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Wednesday, 30 March 2016

30 March 2016 - Today's View & News

Market View

Nifty likely to open on positive note back on positive global clues, index has a stiff resistance in the 7700-7750 zone. 7580 is acting as some kind of support, if Nifty sustaining below 7580 may see an acceleration of the trend on the downside.

Nifty Spot Levels 

Support  7550 – 7510 – 7470
Resistance  7645 – 7700 -7750

Market Update:‎

Sgx Nifty +42 pts ‎Dow +97.72 pts ,Nsdq +79.84 pts , S&P +17.96 pts ‎, Bovespa +316 pts , Ftse -0.58 pts , Dax -36 pts  , Cac -36 pts  , Nikkei  -119 pts , now, Crude @ $38.66 brl (+0.38), Brent @ $39.42 brl (+0.36) , Gold @ $1244.60 (+7.10), Silver @ $15.37 (+0.00), Euro @ $1.1296, JPY @ $112.5400, INR @ $66.5358
US GENERIC GOVT. 10-YEAR YIELD : 1.8105%

Global Market & International Data Update

The S&P 500 closed at its highest in 2016 on Tuesday after Federal Reserve Chair Janet Yellen called for caution on raising interest rates - music to Wall Street's ears.

Yellen's cautious tone contrasted with recent comments from other policymakers, including the chiefs of the 

Philadelphia and Atlanta Federal Reserves, who had expressed support for a more aggressive approach to raising interest rates this year.

The Dow Jones industrial average rose 0.56 percent to end at 17,633.11 points.

Today's Corporate Action 30th Mar Ex Date 

DATAMATICS Interim Dividend - Rs. - 0.5000DIGJAM Amalgamation
HDFC Interim Dividend - Rs. - 3.0000
MOHITIND Spin Off
NMDC Interim Dividend - Rs. - 1.5000
PRESTIGE Interim Dividend - Rs. - 1.2000
VIVIDHA Bonus issue 1:3

TOP NEWS

Sun Pharma to enter Japanese market through acquisition of 14 brands from Novartis – Long term Positive for Sun Pharma
Sun Pharma acquires 14 established prescription brands from Novartis in Japan. As per the agreement, Sun Pharma will acquire the portfolio of 14 established prescription brands from Novartis for a cash consideration of US$ 293 million (~ Rs 1900 crores). These brands have combined annualized revenues of ~ US$ 160 million(Rs 1050 crores) and address medical conditions across several therapeutic areas. Under the terms of the agreements, Novartis will continue to distribute these brands, for a certain period, pending transfer of all marketing authorizations to Sun Pharma’s subsidiary. It is positive for Sun Pharma as it marks Sun Pharma's foray into the Japanese prescription market and provides an opportunity to build a larger product portfolio in the future as Japan is the third largest pharma market.
Sun TV: I&B ministry rejected Red FM applicatation to participate in Phase III Auctions, sentimentally negative
I&B ministry has rejected Red FM applicatation to participate in Phase III Auctions, Govt to present MHA's decision before Delhi HC on April 29.Delhi HC Allows Red FM to continue broadcast in 3 circles till April 29. Red FM was not allowed to participate in auctions as it had no MHA clearance. Earlier, The Delhi high court has asked the home ministry to decide within two weeks on the issue of allowing Digital Radio Broadcasting to migrate to Phase III FM licenses. Last year, the information and broadcasting ministry had refused to allow DRB to participate in the Phase III FM auctions for want of a security clearance from the ministry of home affairs. DRB is part of the Kalanithi Maran-promoted Sun TV Network and runs Red FM.

RBI tweaks MCLR norms -- Fixed rate loans having tenure upto 3 years would be priced in accordance to MCLRnegative readthru for Banks
RBI has reviewed MCLR norms on fixed rate loans whereby it has decided that fixed rate loans upto three years shall be priced with reference to MCLR. Fixed rate loans of tenor above three years will continue to be exempted from MCLR system.  Earlier, the fixed rate loans were initially exempted from being linked to MCLR.

