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Bajaj Finance Limited is a non-banking finance company (NBFC). The Company is engaged in lending and allied activities. It focuses on consumer lending, small and medium-sized enterprises (SME) lending, commercial lending, rural lending, fixed deposits and value-added services. Its consumer lending products include two-wheelers and three-wheelers finance, consumer durables finance, digital products finance, retailer finance, salaried personal loans, e-commerce consumer finance, e-commerce seller finance and home loan. Its SME lending products include loan against property and business loans. Its commercial lending products include loan against securities and financial institutions group lending business. Its rural lending products include personal loans cross-sell, salaried personal loans and gold loans. It offers retail fixed deposits and wholesale fixed deposits. It is engaged in life insurance distribution, general insurance distribution and mutual fund distribution.

Operating performance strong:

Bajaj Finance (BFL) has reported a robust operating performance for Q4FY2017, with the Net Interest Income (NII) surging by 48.3% YoY to Rs1,477.0crore, while the Non-interest Income increased by 49.7% YoY to Rs212.2 crore. The impressive growth in the NII was driven by healthy growth in Advances (up 32.9% YoY) and expansion of Net Interest Margin (NIM; calc) by 103BPS. During the quarter, the company enjoyed the benefits of lower Cost of Funds (CoF) while lower NIMs during Q3FY2017 (due to demonetisation) resulted in NIM expansion. Provisions surged by 85.1% YoY to Rs289.7 crore, which was due to the additional charge of Rs70 crore toward demonetisation and non-recurring provisions. Going forward, the BFL management indicated that it will have to take a further charge of ~Rs40 crore in the next 2-3 quarters as the final impact of demonetisation, which at ~2% of PPOP should not have any significant adverse effect. NIM expansion and well-managed operations resulted in the PAT growing by a healthy 42.6% YoY to Rs449.2 crore.

AUM growth picks up post demonetisation:

Q3FY2017, which was BFL’s seasonally strong quarter, was impacted on account of demonetisation with an adverse effect on its credit growth. Consequently, BFL’s performance in Q4FY2017 has been comparatively better on a QoQ basis. In Q4FY2017, the company’s business growth improved, with AUM expanding by 36.1% YoY. Its main loan segments, viz. Consumer loans (45% of AUM, up by 43% YoY), SME loans (36.7% of AUM, up by 18% YoY), Commercial loans (13% of AUM, up 51.5% YoY) and Rural loans (5% of AUM, up 129% YoY) all reported healthy growth. Digging further deep, the Consumer loans business was mainly driven by Digital Products (up 63% YoY), Personal loans (up 60% YoY) and Salaried loans (up 93% YoY). Growth in the SME book was fueled by a 56% YoY expansion in Professional loans and a 31% jump in Business loans. Loan Against Property (LAP) has seen a slowdown due to the BFL management’s cautious approach, resulting in the LAP portfolio remaining flat.

Asset quality dips marginally:

During Q4FY2017, the asset quality of BFL witnessed some stress, with the Gross Non-Performing Assets (GNPA) increasing by 21BPS QoQ to 1.68% while the Net NPA increased by 5BPS QoQ to 0.44%. The company also took additional provisions worth Rs70 crore on account of demonetisation and non-recurring provisions, which resulted in the slight deterioration in asset quality. However, the asset quality is still at a very healthy level, and the company boasts of 74% Provision Coverage Ratio, besides Rs300 crore of general provisions, which is also comforting.

Outlook and valuation:

BFL has delivered a decent performance for Q4FY2017 despite growing competition and the lag effects of demonetisation. Healthy operational parameters, AUM expansion and a decent asset quality are the key differentiating factors. BFL has been a leading innovator in the NBFC space and going forward better customer mining and further improvement in systems & processes will allow it to maintain its strong growth trajectory and profitability. We upgrade  to ’Buy’ with a price target of Rs1,550.

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Introduction

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and well-regulated. The financial and economic conditions in the country are far superior to any other country in the world. Credit, market and liquidity risk studies suggest that Indian banks are generally resilient and have withstood the global downturn well.

