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Weekly Nifty Trading View for the Week June 26, 2017- July 01, 2017

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Events to watch this week

  • Crude oil prices decline more than 20% from recent peaks

  • Brexit negotiations begin

  • BOE governor, economist split over rate moves

  • MSCI admits China’s A shares

  • Fed’s Powell OK with relaxing Volcker rule

The Week ahead:

 

Date

Country/Area

Release/Event

Mon, 26 Jun

United States

Durable goods orders

Tue, 27 Jun

United States

Case-Shiller home price index

Wed, 28 June

United States

Trade balance, pending homes sales

Thurs, 29 June

Japan

Retail sales

Thurs, 29 June

eurozone

Economic sentiment indicator

Thurs, 29 June

United States

Q1 gross domestic product revision

 Fri, 30 June

 United Kingdom

 Q1 gross domestic product revision

 Fri, 30 June

 eurozone

 Preliminary June consumer price index

 Fri, 30 June

 United States

 Personal income/spending

For the week,Global equities slipped this week, but not before the S&P 500 Index posted a fresh record high early in the week. Falling oil prices have been a cause for investor concern. West Texas Intermediate crude continued its decline, slipping to $42.65 a barrel on Friday from $44.70 a week ago, trading near a seven-month low. The yield on the US 10-year Treasury note was virtually unchanged, while volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), declined slightly to 10.6 from last Friday’s 10.9.

NIFTY- 9,574.95
CRUDE OIL-Rs 2781barrel
GOLD-Rs 28,753gram
Rs/$-Rs 64.52

MARKET ROUND UP 
A divergent trend was witnessed as the barometer index, the S&P BSE Sensex, settled with modest gains while the Nifty 50 index registered small decline in the week ended Friday, 23 June 2017. The BSE Mid-Cap and the S&P BSE Small-Cap indices underperformed the Sensex during the week. Trading activity was quiet during the week in absence of major triggers. 
In the week ended Friday, 23 June 2017, the Sensex rose 81.81 points or 0.26% to settle at 31,138.21. The Nifty 50 index fell 13.10 points or 0.14% to settle at 9,574.95. The S&P BSE Mid-Cap index fell 223.52 points or 1.51% to settle at 14,583.81. The S&P BSE Small-Cap index fell 285.34 points or 1.82% to settle at 15,381.90. Both these indices underperformed the Sensex. 
Key benchmark indices logged strong gains on first trading day of the week on Monday, 19 June 2017 on upbeat global markets. The Sensex gained 255.17 points or 0.82% to setle at 31,311.57, a record closing high for the index. Amid a divergent trend among various index constituents, the key benchmark indices finished a shade lower in a quiet session of trade on Tuesday, 20 June 2017. The Sensex fell 14.04 points or 0.04% to settle at 31,297.53, its lowest closing level since 16 June 2017. 

Macro Economic Front: 
On the Economic Front,Developments related to roll-out of Goods and Service Tax (GST), progress of monsoon rains, domestic and global macroeconomic data, trend in global markets, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs), the movement of rupee against the dollar and crude oil price movement will dictate trend on the bourses in truncated trading week ahead. Domestic stock markets will remain closed on Monday, 26 June 2017 on account of Id-Ul-Fitr (Ramzan Id). 

The market may remain volatile as traders roll over positions in the futures & options (F&O) segment from the near month June 2017 series to July 2017 series. The near month June 2017 derivatives contract expire on Thursday, 29 June 2017. 
The progress of monsoon rains will be closely watched. The IMD said that for the country as a whole, cumulative rainfall during this year's monsoon upto 22 June has been 4% above the Long Period Average (LPA). The June-September southwest monsoon is critical for the country's agriculture because a considerable part of the country's farmland is dependent on the rains for irrigation. 

Major Action &Announcement:
Axis Bank fell 1.06%. The bank has revised Marginal Cost of Funds based Lending Rate (MCLR) rates in the short tenors. The 1 year MCLR stands unchanged at 8.25%. New rates are effective from 17 June 2017. The announcement was made after market hours on Friday, 16 June 2017. 