Sugar - The government has lowered its sugar output estimate by 1.4 per to 25.64 million tonnes (MT; earlier estimate was 26MT) in the cane crushing season 2016 (lower than 28MT produced in sugar season 2015) – positive for sugar companies like (Balrampur Chini and Dhampur sugar) as it will keep sugar prices firm in the domestic market

Tata Steel:  Board open to selling off UK biz, positive read-thru

BEL, Thales to develop PHAROS fire control radar: Positive for BEL step further in area of expertise

Ashok Leyland wins defense orders worth Rs 800 Cr: Positive for the company

More News

Investors see another financial meltdown in 3 years' time
Loan defaults may not always be promoters’ fault: RBI
Reserve Bank of India tweaks upcoming lending rate rules
Emerging market debt trading fell to 6-year low in 2015
RBI, SL central bank sign currency swap agreement
Sebi to pass fresh order in UBHL restatement of accounts case
Govt opens FDI gates wider for e-retail
SC allows SEBI to sell Sahara properties worth Rs 40k cr
Vodafone moves ICJ over tax arbitration with India
EPFO to invest more in govt bonds, FinMin hikes limit to 65%
Sebi tightens noose on commodity exchanges
Over $1 tn to enter global real estate market; up 6% from 2015
Jewellers begin registration with excise amid protest
Reliance Defence forms JV with Rafael to take up $10 bn worth projects 
Tata Sons keen to end row with domestic airlines over 5/20 rule 
GAIL drills first exploratory well in Cambay basin block
Resolved various legacy issues, moving to 25% corporate tax rate: Jaitley
Higher labour productivity, ease of doing business could boost growth: Montek
World’s best economy betraying investors as India earnings decay
Nestle turns to chocolate and dairy to reduce load on Maggi noodles
USFDA issues Form 483 to Lupin’s plant, stock dips 12%
Barclays joins Morgan Stanley in predicting more pain for rupee
Employees may earn interest on inoperative EPF savings account
Sebi to revise rules to reinstate discretionary power on penalties             
India business sentiment falls in March: Survey
Vijay Mallya offers Rs 2,000 crore to settle all Kingfisher loans
RBI may go for a 'measured' cut next week: DBS
Sensex ends 66 points down in volatile trade, Nifty settles below 7,600
Maharashtra, Gujarat accounted for 46 pct of exports in FY15: Report
Car, bike insurance premium rates go higher by up to 40%
FPI limits in govt securities pegged at Rs 10,500 cr from April
Nifty-based ETFs to debut on Taiwan Stock Exchange
ECB loans decline by 40% in February
25% wheat import duty to stay till June 30
RBI cancels registration of 22 NBFCs
S&P, Fitch assign stable outlook to Adani Transmission
Price fixed rate loans up to 3 yrs on marginal cost: RBI
UBI raises Rs 1k-cr via bonds; LIC to buy OBC stake

OTHER NEWS

Ashok Leyland wins defense orders worth Rs 800 Cr: Positive for the company
Ashok Leyland Ltd has  won defense Contract worth Rs.800 crore from Indian armed forces for supply of advanced-technology products - 450 units of Field Artillery Tractor (FAT) 6x6 and other similar Super Stallion vehicles; and 825 units of Ambulance 4x4. This contract is executable over the next two years. Further Ashok Leyland has identified Defense as a core area for growth and has targeted to more than double the share of defense revenues to 10% from the current level of 4% in the next 4 years.

RBI hikes FPI limit in government bonds and state bonds by Rs10,500 crore and Rs3,500 crore respectively

JSPL in talks with Japan's Yamato kogyo to sell 45% stake in rail mill at around Rs 3000 crore, as per media reports.

Reliance Industries imported 13.7% higher crude oil in February 2016 compared to that of in January 2016, as per media reports. Positive read thru for RIL.