Indian banking industry has recently witnessed the roll out of innovative banking models like payments and small finance banks. The central bank granted in-principle approval to 11 payments banks and 10 small finance banks in FY 2015-16. RBI’s new measures may go a long way in helping the restructuring of the domestic banking industry.

Market Size

The Indian banking system consists of 26 public sector banks, 25 private sector banks, 43 foreign banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural cooperative banks, in addition to cooperative credit institutions. Public-sector banks control nearly 80 percent of the market, thereby leaving comparatively much smaller shares for its private peers. Banks are also encouraging their customers to manage their finances using mobile phones.

Standard & Poor’s estimates that credit growth in India’s banking sector would improve to 11-13 per cent in FY17 from less than 10 per cent in the second half of CY14.

Healthy Growth of Banking Sector - Deposits

• During FY06–16, deposits grew at a CAGR of 11.47 per cent and reached 1.46 trillion in FY16.
• Strong growth in savings amid rising disposable income levels are the major factors influencing deposit growth.
• Deposits under PradhanMantri Jan DhanYojana (PMJDY), have also increased. As of October 2016, US$ 6,755.5 million were deposited, while 249.8 million accounts were opened.

Healthy Growth of Banking Sector - Credit

• Credit off-take has been surging ahead over the past decade, aided by strong economic growth, rising disposable incomes, increasing consumerism and easier access to credit.
• In March FY16, total credit extended surged to US$ 1,016 billion.
• Demand has grown for both corporate and retail loans; particularly the services, real estate, consumer durables and agriculture allied sectors have led the growth in credit.

Offers protection in adverse conditions.

Our initial study of PradhanMantriFasalBimaYojana (PMFBY) shows it offers hope to banks lending to agriculture in adverse conditions. The new scheme has seen ~100% increase in the sum insured in FY2017, greater interest from private insurance players and higher participation of farmers. Strict timelines, mandatory use of technology and a relatively transparent mechanism amenable to quick/easy audits could effectively reduce the risk of sharp rise in impairments for banks. 

Significant increase in outlay; more than the cumulative allocation in all previous years

There are some positive signs that the lending to agriculture is taking a better form that should lower the “volume” risk associated to famers as new schemes offer greater protection. The government has modified the crop insurance program under the new scheme, PMFBY, which is seeing greater levels of participation by all segments. The government has budgeted to spend `130 bn in FY2017 for the scheme as compared to the initial budget of `55 bn, which is ~6X increase over FY2016 and similar to the total funds allocated to the scheme since FY1997. The budget for FY2018 is lower at `90 bn but we wait to see the year end given that the focus is to increase the area under the scheme to ~50% over the next two years from ~25% currently.

100% increase in sum insured gives comfort, but a few more years needed to ensure stability

We are seeing some early success of the scheme as there has been more than 100% growth in premium in FY2017 across key players like Agriculture Insurance Corporation, ICICI Lombard,HDFC Ergo. The total sum insured has doubled in the Kharif crop for 2016 to `1.4 tn and one should expect this to have increased further as some bottlenecks resulted in select states that did not implement it last year. The government is extending this scheme for non-loan farmers as well giving a wider business opportunity for private insurers. FY2017 may not be a good test case as there is likely to be lower claims given the bountiful rainfall witnessed. Private insurance companies gave away a substantial portion of risk to reinsurers and we need a stronger reinsurance market till market players get confident in the underlying data.

Banks stand to benefit as well; a weak monsoon is probably of lesser concern

The key objective of the note is to understand the impact on bank’s portfolio given the spate of debt waiver announcements. In a prudish manner, the success of this scheme will imply that volume related risks have been taken away. This also implies banks are relatively better off during the weak monsoon but a surplus monsoon, as in FY2017 creates ‘price-risk’ where the current solution is not effective. A strong commodity derivatives market along with adequate infrastructure for post-harvest storage could be useful to address a part of these risks.