ICICI Bank lost 7.9%. The company announced that the Committee of Executive Directors of the Bank at its meeting held on 20 June 2017 has approved the proposal for 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. 

Index heavyweight and housing finance major HDFC advanced 0.72%. The company filed term sheet for issuing secured redeemable non-convertible debentures worth Rs 700 crore on private placement basis. HDFC said that the coupon rate on debentures is 7.21% per annum. The tenor of the debentures is one year 93 days, with redemption date being 24 September 2018. The announcement was made after market hours on 21 June 2017. 

Tata Motors lost 2.72%. As per reports the Tata Group may be considering listing its luxury carmaker Jaguar Land Rover through an initial public offer. According to reports, senior executives of Tata Group have held preliminary internal discussions over listing of the British luxury automobile company Jaguar Land Rover (JLR) over an international stock exchange, which may potentially include New York Stock Exchange or London Stock Exchange. Tata Motors had bought an ailing JLR in a surprise move in 2008 for $2.4 billion from Ford Motor Co. 

Adani Ports and Special Economic Zone (APSEZ) rose 1.35%. The company said Moody's has changed its outlook on the company to stable from negative. Moody's has re-affirmed its investment grade rating at Baa3 on APSEZ. The announcement was made during market hours on 19 June 2017. 

Drug major Lupin lost 6.2%. Media reports suggested that Lupin'sPithampur Unit 3 has been issued 5 observations by the US Food and Drug Administration (USFDA). Meanwhile, Lupin announced during market hours on 22 June 2017, the launch of its Desoximetasone Cream USP, 0.05% and Desoximetasone Cream USP, 0.25% having received an approval from the United States Food and Drug Administration (FDA) earlier. 

Global Front: 
In Overseas Markets,growth in the eurozone's manufacturing and services sector slowed in June, data showed on Friday, 23 June 2017. Markit's flash eurozone PMI composite output index came in at 55.7 in June, a five-month low. 
A report on weekly jobless claims showed that fewer than 250,000 Americans applied for unemployment benefits in mid-June. Initial jobless claims rose by 3,000 to 241,000 in the seven days stretching from 11 June to 17 June 2017, Labor Department said on Thursday, 22 June 2017. 

Global Economic News:

Crude oil prices deepen slump
The price of a barrel of West Texas Intermediate crude oil extended its decline this week amid rising global inventories. WTI prices have fallen in excess of 25% from their $58.30 high, which was posted on the year’s first trading day. Energy company shares have been under pressure, while spreads in the sector’s high-yield bond market have widened over benchmark Treasury yields this week. The sharp decline in energy prices will make it that much more difficult for the US Federal Reserve to reach its 2% inflation target in the foreseeable future.

Brexit talks underway
Negotiators from the United Kingdom and the European Union met on Monday in the first formal Brexit negotiating session. The one breakthrough from the talks was the UK’s acquiescence to EU demands that the divorce bill must be settled before the EU begins to negotiate a new trade arrangement. Late in the week, Prime Minister Theresa May met with EU leaders in Brussels and laid out her plan to protect the rights of the three million EU citizens living in the UK, allowing them permanent residence. May called on leaders to grant British citizens living in the EU the same rights.

To hike or not to hike?
That is the question on the minds of the members of the Bank of England’s Monetary Policy Committee. While UK growth has suffered a downturn of late, inflation has surged on the heels of a tumble in the pound’s exchange rate. Rising import prices have pushed consumer prices up 2.9% versus year-ago levels, prompting three members of the short-staffed MPC to vote for a rate hike last week against five votes to leave policy unchanged. The divide deepened this week as the Bank’s two most high-profile officials came out on opposite ends of the question of whether rates should be raised this year. BOE governor Mark Carney made the case that now is not the time for rate hikes given low wage growth and mixed signals on consumer spending and business investment. BOE chief economist Andy Haldane countered that it would be prudent to raise rates in the second half of this year to counter the inflation surge. 

China gets nod from MSCI
After years of fighting for inclusion in MSCI’s influential stock indices, China finally received word that some of its A shares will be included in the indices in mid-2018. Just fewer than half of the 448 A shares will be included in the indices and at an initial weighting of just 5% of each stock’s market cap. These restrictions are an effort by MSCI to incentive China to further liberalize its stocks markets.

