet President Trump in Washington. The market is closed for Eid, so this week’s action may be subdued.

15 Jun 2017

Good monsoon

There is some concern about state level plans for cancelling farm debt. In fact it appears that the size-limits for application of the policies are so restrictive that the effect may not be significant.  Meanwhile, the outlook for the farming community continues to improve with the arrival of what is now expected to be a good monsoon.

14 Jun 2017

Further rate cut prospects may be good

At its June monetary policy review, the RBI held the repo rate at 6.25%, in spite of evidence of weak growth and benign inflation. In fact it revised its own GDP forecast for FY18 down to 7.3% with an adjusted inflation target of 4% for year-end. The decision was not unanimous and the tone of the report was neutral suggesting further rate cut prospects may be good.

13 Jun 2017

#nestle, #tcs, #kotak mahindra bank

In the private sector, Nestle India continues its efforts to broaden market share by launching iron-fortified, low-salt lines of Maggi instant noodles aimed at health conscious consumers. ITC is also broadening its market appeal by adding frozen foods and planning a launch of sauces and condiments. Infosys reports institutional clients pushing for 20-30% cost reductions over a five year period. TCS applied for less than a third of previous numbers of H-1B visas in the US last year as it stepped up recruitment from US engineering and business schools. Kotak Mahindra Bank is to seek approval at its AGM in July for $800mil in additional capital funding. It plans to raise this amount by way of private placement of convertible securities.

12 Jun 2017

World Bank: India +7,2% growth

The World Bank is forecasting a recovery for India to 7.2% growth in FY18 as evidence of benefits from what has turned into 'remonetization' starts to feed through. Early evidence shows a dramatic jump in the number of digital transactions; debit card transactions have jumped by a factor of ten over a twelve-month period. Some effects of the move towards implementation of GST on July 1st are appearing: retailers are offering up to 40% discounts in order to shift inventory in advance. Agreement by the GST Council on applicable rates for GST seems to have inspired foreign investor sentiment as FPIs invested a net $4.2bn in Indian debt and equity markets in May.

11 Jun 2017

ITC, Indraprashtha Gas, Torrent Pharma

We had three results to consider this week: ITC reported sales ahead by 10.5% and profits by 7%. Indraprashtha Gas reported sales growth of 12.9% and earnings growth of 22.9%. Torrent Pharma disappointed with sales down by 6.2% and profits down by 42.3%.

Improving European grwoth prospects

Equities remain in demand as European growth prospects improve and markets accept continued withdrawal of stimulus in the US. Indian markets are range-bound near all-time peaks supported by foreign and domestic buying. The Nifty 50 has added just 73 points to reach 9668, a gain of just 0.8% after trading in a range of 1.7%. Average daily trading volumes remained above the trailing average at $4.5bn as FPIs bought a net $48mil in cash equity and domestic institutions were net buyers of $170mil. Volatility stayed subdued as the India VIX traded in the 9 to 12 range before closi ng where it opened at 11. Breadth was narrow, with advances just ahead of declines by 5 to 4. The outlook seems for continued range trading as index futures closed at a premium of just above 0.5%.

India’s per capita income: +10%

Fourth quarter GDP growth fell to 5.6% as the impact of demonetization continued to feed through. Private investment remains a weak contributor. The central fiscal deficit for the year met the government’s target of 3.5% of GDP. India’s per capita income grew by 9.7% in FY17, to $1,600. Purchasing managers’ index figures for May give conflicting signals, though both sub-indices continue to indicate growth. The manufacturing PMI slipped from 52.5 in April to 51.6 while the Services PMI advanced strongly from 50.2 to 52.2.

4 Jun 2017

3 reasons to invest in India via Himalayan Fund

Investing in the dynamic and emerging market India is a solid contribution to every portfolio. Three reasons to do so:

1) The main reason the invest in Himalayan Fund is the return. The return historicly has been very good and the fund management proofed to be able to make the right selection of the last years.

2) Himalayan Fund is the only foreign investment fund that can trade direct on the stock exchange of Mumbai, hence no middlemen, no extra costs.

3) The dual-listing at the London Stock Exchange and Euronext Amsterdam offering excellent liquidity.

1 Jun 2017

HCL and TCS do buy-back

HCL Tech and TCS have commenced their share buyback tenders. Kotak Mahindra Bank has approved an increase in its FPI limit from 43 to 44%, subject to regulatory approval. Indraprashtha Gas will buy out its joint venture partners in Central UP Gas and Maharashtra Natural Gas to take control of both entities.

Uncertainty and changes

GST is on track for July 1st implementation and the GST Council has set the applicable rates for 80-90% of goods and services (1211 items) and is trying to limit the list of exemptions to just 100 items. Pending implementation, some dealers may be deferring purchases which might cause a temporary drop in excise duties. All vehicles, boats and private planes have been assigned the top 28% rate. Following the recent global cyber attack, the RBI has instructed banks not to reopen ATMs until obsolete operating software has been upgraded. The government intends to direct physicians to prescribe only generic drugs where possible which will be a blow to local branded medicine producers.