Investments/developments

Key investments and developments in India’s banking industry include:

• RBL Bank Limited, an Indian private sector bank, has raised Rs 330 crore (US$ 49.6 million) from a UK-based development finance institution CDC Group Plc, which will help RBL to strengthen the capital base to meet future requirements.
• The State Bank of India (SBI) signed an agreement with The World Bank for aRs 4,200 crore (US$ 625 million) credit facility, aimed at financing grid connected rooftop solar photovoltaic (GRPV) projects in India.
• JP Morgan Chase, the largest bank in United States by assets, plans to expand its operations in India by opening three new branches in Delhi, Bangalore and Chennai in addition to its existing branch in Mumbai.
• Canada Pension Plan Investment Board (CPPIB), an investment management company, has bought a large stake in Kotak Mahindra Bank Ltd from Japan-based Sumitomo Mitsui Banking Corporation.
• India’s first small finance bank called the Capital Small Finance Bank has started its operations by launching 10 branch offices in Punjab, and aims to increase the number of branches to 29 in the current FY 2016-17.
• FreeCharge, the wallet company owned by online retailer Snapdeal, has partnered with Yes Bank and MasterCard to launch FreeCharge Go, a virtual card that allows users to pay for goods and services at online shops and offline retailers.
• Exim Bank of India and the Government of Andhra Pradesh has signed a Memorandum of Understanding (MoU) to promote exports in the state.
• Kotak Mahindra Bank Limited has bought 19.9 per cent stake in Airtel M Commerce Services Limited (AMSL) for Rs 98.38 crore (US$ 14.43 million) to set up a payments bank. AMSL provides semi-closed prepaid instrument and offers services under the ‘Airtel Money’ brand name.
• Ujjivan Financial Services Ltd, a microfinance services company, has raised Rs 312.4 crore (US$ 45.84 million) in a private placement from 33 domestic investors including mutual funds, insurance firms, family offices and High Net Worth Individuals (HNIs)).
• India's largest public sector bank, State Bank of India (SBI), has opened its first branch dedicated to serving start-up companies, in Bengaluru.
• Global rating agency Moody's has upgraded its outlook for the Indian banking system to stable from negative based on its assessment of five drivers including improvement in operating environment and stable asset risk and capital scenario.

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Indian Pharma Market remains sluggish; focus now shifts to GST impact

* The Indian Pharma Market’s (IPM) growth remained subdued in May’17, with the overall growth rate at 7%. We attribute the ongoing slowdown partly due to the continuing government intervention in the sector.

* The key reasons for the poor sector growth has been the declining price growth and softer volume growth. Declining price growth is attributed to the crackdown on FDCs (Fixed Dosage Combinations) where companies had greater leeway in pricing.

* Weak volume growth in the past has been a function of anemic economic activity. We believe some of the recent tepid volume trend may also be due to demonetization.

* The past 3 years’ data clearly shows that price growth has declined in the Indian market since early CY16 and is now the lowest for nearly 18 months. This despite the WPI index (on which price revisions are indexed) rising over the same period. We believe that the weakness in price growth seems to have coincided with the government’s unsuccessful crackdown on FDCs, which constitute c45% of the IPM by value. While the move was stayed by courts, our discussions with industry players clearly indicate that most companies are now trying to move away from the lucrative FDC-led growth model. We believe this has had a significant impact on the overall price growth in the sector.

* Surprisingly, volume growth has also been sluggish. Overall volume growth, which averaged well over 5-5.5% in CY16, is well below 3% in YTD CY17. Weak volume growth usually is accompanied by either muted economic growth or poor underlying wage growth. The only data shoring up the overall IPM seems to be NI growth, which though trending downward, is still healthy at c5%. We have detailed the impact on continuing govt. led crackdown impacting sector growth in our note titled Healthcare industry in government crosshairs dated 5th May 2017.

* We believe that the street would focus on the extent of disturbance caused by the impending GST implementation and its impact on the industry growth. This would last only for a quarter, but post that we expect focus to return to whether IPM growth can revert to mid-teens, which given the above data appears difficult. We believe that in the medium term, the overall IPM growth would be sluggish for most companies.

