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Tuesday, 27 June 2017

27 June 2017 - Views & News

MARKET INSIGHT

Markets are likely to open flat. On the downside 40 DMA 9500 is a major support to watch out for. As long as bulls manage to defend that level on closing basis the bullish outlook remains intact. On the higher side, 9600-9620 is a key hurdle zone from near term perspective.

Nifty Spot Levels

Support 9560 – 9500 - 9430
Resistance  9620 – 9709 - 9788

GLOBAL MARKET

The S&P 500 and the Dow were slightly higher on Monday but gains were muted by a fall in technology stocks which nudged the Nasdaq lower as investors turned to more defensive sectors.
Technology stocks, which have been under pressure as investors worry about stretched valuations, hit a session low in late afternoon trading.
Data on Monday showed new orders for key US-made capital goods unexpectedly fell in May, with non-defence orders excluding aircraft - a closely watched proxy for business spending plans - dropping 0.2 percent.
The Dow Jones Industrial Average was up 39.35 points, or 0.18 percent, to 21,434.11.

MARKET UPDATE

Sgx Nifty +33 pts(9625) (Nifty fut 9592) Dow +14.79 pts ,Nsdq -18.10 pts , S&P +0.77 pts‎, Bovespa +1100 pts , Ftse +22 pts , Dax +37 pts , Cac +29 pts , Nikkei +62 pts now , Crude @ $43.41 brl (+0.03), Brent @ $46.13 brl (-0.03) , Gold @ 1244.13 (-2.27), Silver @ $16.547 (-0.02), Euro @ $1.1183, JPY @ $111.8700, INR @ $64.431

Today's Corporate Action 27th June  Ex Date

APOLLOTYRE Dividend - Rs. - 3.0000
FCH Final Dividend - Rs. - 2.6000

TOP NEWS

ALERT: Banks could face 60% haircut on 12 large accounts under NPA as per Crisil report – Negative read thru for public sector banks, ICICI Bank, Axis Bank; rough estimates suggest that banks might have to set aside Rs80,000 crore for provisions/write off of they take 60% haircut on 12 large accounts gone bad

Can Fin Homes board approves stock split, Rights issue – Positive read thru
Can Fin Homes board has approved sub-division of equity share of face value of Rs.10 into equity shares of face value of Rs.2 each, subject to regulatory and other approvals. It has also approved issue of shares on Rights basis upto Rs.1000 Crore – Positive read thru for as rights issue at present valuations will be book value accretive and add to the Tier 1 Capital; stock split will be sentimentally positive

Maruti Suzuki likely to hit 2 million sales mark by H2FY20 as against earlier target of FY20 end; new target implies 10% CAGR growth in next three years as against earlier 8.5% CAGR; positive read thru……(detail in other news)

Nocil is expected to sell its entire 4.81% stake in Navin Flourine for a consideration of Rs 140 Crs. The company already has a strong cash position of around Rs 120 Crs. Positive for the stock as there could be possibility of a buyback and a special dividend for Nocil.

Aurobindo’s Unit VII completes USFDA inspection without any observations – Positive for Aurobindo.

Natco Pharma and Dr Reddy get USFDA approval for Azacitidine Powder (gVidaza); used to treat Myelodysplastic Syndrome – Positive for Natco & Dr Reddy.

FMCG Sector - GST rollout - Companies say retailers refusing to buy fresh stocks; retailers want consumer firms to protect margins – will have short term impact on Q1 and Q2 sales of FMCG companies unless more clarities emerge on implementation of GST….(details in other news) 
OTHER NEWS

Pincon Spirit to set up 2 new plants in West Bengal for manufacturing of rice bran oil – will help in driving the company’s FMCG business; positive read through for the stock
Pincon Spirit will set up two new plants in West Bengal at a total cost of about Rs. 50 crore. It will have a production capacity of 200 mt per day. Of the total production, 50 per cent will be for captive use of Pincon rice bran oil brand sales across India, while the rest will be for bulk supplies to corporate buyers. The board has also approved setting up of a polythylene terephthalate bottle (PET) manufacturing plant at Asansol with a tentative cost of Rs. 20 crore.

Banking Sector: The Reserve Bank of India asks banks to do 50% provisions for loans being referred to the bankruptcy courts -  negative read thru
RBI told banks to set aside at least 50% of the loan amount as likely losses for all cases referred to the insolvency process. The regulator also said that provisioning should be 100% in those cases that don’t get resolved in the initial mandatory period for loan restructuring and instead are forced into liquidation -  Negative read through. While the market was  expecting liberal provisioning norms after RBI ordered  banks to start insolvency proceedings against the country's top 12 defaulters. There is also a worry that with bankruptcy courts as yet untested, many cases may not get resolved in the stipulated time and be headed for liquidation, which could double the provisioning for the next fiscal year as well, stretching out bank's woes. The saving grace here is that the RBI has allowed that Banks can spread the provisions across four quarters from June 2017 till March 2018. The indebted dozen account for 25%, or Rs 2.5 lakh crore, of the total bad loans in the banking system. Banks have indicated that provisioning on these accounts is now in the range of 30-40% and thus they will need another Rs 30,000-50,000 crore by the end of this fiscal year.

