Thursday, 31 March 2016

31 March 2016 - Today's View & News

Market View

Markets are likely to open flat today. However due to schedule expiry and financial year ending may show some volatility during the day’s trade. 7640 and 7800 will be range that market will watch for. A break on either side will of this range, will decide further trend.

Nifty Spot Levels

Support 7670 – 7640 - 7580
Resistance 7800 – 7845 - 7890

Global Market Updates

US stocks plowed further into positive territory for 2016 on Wednesday, helped for a second session by comments from Federal Reserve Chair Janet Yellen that eased anxiety about potential interest rate hikes.

Yellen said on Tuesday the US central bank should proceed cautiously as it looks to raise interest rates. 

On Wednesday, her comments were echoed by Chicago Fed President Charles Evans, who said there was a high hurdle to raising rates in April, given low inflation.

That soothed investors who have been on edge for months about a slow global economy, a strong dollar, volatile oil prices and lackluster top-line growth at US companies.

The Dow Jones industrial average added 0.47 percent at 17,716.66 points


Infra companies - RBI eases ECB norms for infra sector – Positive for infra, construction companies

Ashok Leyland - Hinduja Leyland Finance (subsidiary of Ashok Leyland) Files for a DRHP – Sentimentally Positive for Ashok Leyland; unlock value of its investments. Ashok Leyland currently holds 57.5% stake in Hinduja Leyland Finance
RBI eases ECB norms for Infra firms – positive for REC,PFC,L&T Finance Holding, SREI  and infra firms
RBI allowed all companies engaged in the infrastructure sector to raise external commercial borrowings with a minimum maturity of five years, including those non-banking finance companies (NBFC) regulated by the RBI. The borrowings have to be fully hedged and the individual limit of borrowing under the automatic route is $750 million. Apart from IFCs like PFC/REC/L&T Finance Holdings it will help companies like SREI and Shriram Finance also that are engaged in lending to various infrastructure related sectors such as transport and equipment financing.
Natural gas price to be revised down from 1st April 2016 to $3.06 from $3.82; lower than expected and Negative for Upstream companies
The government is likely to revise down the natural gas price from USD 3.82 to USD 3.06, in upcoming revision from 1st April 2016 (6 monthly revision in line with benchmark international gas prices). Negative for upstream companies (ONGC/OIL) as they will have revenue loss, however positive for gas based power producers. On the other hand, Government’s fertilizer subsidy burden will reduce.

Hindustan Zinc declared a special golden jubilee dividend of Rs24/share for FY 2015-16, which is a very high dividend yield of 13.7% on the last closing price.

Kansai Nerolac Paints – Kansai Nerolac Paints has sold 16 acre property in Perungudi, Chennai for a sale consideration of Rs537.86 crores to Brigade group and GIC. The development is positive for Kansai Nerolac Paints.


Tata Global Beverages Ltd enters into the branded coffee with Tata Coffee Grand – positive from long term perspective
Tata Global Beverages has forayed into the branded instant coffee business in India by launching Tata Coffee Grand to tap the growing consumption of the drink in the country. The company has entered the branded coffee space at a time when coffee consumption has started rising rapidly across India. Tata Coffee Grand will be available in 50 gm jar, 50 gm and 5.5 gm pouch priced respectively at Rs 110, Rs 95 and Rs 10.
The per capita coffee consumption in India is one of the lowest if compared some of the developing economies and developed countries. The overall coffee consumption in India is expected to grow in mid single digit (retail segment is expected to grow at 20%). Thus sensing this as an opportunity TGBL launched Grand coffee in domestic market.

Coal India has received a green nod from environment ministry panel with some riders to Coal India's Ashok open cast mining project in Jharkhand. The estimated production from the mine is in the range of 10 to 14 MTPA – Positive read thru for Coal India

Apollo Tyres appointed Steven Smidlein as a Senior VP to boost  sales in North America. Steven Smidlein would be responsible for building the brand and sales in North America for both, Apollo and Vredestein brands. Steven comes with a 30+ years of experience in the sales Management and has served as a Director, OE Sales for a leading tyre maker in North America and as a Corporate Director for Daimler Chrysler.