* May 2017: Domestic pharma market grew by 7% (as per IMS)

* IPM reported sales of Rs97.6bn in May’17, a growth of 7% against 6% in Apr’17.

US FDA shows it has a bark and a bite

* New US FDA commissioner acts on his promise to limit access to opioid substances by requesting Endo Pharma to withdraw opioid brand Opana ER from the market

* The new regime at FDA had specifically highlighted abuse of opioid medicines and faster generic approval timelines with lower backlogs as key targets for the agency

* Indian generic industry has limited exposure to Opioids space but with the agency showing that it is serious about pursuing its agenda, should be cause for concern for the entire generic industry from an increasing competitiveness perspective.

The US FDA last week has asked Endo Pharma (ENDO) to withdraw its opioid painkiller Opana ER (oxymorphone hydrochloride) from the market on the grounds that risks from the product far outweigh its benefits (Link here). Opioid addiction is a public healthcare crises in USA where by painkiller/controlled substances are often misused for addiction. To put this in context, in India similar reasons have been expounded by the government in order to restrict or ban (unsuccessfully) certain codeine based syrups.

* While the Indian generic companies has limited exposure to Opioid business (largely with SUNP and CDH), the development is still very important from the perspective of the US FDA getting more serious on the issues it has highlighted to resolve. The new US FDA commissioner Scott Gotlieb has been quite vocal on two specific issues 1). To limit or restrict access to Opioid drugs in order to contain the opioid epidemic plaguing US healthcare system & 2).to get the FDA to step up the pace of generic approvals including streamlining the approval process to allow ANDA filings to jump queues, prioritize ANDA applications where drug costs are high, eliminate within a year the backlog of 2640 generic drug applications etc. We have written extensively on this earlier in our note titled Radical moves by new US FDA head for shorter generic timelines dated June 7, 2017.

* While ENDO likely to explore legal options in order to continue the Opana franchise, the FDA acting against Endo shows its strong intent to pursue the objectives set out under the new regime at the agency. Note that this is the first time that FDA has taken steps to remove a currently marketed opioid product from the market place.

Have a Nice Day  !!

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Events to watch this week

• FOMC raises policy target range 25 basis points to 1% - 1.25%

• Macron’s party likely to secure majority

• Moody’s: UK election result credit negative

• IMF raises China forecast, says deep reforms needed

The Week ahead:

For the week,Global equities are virtually unchanged on the week, but that didn’t stop the Dow Jones Industrial Average from setting a record high at midweek. The yield on the US 10-year Treasury note fell 4 basis points from week-ago levels to 2.16% while the price of West Texas Intermediate crude oil declined to $44.70 from $45.50 last Friday. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), edged up to 10.9 from 10.0 a week ago.

NIFTY- 9,588.05
CRUDE OIL-Rs 2876barrel
GOLD-Rs 28,680 gram
Rs/$-Rs 64.43

MARKET ROUND UP 
Key indices posted modest losses tracking weakness in global stocks and after the Federal Reserve hiked the fed-funds rate by a quarter-point to between 1% and 1.25%. The S&P BSE Sensex shed 205.66 points or 0.65% to settle at 31,056.40. The Nifty 50 index dropped 80.20 points or 0.82% to settle at 9,588.05. There had been concerns that higher interest rates in the United States will boost returns on US debt and bank deposits, drawing money back from riskier markets. 
The BSE Mid-Cap index shed 0.45%. The decline was lower than the Sensex's fall in percentage terms. The BSE Small-Cap index rose 0.75%, outperforming the Sensex. 

Trading for the week began on a dull note as the key benchmark indices registered modest losses on Monday, 12 June 2017 on negative global cues. The Sensex shed 166.36 points or 0.53% to settle at 31,095.70, its lowest closing level since 26 May 2017. 
A divergent trend was witnessed as the barometer index, the S&P BSE Sensex, settled with tiny gains while the Nifty 50 index registered minor losses in a volatile session of trade on Tuesday, 13 June 2017. The Sensex rose 7.79 points or 0.03% to settle at 31,103.49, its highest closing level since 9 June 2017. 