Trent - Tata-Tesco JV to open 50 retail stores, distribution centre in Hyderabad – positive read through for Trent
Trent Hypermarket, a 50:50 joint venture between Tata and British retailer Tesco, plans to open 50 retail stores in Hyderabad in the next 2-3 years apart from setting up a distribution centre. The expansion is part of the 200 stores planned for Mumbai, Pune, Hyderabad and Bengaluru. The retailer currently has 45 stores across these cities. The company has identified a 70,000 sft space for its distribution centre that will cater to the Hyderabad market. It already has two distribution centres that cater to Mumbai-Pune and Bengaluru stores.

Maruti Suzuki likely to hit 2 million sales mark by H2FY20 as against earlier target of FY20 end; new target implies 10% CAGR growth in next three years as against earlier 8.5% CAGR; positive read thru
As per Maruti Suzuki, it is likely to hit production target of 2 million vehicles on an annualised basis at least two quarters into fiscal 2019 (H2FY2020), powered by demand for new models, almost all of which have become best sellers in their respective categories. Maruti anticipates its production growth to be a minimum of 10% in the coming three to four years. Maruti produced 1.58 million vehicles in fiscal 2017. A 10% annual expansion (expectations are for faster growth) will take output to more than 1.9 million in fiscal 2019 and 2.1million in FY2020. Maruti management states If the market conditions become better as is expected and the economy continues to grow, Maruti will achieve the 2 million figure in late 2019 or early 2020. The new target implies 10% CAGR over FY2017-2020 which is higher than earlier growth of 8.5% CAGR. Positive

Bajaj Auto to launch Pulsar NS 160 next month to fortify presence in premium motorcycle space; positive
Bajaj Auto will launch the Pulsar NS160 next month as per media reports. The company dealerships have started billing for the motorcycle and the Pulsar NS 160 is expected to reach the dealerships by next week. The Pulsar NS160 is powered by a 160.3cc, single-cylinder, oil cooled, four-stroke engine, capable of producing 15.2 hp of power and 14.6 Nm of torque. The engine is mated to a 5-speed gearbox. Pulsar NS160 will be introduced at a price tag of around Rs 80,000 to Rs 85,000, ex-showroom, Delhi and will compete with the likes of Suzuki Gixxer and Honda CB Hornet 160. Positive read thru

FMCG Sector - GST rollout - Companies say retailers refusing to buy fresh stocks; retailers want consumer firms to protect margins – will have short term impact on Q1 and Q2 sales of FMCG companies unless more clarities emerge on implementation of GST
A tussle has erupted between large consumer companies and organised trade just ahead of the introduction of the goods and services tax (GST) on July 1. FMCG companies say that large retailers are refusing to buy fresh stocks starting June 26 till the month ends, while retailers want consumer companies to protect margins. According to the industry, educating over 4.5 million retailers is a significantly big task and there is confusion among the trade about buying fresh stocks now. There will be some wholesalers and retailers who will be out of stock for a while, leading to a shortage of products on shelves. While in the long term, GST is positive, it will take about a quarter for things to settle down. Through May and June, companies have been offering the trade product and cash discounts to push stocks ahead of July 1, saying that managing and evaluating inventory across millions of outlets in the pre-GST and post-GST scenario will be a mammoth task, and also to avoid the same product having two maximum retail prices (MRPs). But despite the step-up in margins by companies, retailers say they had reduced stock by about 25% since they didn’t want to be saddled with unsold stocks on July 1.

Marico launched Set Wet range of beard gel in male grooming space; it is the 3rd new launch by the company in time frame of last 30-45 days (most launches were done in personal care segment) – positive read through for the stock

Raymond firm on India plans with Rs1,400 crore investment – positive read through for the stock; but corporate governance issue remains overhang on the stock
Raymond plans to invest Rs1,400 crore in a phased manner in its greenfield project at Amravati to expand the cotton textile manufacturing footprint. Spread across 500 acres, the project is in line with our strategy to expand the cotton textile manufacturing footprint by creating world-class linen, cotton shirting, denim and garmenting at the newly created Textile Park in Amravati. On the retail side, the company plans to put up 300 Raymond shops and 200 other format shops under Park Avenue and Colour Plus in tier-IV and tier-V cities over the next two years. It currently has 1,100 shops in 450 cities.

Aditya Birla's Fashion & Retail store 'The Collective' plans to diversify into electronics – positive for the long term
Aditya Birla Fashion & Retail’s ‘The Collective’ has plans to diversify into newer categories such as high-end electronics. The Collective retails over 100 brands, including Versace, Armani, and Alexander McQueen, through its eight shops in different cities and e-commerce. It will launch new stores in Hyderabad and Chennai this year besides getting on board more brands like Paul Smith and UK-based brand Farah. It will also launch mono-brand stores of some of its brands like Ted Baker. Ted Baker, Fred Perry and Hackett continue to lead the growth for the company. Sunglasses as a category has grown tremendously and ABFRL sees traction in fashion jewellery. The Collective will also launch Kate Spade jewellery and is in talks with other popular international jewellery brands.
M&M has discontinued the AT (automatic transmission) variant of its leading utility vehicle scorpio with immediate effect citing end of life cycle for the product. This is unlikely to have any material impact of the sales volumes of the company as the AT variant constitute a small share of the total sales.