Maharashtra's Power Discom proposes 5.5% tariff hike for FY2016-17                                         
The Maharashtra State Electricity Distribution Company (MahaVitaran) has proposed an average tariff hike of 5.5% for 2016-17, in its petition before the regulator. The discom needs rise in tariff to meet the revenue gap of Rs 38,987 crore and also to meet the inflation ranging between 5% and 8% in the country.

BEL, Thales to develop PHAROS fire control radar: Positive for BEL step further in area of expertise
BEL-Thales Systems Limited (BTSL) have signed a partnership agreement with Thales for joint development of PHAROS fire control radar which provides defence against small, fast moving and highly manoeuvrable air and surface targets that may also be encountered in littoral missions. The multiple target tracker is capable of simultaneously controlling in all weather conditions the engagement of these targets with guided ammunition. The responsibility of overall system design will be borne by Thales. BTSL will develop the mechanical design and radar processing modifications, while Thales will be responsible for the design and production of the radar antenna. The jointly developed PHAROS system will cater to both domestic Indian and international market requirements. 
PNC Infratech receives letter of acceptance for PWD road project in UP – Positive for PNC Infratech
PNC Infratech has received letter of acceptance for the project of construction of three lane road on both sides of Sharda Sahayak Feeder Canal from Lucknow-Faizabad Road to Lucknow-Sultanpur Road, in the state of Uttar Pradesh on 28th March 2016. During the current quarter PNC has received letters of award for a total contract value of over Rs. 1,000 crores.

Natural rubber price surge by 12-13% in one month; tyre companies likely to pass on the increased costs
Natural Rubber prices (which forms about 45% of the raw material costs for tyre companies) have surged by about 12-13% in the last one month on back of export cuts announced by major rubber producing countries viz Thailand and Indonesia (cuts announced are to the tune of about 5-6% of the global consumption). Surge in the rubber prices would result into increased cost of inputs for tyre companies. However, the tyre companies have indicated that increase in the input costs would be largely passed on to the customers thereby limiting impact on the margins.

ZEEL to reorganize channel distribution, advertisement sales functions
Zee Entertainment Enterprise Ltd (ZEEL) will reorganize its channel distribution and advertisement sales functions. The board of the company has in-principle approved the proposal of reorganization of channel distribution function, which is presently handled by its wholly-owned subsidiary Taj Television. The channel distribution activity with effect from April 1, 2016, shall be integrated within the company and  would also distribute its channels from the next fiscal as part of the reorganization. The company shall also distribute channels of broadcasting entities of associated/related entities of the company at a mutually agreeable commission on arms-length basis. This has been done to take the advantage of ongoing digitization of home cable delivery system and increasing penetration of DTH services.  The board has also approved the formation of a new company, Zee Unimedia Ltd, which would work as canvassing agent for the company from April 1 to provide an integrated solution to media buyers.

Rallis India : Rallis India has entered into an agreement with IKEA India to transfer its leasehold right over a land parcel in Mumbai for a consideration of nearly Rs 214 crore.

Tata Steel:  Board open to selling off UK biz, positive read-thru
As per media news, Tata Steel is considering the sale of its entire UK business to stem heavy losses. According to the report, the company’s European arm would now “explore all options for portfolio restructuring, including the potential divestment of Tata Steel UK, in whole or in parts. Meanwhile, Indian Board of Tata Steel in a meeting has  rejected current plan of UK Tata Steel union to sell of long product business in UK, Board has asked EU board for  Tata Steel to explore all options.

Majesco’s US Arm Enters Into Strategic Partnership With SPLICE Software
Majesco announced that SPLICE Software, a provider of solutions that connect insurance companies and customers with a real-time, data-driven engagement across all mediums of automated communication, has joined their partner ecosystem. SPLICE helps insurers to authentically interact with their customers in a personalized fashion that takes into account permissions and preferences, to create proactive, relevant communications, thereby improving the customer experience. Splice software is pre-integrated with Majesco’s DigitalConnect with an initial focus on billing and claims, the most common customer touchpoint for insurers. Additional plans for further use cases are in development.