Macro Economic Front: 
On the Economic Front,merchandise exports have shown growth of 8.32% in dollar terms valued at $24014.62 million during May 2017 as compared to $22170.62 million during May 2016. Merchandise imports rose 33.09% and were valued at $37856.34 million during May 2017 from $28443.52 million in May 2016. The trade deficit for May 2017 was estimated at $13841.72 million as against the deficit of $6272.90 million during May 2016. The data was released by government after market hours on Thursday, 15 June 2017. 

The annual rate of inflation, based on monthly wholesale price index (WPI) stood at 2.17% (provisional) for the month of May 2017 over May 2016 as compared to 3.85% (provisional) for the previous month and -0.9% during the corresponding month of the previous year. Build up inflation rate in the financial year so far was -0.35% compared to a build up rate of 2.51% in the corresponding period of the previous year. The data was announced during market hours on Wednesday, 14 June 2017. 
The retail price inflation, as measured by the consumer price index (CPI), slowed to 2.18% in May from 2.99% in April 2017 as food prices started falling from their year-ago level. Inflation is now well below the Reserve Bank of India's (RBI) medium-term target of 4%, and at the lower end of its CPI projection of 2%-3.5% in the first half of the fiscal year. 

Major Action &Announcement:
Dr Reddy's Laboratories gained 1.41% The company said that it has received Establishment Inspection Report (EIR) from the United States Food and Drug Administration on 13 June 2017 as closure of audit for the company's API manufacturing plant at Miryalaguda. This unit was inspected by the USFDA in February 2017 and Dr Reddy's was issued form 483 with three observations. The announcement was made after market hours on Tuesday, 13 June 2017. 

ICICI Bank fell 1.65%. The bank said that the committee of executive directors of the bank is scheduled to meet on 20 June 2017 to consider fund raising by way of issuance of senior unsecured long term bonds in the nature of debentures in single/multiple tranches on private placement basis. The announcement was made after market hours on Thursday, 15 June 2017. 

Infosys dropped 0.86%. Infosys announced the appointment of KarmeshVaswani as the Global Head – Retail, CPG & Logistics (RCL) and NiteshBanga as the Global Head of Manufacturing, effective 15 July 2017. KarmeshVaswani and NiteshBanga are both career Infoscions who have held strategic portfolios across the organization for nearly a decade. The announcement was made after market hours on Thursday, 15 June 2017. 

TCS slumped 4.49%. TCS announced that it has launched ignio for SAP ERP to help customers run their operations in SAP more effectively. ignio is a cognitive automation solution for enterprise IT. ignio has also achieved certified integration with SAP ERP. The announcement was made after market hours on Thursday, 15 June 2017. 

Tata Motors declined 2.5%. The company said that its global wholesales, including Jaguar Land Rover, declined by 1% to 86,385 units in May 2017 over May 2016. The announcement was made after market hours on Friday, 9 June 2017. 
Separately, the company said that it is desirous of offering the eighth series of its rated, listed, unsecured, redeemable, noon convertible debentures (NCDs) aggregating to Rs 500 crore and in this regard is holding a meeting of its duly constituted committee of the board on 21 June 2017. The announcement was made during market hours on Friday, 16 June 2017. 

Reliance Industries (RIL) jumped 3.92%. The stock was the biggest gainer from the Sensex pack. RIL and BP on Thursday, 15 June 2017 announced that they are moving forward to develop already-discovered deepwater gas fields, bringing new gas production for India. The two companies have agreed to deepen and expand their partnership to work jointly across a wide range of areas throughout India's energy sector. The announcement was made after market hours yesterday, 15 June 2017. 

Global Front: 
In Overseas Markets,the Federal Reserve hiked the fed-funds rate by a quarter-point to between 1% and 1.25%, as expected, after its two-day policy meeting on Wednesday, 14 June 2017 and indicated that it start shrinking its $4.5 trillion portfolio of bonds and other assets this year. Fed Chair Janet Yellen said the process could start relatively soon, while projections of Federal Reserve Board members also showed they expect one more rate hike by the end of year. 