ONGC  has found hydrocarbon deposit with an estimated production of 5.5 lakh SCF per day in Mizoram. – Positive for ONGC (News came during market hours)

Logistics sector – India’s major ports saw cargo traffic growth of 4.18% YoY to 549.98MT during April-February 2016. However container traffic for the same period grew by just 2.8% YoY. The data is yet show to major recovery in traffic growth from ports. The development is neutral for Container Corporation, Gateway Distriparks among others.

Saab, Ashok Leyland join hands to manufacture truck simulators
·  Defence and security company Saab and Ashok Leyland have joined hands to manufacture truck simulators in India under the Make in India concept.
·     The two companies signed a teaming agreement at the end of 2015. The simulator is based in the original Ashok Leyland cabin and is integrated with Saab simulation technology, according to a Saab press release.
·   The simulator has been developed on the Ashok Leyland Stallion 4x4 vehicle, which is used by Indian armed forces and paramilitary forces. The simulator enables the driver to drive and operate the Ashok Stallion vehicle in different terrains, different weather conditions and under all types of potential day to day challenges. The simulator combines the Ashok Stallion cabin realism with a motion base, 4K computer graphic visualisation for total trainee immersion.

Maruti Suzuki’s hybrid technology gaining ground
·         Maruti Suzuki India (MSIL) has said that its Smart Hybrid Vehicle from Suzuki (SHVS) technology is a win-win for all – customer and country — as it does not impact environment.
·     The company is enjoying the first mover advantage in the SHVS technology.
·    This is evident from the positive response to its two products – Ciaz sedan and multi-utility vehicle Ertiga – that have this technology.
·    There are more than 40,000 units of both the vehicles on road over the last four-five months. Of the around 5,000 units of the Ciaz and 6,000 units of the Ertiga sold every month, almost 58 per cent and 57 per cent sales come from the SHVS variants
·  With the government taking some initiatives such as Faster Adoption and Manufacturing of Electric vehicles (FAME), to provide subsidies on electric and hybrid vehicles, the traction of sales of such vehicles are going up. Apart from the customers getting better mileage, under the FAME rule, they also get discount of around Rs30,000 on such vehicles. The SHVS technology is low on emissions and offers ease of driving, and one of the major reasons for gaining popularity of such vehicles is fuel efficiency, which improves by more than 20 per cent (in come cases around 50 per cent).
·      The instructor operating station enables the instructor to observe and interact with the trainee in real time, and allows him to take over controls in emergency situations and to give the trainee the after action feedback for fast learning progress
Reliance Industries - Media reports reveals that Reliance Jio is likely to enter market with very competitive pricing for its 4G services, way ahead of its peers offerings. This is to intensify competition and RIL JIO could gain market share. As per media reports, the SIM cards will be available at a cost of Rs 200 and JIO will offer humongous 75GB of  4G data and 4500 minutes of call timeas well as some freebies. – Positive for Reliance Industries, Negative for incumbent telecomm players like Bharti Airtel & Idea Cellular

JMC projects declined to the media news stating that the company is in talk with few investors to sell its four road boot projects. 
More News