Government is likely to implement open acreage licencing policy from 01-July-2017 under which oil companies will be allowed to pick their own area for exploration. The existing New Exploration Licencing Policy will come to an end withe introduction of open acreage licencing policy - positive for oil & gas sector especially compannies engaged in upstream business (ONGC, Oil India and Reliance Industries)

Reliance Industries (RIL) and British Petroleum (BP) are likely to award contracts for the development of their R-series project within few weeks as per the media reports - positive read through for RIL.

Reliance Industries plans to raise Rs25000 crore through non convertible debt instruments as per the media reports. The money Lilley to be utilised for investment in its telecom subsidiary Reliance Jio.

Cadila gets USFDA nod for Hepatitis-B Drug Entecavir Tablet – Positive for Cadila.

Sun Pharma in Focus : Mylan gets approval for gGleevec – Negative for Sun.

Glenmark Gets US FDA Nod For Anti-inflammatory Drug, Indomethacin Capsules.

TVS Motors, Eicher Motors (Royal Enfield) to pass on GST benefit to customers; neutral
Two-wheeler makers TVS Motor Company and Royal Enfield will pass on expected benefit of GST to customers by lowering prices of their vehicles. Royal Enfield has reduced prices of its models by up to Rs 2,300 (on-road Chennai) while TVS Motors did not disclose quantum of price cut on its product portfolio. Under GST, most of the two-wheelers will attract a tax rate of 28%, lower than total tax incidence of around 30% at present. 

MORE NEWS

ONGC turns to GSPC’s undersea infra for KG gas output
Lupin founder and Chairman DB Gupta passes away
Italian bank deal lifts European shares; dollar on back foot
India probes dumping of Chinese polyester yarn
Raghuram Rajan was offered RBI dy governor’s post in 2004
Japanese cos invested $4.7 bn last year in India, says envoy
HDFC Life, Max prepare new structure for merger
GST rollout from 1 July, but confusion still persists among auto, FMCG firms
Snapdeal sale to Flipkart delayed due to complex due diligence process
Cargo traffic at 12 major ports up 6 per cent to 114 million tonnes in April-May
SAIL seeks NITI Aayog help to resolve differences with ArcelorMittal
Job market eyes GST booster for over 1 lakh immediate openings
WB clears $250-million loan to train India’s job seekers
NSE co-location case: Sebi wants unlawful gains quantified
Over 60% of bank credit goes to west & south
Activist buys 1% stake in Nestle, asks it to sell holding in L’Oreal
Gold futures fall 1.24 pc on global cues
Govt. defers TDS, TCS under GST to ensure smooth rollout
EU likely to slap 2b euro fine on Google this week
Budget likely in Nov as govt may switch FY to Jan-Dec

STOCK IN NEWS 

1.HDFC Ltd will seek shareholders’ approval at the AGM next month to raise up to Rs 85,000 crore through various debt instruments
2.Cadila Healthcare board has approved raising up to Rs 18,500 crore through various financial tool 
3.Grasim 20th July record date for demerger of financial services from Grasim: 7 shares of Aditya Birla Capital ltd for 2 shares of Grasim
4.Nocil board approves to sell 4,71,015 shares of Navin Fluorine worth 141cr
Sterlite tech chosen for kakinada smart city project will supply equipment for command center, CCTV, wifi and other electronic equipment
5.US FDA completes inspection of Aurobindo Pharma's Unit 7 with zero observations: sources
6.IDFC in focus: Vikram Limaye resigns as MD & CEO
7.Loan account of Bajaj Hindustan Sugar will be taken under S4A Scheme
8.Endurance Tech - Crisil upgrades long term rating to AA/Stable from AA-/Postive
9.Mafatlal Industries board approves to sell 1,18,389 shares of Navin Fluorine worth around 33cr
10.JSW Steel BM on June 29th June to consider raising additional funds
11.UCO Bank - ICRA revises on tier II bonds to A+ from AA-
12.Infosys settles with New York Attorney General relating to amount of taxes paid in NY
13.LT Foods inaugurates rice plant at Rotterdam, Netherlands with capacity of 60,000 tonnes
14.SBI, Bhushan steel, Amtek, Jyoti in focus: SBI chooses various consultancy firms for handling loans of Amtek, Electrosteel, Jyoti structures, Bhushan steel
15.HPCL joins talks to buy stake in Russian oil fields
16.SAIl eyes South Africa, Canada for coal import
17.Adhunik metaliks to plead insolvency
18.HDFC seeks shareholders nod for 18000cr fund raising
19.Lupin Founder Desh Bandhu Gupta Passes Away At The Age Of 79
20.From PTI: ONGC Mulls Using GSPC's Undersea Infra To Produce Gas From KG-Basin
21.FieldsSyndicate Bank Gets Shareholders' Nod For Raising Capital Worth `3,500 Cr.

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