The Bank of Japan (BOJ) left policy unchanged on Friday, 16 June 2017, maintaining its aggressive monetary stimulus aimed at lifting inflation, which continues to show weakness despite brighter spots elsewhere in the economy. The BOJ board voted to keep its target for 10-year Japanese government bond yields at around zero and a shorter-term interest rate at minus 0.1%, as widely expected by economists. The bank also reiterated that it would continue to buy government bonds at an annual pace of about ¥80 trillion ($720 billion). 

China's central bank left interest rates for open market operations unchanged. The rate for seven-day reverse repos remained at 2.45%, the 14-day tenor at 2.6% and the 28-day tenor at 2.75%, the PBOC said in a statement. China's benchmark one-year lending and deposit rates have remained unchanged since October 2015. 

Global Economic News:

Fed hikes rates, reveals plan to shrink bond holdings
Despite falling inflation data in recent months, the US Federal Reserve hiked rates on Wednesday, and indicated it will likely hike rates once more this year. Also, the central bank laid out the framework it will use when it begins to shrink its massive balance sheet, a process it indicated will begin later this year. The Fed will initially allow $10 billion in securities to mature each month — $6 billion in Treasuries and $4 billion in mortgage and agency debt — gradually increasing until it reaches a cap of $50 billion a month. In her Wednesday press conference, Fed chair Janet Yellen chalked up the recent decline in inflation to one-off factors such as falling prices for cell phone service and prescription drugs. Despite three consecutive monthly declines in consumer prices, the Federal Open Market Committee said that it expects inflation to stabilize around the committee’s 2% target in the medium term. Despite three rates hikes, yields on US 10-year notes are nearly a half-percent lower today than they were when the FOMC resumed its tightening cycle in December 2016.

New party set to grab French majority 
French president Emmanuel Macron’s Republic on the Move party is set to secure a significant majority in the National Assembly, based on voting in the first round of the two-round process. His party is projected to win as many as 450 of the 577 seats in France’s lower house, potentially giving him the ability to push through needed, but previously unpopular, reforms. The final round of voting takes place on Sunday, 18 June.

IMF ups China outlook
The International Monetary Fund raised its gross domestic product forecast for China to 6.7% in 2017, up from its prior 6.6% projection, the second time the fund has boosted its outlook. China should embrace reform while growth is strong, the IMF said, since buffers are sufficient to ease the transition and to avoid sharp adjustments down the road.

Greek debt relief will have to wait
Greece’s creditors reached another deal to release a further round of funding to keep the country afloat. The lifeline did not include an agreement to cut Greece’s debt load, as had been hoped, postponing discussions on that matter until August 2018. Under the terms of the deal, Greece will be granted access to an additional €8.5 billion, though its debt remains excluded from the European Central Bank’s asset purchase program. Greek unemployment stands at 23%, and the Greek economy has shrunk 27% since 2008, according to the Organization for Economic Cooperation and Development.

US revises Cuba policy
The Trump administration announced a revised Cuba policy on Friday that will tighten rules on Americans traveling to Cuba and restrict US companies from doing business with entities controlled by the Cuban military. Exceptions will be made for US air carriers and cruise lines.

GLOBAL CORPORATE NEWS

UK election fallout reverberates
Credit rating agency Moody’s Investors Service warned this week that the minority government resulting from the recent snap election in the United Kingdom further complicates Brexit negotiations with the European Union. The latest political developments are a credit negative, and the government will likely be forced to put fiscal deficit cuts on hold, the agency said. Meanwhile, inflation remains a major concern for Bank of England policymakers after consumer prices rose 2.9% versus a year ago, the fastest pace in nearly four years. Markets were caught by surprise as three members of the eight- member Monetary Policy Committee — there is one vacancy on the committee — voted to raise interest rates this week in order to rein in inflation. London’s financial community had expected to hear from Chancellor of the Exchequer Phillip Hammond and Bank of England governor Mark Carney late in the week, but both cancelled scheduled speeches out of respect for those killed and injured in the Grenfell Tower apartment building fire.