Stock in News 
  • Reliance Defence Ltd, a 100 % subsidiary of Reliance Infrastructure Ltd, and Rafael Advanced Defence Systems Ltd have decided to set up a joint venture (JV) company in India in the areas of air-to-air missiles, air defence systems and large
  • Sun Pharma buys Novartis brands for Rs 1,900 cr
  • Ashok Leyland bags Rs 800 crore order from armed forces
  • Rating agencies assign BBB- with stable outlook to Adani Transmission
  • Zydus gets FDA nod for anti-viral Acyclovir capsules
  • Mobile tower companies to grow revenues by 8-10%: Moody's
  • Bank of India to get Rs 1,150 crore capital infusion from govt
  • Adani Ports raises Rs 500 crore via debentures
  • GSK Pharma to launch more combination vaccines

Derivatives Updates


NIFTY PCR:
0.97
India  VIX:
17.64
MARKET WIDE OPEN INTEREST:
Rs. 256548 cr and Rs. 5186 cr were Added in OI
NIFTY CALL:
Added 5.37 lakh shares in OI
NIFTY PUT:
Added 10.73 lakh shares in OI
MAJOR OI GAINERS
Hexaware (47%), Apollo Hospital (20%), Bank of Baroda (19%), IFCI (18%) and Unitech (17%)
MAJOR OI LOSERS
L&T Finance Holding (-15%), Pidilit Industries (-10%), PNB (-10%), Godrej Industries (-10%) and Uco Bank (-9%)

Stock Update

Bharat Electronics
Reco: Buy  
In a sweet spot CMP: Rs1,180

Key points
Increasing target market size with DPP-2016: In our special report on the defence sector dated March 29, 2016, on DPP-2016, we have highlighted the defence capital outlay opportunity for the industry to the tune of $150 billion over the next decade. Bharat Electronics Ltd (BEL) has already got a head start with four licences since 2004 in radar and wafers where the company enjoys a monopoly position. Further, the company has a market opportunity size of Rs70,000 crore over the next seven to eight years in its area of expertise.

Gearing up to compete with the private sector: BEL is planning to invest Rs1,500 crore over the next three years under its “Make In India” expansion and modernisation strategy. The company will also be increasing its R&D spends to 10% of turnover (currently at 8%). BEL will be increasing its procurement from MSMEs (thrust area in DPP-2016) from 8% in FY2015 (5% in FY2014) to focus on core areas and R&D. Additionally, BEL will be focusing on exports, offsets and buyer nominated equipment. The likely increased private sector participation has led BEL to diversify into areas of homeland security, smart cards, smart city elements and solar power plants which too have tremendous growth potential with better operating profit margins.

Maintain Buy with price target of Rs1,450: BEL remains our preferred pick in the defence sector on account of its strong manufacturing and R&D base. BEL has already started to reap benefits of indigenization of the defence procurement with 44% Y-o-Y jump in its order book which stood at Rs32,333 crore at the end of Q3FY2016 (order intake of Rs12,000 crore in Q3FY2016). BEL being a virtually debt-free company with cash of over Rs5,200 crore (Q2FY2016), return ratios (RoCE, RoE) at 15% (FY2015) and consistently paying dividend is suitably placed to capitalise on the upcoming defence procurement opportunities. Consequently, we reiterate our Buy rating on the stock with an unchanged price target of Rs1,450.

Defence Procurement Policy 2016

DPP 2016-Huge opportunity in offing but will not materialise immediately 
The defence minister recently cleared a long awaited Defence Procurement Policy of 2016 (DPP-2016) which will overtake DPP-2013 and govern all defence acquisitions initiated after April 1, 2016. The chapter 6 which deals with the appointment of “strategic partners” (priority partners in the manufacturing equipments like aircraft, warships, helicopters, submarines, tanks etc based on technology from foreign vendors) in the private sector would be finalised in another one to two months.

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