US banks clear first round of stress tests
Thirty-four big US banks passed the first round of the Fed’s stress test this week. Next week, the central bank will announce whether it will allow the banks to return capital to shareholders. Some banks may begin to reduce their capital if the Fed approves. That could be seen by markets as a sign of confidence that the banking system is strong and positioned well to withstand a significant economic downturn.

GLOBAL CORPORATE NEWS

Room to relax
Fed governor Jerome Powell told a congressional committee that US regulators have room to relax or eliminate some aspects of the Volcker rule, which is intended to limit banks’ ability to make speculative bets with insured deposits. Regulators are looking for ways to simplify the complicated rule and may exempt small banks from having to comply, Powell said.

Treasury secretary rejects one-off ultra-long bond
US treasury secretary Steven Mnuchin this spring floated the idea that the United States is considering issuing very-long-dated bonds. This week he said the government will only issue ultra-long maturity Treasuries if there is sustained appetite for the securities. Mnuchin said his department is reaching out to investors in order to gauge demand for instruments with maturities between 50 and 100 years, but any move to issue very-long-term debt would not be a one-off. Apparently there is at least some investor demand for long paper, as Argentina issued 100-year bonds this week despite having defaulted six times in the last century. The issue, although rated below investment-grade, was heavily oversubscribed.

NEW 52-WEEK HIGH BSE (A):

ABIRLANUVO

1775.00

BALKRISIND

1729.00

COLPAL

1120.00

NEW 52-WEEK LOWS BSE (A):


APLLTD

500.75

COALINDIA

243.35

DISHTV

73.50

MAJOR WEEKLY GAINERS IN BSE A CATEGORY(%):


JAIPRAKASH ASSO

26.29

rELIANCE COMM

11.29

BALKRISHNA IND

10.35

MAJOR WEEKLY LOSERS IN BSE A CATEGORY:


GODREJ CONSUMER

-48.98

CENTRAL BANK

-13.75

VIDEOCON

-22.52



Eyes will be set on the certain US economic data releases are: 
Monday (26June)
Durable Goods Orders 
Tuesday (27 June)
Consumer confidence 
Wednesday (28 June)
MBA Mortagage Applications
Thursday (29 June)
Jobless Claims 
Friday (30 June)
Consumer Sentiments

Technically Pick of the week:

Accumulate ITC Ltd For Target Rs.363.00

* ITC Closed 0.7% up in trade today at Rs311 compared to flat close in benchmark Nifty.
* We expect ITC to benefit in GST regime as tax outgo is similar to the current tax structure. It also provides more clarity and uniformity in taxes across states.
* Increase salience of DSFT cigarettes and strong pricing power would aid growth in volumes and profitability in the coming quarters.

* We expect ITC to post revenues and net profit of Rs449.4bn and Rs118.2bn respectively in FY18.Based on expected EPS of Rs9.7, the stock currently trades at an attractive P/E multiple of 32x FY18E earnings, which is at a 20% discount to sector multiples.

* We maintain BUY rating on the stock with target price of Rs363.

MARKET OUTLOOK
Markets to make a cautious start on mixed global cues
 
The Indian markets gave up all their gains in final hours to end flat with just a positive bias in last session, tracking weak cues from European markets. Today, the start is likely to remain cautious tailing mixed global cues. Markets however, may get some support with Reserve Bank Governor Urjit Patel’s statement that he is not 'overly pessimistic' about employment scenario in the IT sector, pointing out that mushrooming startups can compensate for job losses. Meanwhile, the Union Cabinet passed a resolution expressing gratitude to Chief Ministers of States and others for their cooperation in introduction of GST, calling it the biggest tax reform in independent India.

The banking stocks will be in focus with credit rating agency ICRA stating that asset quality pain for banks is expected to continue in financial year 2018 due to restructuring by banks, weakness in some large corporate accounts and moves like waiver of farm loans.  On the same time IT stocks may come under pressure as Industry body Nasscom has projected that India's IT industry is expected to grow at the slowest pace in nearly a decade as clients defer spending in the face of geopolitical uncertainties. Software export growth in financial year 2017-18 is projected at 7-8 per cent in constant currency terms, down from 8.6 per cent last year.