NEW 52-WEEK HIGH BSE (A):

NEW 52-WEEK LOWS BSE (A):

MAJOR WEEKLY GAINERS IN BSE A CATEGORY(%):

MAJOR WEEKLY LOSERS IN BSE A CATEGORY:

Eyes will be set on the certain US economic data releases are: 
Monday (19June)
Week Bill Announcement 
Tuesday (20 June)
Current Account 
Wednesday (21 June)
Existing Home Sales
Thursday (22 June)
Jobless Claims $ Natural Gas Report
Friday (23 June)
New Home Sales

Fundamental Pick of the week:

Accumulate HDIL Ltd For Target Rs.110.00

Hdil, after prolong corrective phase, has been trading in a broader range of 50-110 for last three years.
Technically, the realty index has witnessed bullish reversal after several years of underperformance and Hdil is also rebounding in line with the sectoral index.

Currently, it has been consolidating above the support zone of multiple moving averages with exponential rise in volumes which indicates accumulation. The chart pattern along with oscillators is also pointing towards strong prospect of retesting the upper band of the range in near term and possibly a breakout also this time. In short, we strongly advise traders to use this phase to accumulate in the given range of 90-93 with close below stop loss of 83 for the target of 110.

Recommendation 
Buy HDIL  Ltd @ 90-93 Stoploss 83 Target 110 

MARKET OUTLOOK: 
The Nifty opened on flat note today & traded with bearish bias throughout the day. Nevertheless the index obeyed the falling channel on the hourly chart & remained within the same. Near the support zone of 9580-9560 bulls rushed in to provide support to the benchmark index. Thus Nifty managed to close just above the 20 DMA. Till the time the key Moving Average & the lower channel line holds on closing basis sharper decline is unlikely. On the higher side, 9627-9655 is a key resistance zone to watch out for. Once that gets taken off, the next move on the upside can take the index to 9815, which is our short term target.

Other technical observations 
On the daily chart the Nifty is above the 20-day moving average (DMA) and the 40-DEMA, i.e. 9577 and 9465 respectively. The momentum indicator is in bearish mode on the daily chart.

On the hourly chart, the Nifty is below the 20-hour moving average (HMA) and the 40-HEMA, i.e. 9606 and 9614 respectively. The hourly momentum indicator is in bearish mode. The market breadth was marginally negative with 728 advances and 747 declines on the National Stock Exchange.

Low made  was 9560 bears broke 9595 and finally closed below it and can push towards 9520/9480. Bullish above 9610 for a move towards 9660/9720/9770. As seen in below chart, nifty has done 2 time whipsaw at gann angle and shown a impulsive move on upside. Will it be repeated again ? 17 June is important trend change date as per geometric time cycle as it being holiday we should see effect either tomorrow or Monday.  Nifty continue to close below gann angle, but in the process formed an Inside bar pattern. Bullish above 9610 for a move towards 9660/9720/9770. Till we are closing below 9595 bears have upper hand and can push 9520/9480.As we discussed 17 June is important trend change day so low made on Friday is important ie.9565 holding the same we can continue to move higher towards our target.  

Conclusion: 
The Indian equity markets snapped its five week winning streak amid profit booking around the all time high of 9700. Rising NPA issues, loan waivers by states kept the overall sentiment under check. RBI identifying 12 accounts that covered about 25% of the banking system’s NPA for immediate resolution under the Insolvency and Bankruptcy Code also saw uncertainty spread across the street. Meanwhile, the Index of Industrial Production rose to 3.1% in April led by high growth in manufacturing. On the other hand, retail inflation fell to a record low of 2.18% in May. The wholesale price index based inflation eased to 2.17% in May this year from 3.85% in April. Among the other macro-economic data, India’s current account deficit in the fourth quarter widened to USD 3.4 bn, or 0.6% of gross domestic product (GDP), against USD 0.3 bn (0.1% of GDP) in the fourth quarter (Q4) of 2015-16, owing to a widening trade deficit. Mostly sectoral indices traded in line with the benchmark and ended on flat note, in absence of any fresh trigger. For the week, BSE Sensex and Nifty were down by 0.8% each.