Sensex ends 438 points up on buying in metal, realty shares; Nifty settles at 7,735
Rel Jio is world’s largest startup: Mukesh Ambani
Cos with over Rs 500 cr net-worth under new Ind AS
Credit growth in Indian banks Slows down, says RBI
RBI allows infra firms to borrow overseas for short tenor
Fed's Evans sees high hurdle to April rate hike
Exiting UK operations a logical way of de-risking businesses: Tata Steel
India, WB sign $1.5 bn loan pact for Swachh Bharat Mission
Banks may not buy Mallya's settlement offer by September
RBI's take on liquidity most important in the policy: Economists
Cameron likely to hold emergency meet on Tata Steel UK business
ONGC has found hydrocarbon deposit in Mizoram
Suzlon bags 48.30 Mw wind power project from Indian Oil Corp
Kalyani eyes tie-up with Italian firm for making small arms
Adani Group enters defence sector with statement of intent
Small savings interest cut is ‘double taxation’: panel
Europe exit will help Tata Steel pare debt, trim losses
India-Australia joint research projects get $5.6 mn funding boost 
MOPE acquires 4.1% stake in Indian Energy Exchange
Special dividend for Hind Zinc shareholders
‘Start-ups are not a bubble, they are a necessity’
RBI gives loan defaulters’ list to Supreme Court, seeks secrecy
UTI AMC continues to push for IPO; plans to offload 26% stake
Govt extends import taxes on some steel products till March’18
Kandla Port poised to reach three-figure mark in cargo handling
Tata Motors’ defence business bets its future on FICV
United Bank of India to raise Rs480 crore from govt via preferential allotment             
Bharti Airtel's low-cost strategy unsustainable: BMI
Gas prices to dip 17 per cent to $3.15
Govt proposes strict penalty, jail term for ponzi operators
Vijay Mallya offers to pay Rs 4,000 cr to settle case
ADB cuts India's growth forecast to 7.4% for 2016-17
RIL invests over Rs 1.5L cr in telecom, internet venture
Nestle dragged to court in UP over 'sub-standard' Maggi
Swavalamban subscribers can switch to APY: PFRDA
Sun Pharma shares gain 2%; m-cap up by Rs 4,238 cr

Derivatives Updates

Rs.2,63,642 Cr. and Rs.7,151 Cr. Sheded in OI
Shed 32.96 Lac shares
Added 60.51 Lac shares
Hindustan Zinc (31%), Godrej Industries (25%), Cummins India (22%), Federal Bank (20%) and Adani Power (19%)
IOB (-25%), HDIL (-20%), Titan (-14%), Syndicate bank (-12%) and PC Jewellers (-12%)

Stock in News

1. Sun Pharma to tap Japan's growing focus on generics
2. New FDI norms pose rejig challenge for Flipkart, Amazon
3. Reliance Capital completes 23% stake sale in life insurance venture
4. Tata Sons-promoted Indian Hotels Company, or IHCL, announced its exit from a property in Jaisalmer, the Gateway, which it had managed for the last several years.
5. Kalyani eyes tie-up with Italian firm for making small arms
6. Adani Group enters defence sector with statement of intent
7. Kansai Nerolac sells Chennai land to SPV floated by Brigade & GIC Singapore
8. Defence and security company Saab and Ashok Leyland have joined hands to manufacture truck simulators in India under the Make in India concept.
9. RInfra proposes 5.26% tariff increase for 2016-17
10. AstraZeneca saves $400 mn through in-house IT spending

Stock Update

USFDA issues 483 observations at Mandideep plant
Cmp: Rs 1475
Reco: Hold
Tgt: Rs 1758

Key points

Event: USFDA inspection reports 483 observations at Mandideep plant (both API and formulation units): Lupin has received two observations each (under 483) from the US Food and Drug Administration (USFDA) for its Mandideep active pharmaceutical ingredient (API) and formulation plants after the inspection, which was carried out in between February 8-19, 2016. The observations are related to “use of non-conforming intermediate for making APIs”, cleaning standard operating procedures and inappropriate equipment design.

Impact-Low risk to operations: Mandideep is the second largest revenue contributor to Lupin’s US business after Goa. However, there are no pending abbreviated new drug applications (ANDAs) from this plant and nor does it support ANDAs at other plants, as per the clarification of the management. Hence, it would not affect growth, given that no approvals are at risk.

Focus on Goa plant outcome: We remain focused on the Goa plant and the outcome of 483s issued there in March 2016 and July 2015, given that it is a large source of Lupin’s pipeline and any delay in product approvals could hurt earnings forecast. Product approvals from this plant would be the key to monitor.

Outlook and valuation: We believe that in the near term, the stock is likely to remain range bound till the USFDA concerns subside, especially since a few observations are repetitive in nature. Moreover, it is little worrying reflected by the fact that it is the second plant under the USFDA scanner in a short period of time. We have not reviewed the 483s yet but are relying on the management’s clarification on the issues. We have maintained our Hold rating on the stock and have retained our price target of Rs1,758 (valuing the stock at 22x its average earnings of FY2017E and FY2018E).

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