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ICICI Prudential Life boosts industry growth.

ICICI Prudential Life delivered 100% individual APE growth in May 2017, pushing private sector growth to 46%, which would have been 30% otherwise. We expect ICICI Life’s high growth to moderate in 2HFY18 on a high base. On the other hand, HDFC Life’s low base will benefit from June 2017 leading to higher (20% yoy in May 2017) growth over the next 10 months. Other players continue to deliver steady (about 20-30%) growth.

High growth for most; ICICI Life pulls up industry growth rate

Most large private players reported 20-30% growth in APE; high growth at ICICI Prudential Life (up 100% yoy) lifted private sector individual APE growth to 46%; excluding ICICI Prudential Life, the rest of the private sector reported 30% individual APE growth. LIC remained muted at 5% yoy. Overall industry was up 24% in individual APE during the month.

ICICI Prudential Life will moderate in 2H

According to the management of ICICI Prudential Life, the business is now in a secular growth mode across channels and doing away with seasonal trends. While individual APE growth was 100%, ticket size growth in individual non-single segment was 52% yoy, flat qoq, i.e. about half its yoy growth was driven by volumes. The company reported Rs5.7 bn of individual APE in May 2017; it has maintained a run-rate of Rs5-6 bn since November 2017. ICICI Life’s management expects the run-rate to continue or trend up marginally throughout the year and as such yoy growth rate in 2H will be lower.

Behavioral pattern of deposits and interest rates is not straightforward

As against the expectations of a strong inverse correlation between savings deposit growth and interest rates and a positive correlation between growth in term deposits and interest rates, the data too are not playing out in India. Urban/metro region shows this relationship in savings but not term (see Exhibits 32-33). Rural and semi-urban shows in term deposits but not in savings (see Exhibits 28-31). We believe that a combination of new depositors coming to the fold, especially in rural and semi-urban as well as weak performance by nonhouseholds, especially in urban markets, could explain this contradiction.

20-30% growth in individual APE for most large players

* HDFC Life delivered 20% yoy growth, following a long period of subdued growth. Its base was a bit large at 43% growth in May 2016. The company has delivered average growth of 3% between June 2016 and March 2017. As such, we expect yoy growth rate to be significantly higher from June 2017 onwards. One of the reasons for low growth for HDFC Life was slowdown at HDFC Bank due to streamlining of its KYC process; this is now back on track. HDFC Bank’s partnership with Birla SL may take away some share of the banks franchise though the terms of the agreement are not yet clear.

* Max Life remains steady with 22% growth in May 2017; this compares with 25% growth in FY2017. Interestingly, its ticket size is reducing – down 11% yoy, 19% qoq. This may likely be due to increase in policies in the protection segment and lower share of unit-linked policies.

* Reliance Life delivered moderate (15%) growth; the company has been shifting its focus on traditional business from unit-linked policies leading to slow growth/yoy decline in last few months. Interestingly, the company reported 47% growth in average ticket size in the individual non-single segment even as its ticket size at Rs28,000 is lowest amongst large players.

* Bajaj Life and Birla SL remained strong with 67% and 32% growth respectively. Both reported about 35% growth in average ticket size.

Private sector up in group business; single business remains strong for LIC

LIC continues to have high share of single premium (81% in May 2017in its overall business)

; the ratio has been stable for last two years.

Private players have generally been selective in this segment; the share of single premium of private players was 40% in May 2017: 35-40% for last three years. The ratio has been highfor Bajaj Life, Birla SL and HDFC Life at about 60%.

In the group business, the share of private players has been stable at about 18-19%.

increased to 25% from 19% in the last two financial years. Bajaj Allianz Life lost share to

ICICI Prudential Lifeon mom basis.

Have a Nice Day  !!