Other technical observations 
Low made friday was 9608 so even though bulls were not able to break the gann angle but they held on to support of 9610 in today’s fall and closed at 9633, Now bulls need a close above 9650 for a quick move towards 9720/9770. Bearish below 9610 for a move towards 9565/9520. Nifty made high of 9698 today unable to make a new life high above 9709 and made low of 9630, so bulls protected 9610 and bears protected 9720 hence trading in neutral zone with high volatility experience during the day.Today is 3 day where we made the failed attempt to close above gannangles, bulls should not delay much else bears will become active and can push nifty lower towards 9500/9400 odd levels. Now bulls need a close above 9650 for a quick move towards 9720/9770. Bearish below 9610 for a move towards 9565/9520. 

Conclusion: 
Fresh farm loan waiver by the Karnataka government, escalating NPA issues and problems faced by the IT industry on the H1B visa front are among the multiple headwinds that have dragged Nifty over 100 points in the past two days.
On the other hand, banking stocks were in action after RBI announced plan to resolve troubled assets of 12 large borrowers and has also asked banks to resolve 55 high value cases of bad loans within six months. For the week, BSE Sensex and Nifty ended with marginal losses.


The IPO market is seeing very healthy signs with the IPO of CDSL receiving an overwhelming response as it got oversubscribed 169 times.

Global markets consolidate as US stocks correct another day. Oil weakness hits energy stocks while gold rebounds on safe haven buying.

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Indian Indices: Asian indices opened flat to slightly positive as overnight US indices closed marginally in the red for another day. Gold prices saw defensive buying while bond yields fell as markets consolidated the recent gains. Oil importers gained while oil exporters fell even as financial stocks saw profit booking.


Nifty witnessed huge reversal intraday after hitting 9700 to close marginally in the red as midcap stocks led the sharp selloff. Metals, Realty and select FMCG sold off while select Pharma and Cement majors saw buying while the broader market breadth was extremely poor. For today expect weekend blues to see quiet trade in the first half while second half profit booking may be on the cards.


The BSE Sensex is currently trading at 31211.85, down by 78.89 points or 0.25% after trading in a range of 31197.36 and 31365.39. There were 11 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.35%, while Small cap index was down by 1.50%.

The CNX Nifty is currently trading at 9590.25, down by 39.75 points or 0.41% after trading in a range of 9585.15 and 9647.65. There were 15 stocks advancing against 36 stocks declining on the index.

MARKET INDICATORS

·           

 

Group ATopGainers

 

 

Company

Price (Rs)

% chg

JPAssociat

17.27

4.98

Wockpharm

573.65

2.58

Mindtree

531.45

2.06

RDEL

61.15

1.92

Group ATopLosers

 

 

Videoind

17.20

-4.97

Fortis

177.25

-10.46

Prestige

245.95

-4.54

IIFL

583.00

-4.42

INDEX PERFORMANCE

 

 

Indices

Support

Resistanes

Sensex

31205

31415

Nifty

9610

9675

 

Technical view: Nifty found strong resistance around 9700 and now finds support around 9600 which if broken can trigger a fall till 9500. Bank Nifty also saw resistance around 23900 while 23650 will act as support on the downside, which if broken can see 23650 being tested.


 

Just Dial Jun FUTs (SELL Below 392 with Stop Loss at 398 for Target of 382): The stock has been consolidating for the past six days and has finally broken down from a Symmetrical Triangle pattern on the daily charts. The recent price action indicates that steeper decline is on the cards. Other momentum oscillators also suggest that the downfall is likely to extend.


EconomicSnippets:  

India's government is facing mounting pressure to raise import duties on edible oils after farmers staged mass protests in key farm states amid a slump in oilseed prices to below government support levels. (Moneycontrol)

With the Goods and Services Tax (GST) coming into effect from July 1, train passengers will have to pay a bit more to travel AC and first class. Service tax on ticket charges is set to hike from 4.5 % to 5 % after the GST implementation. (FE)

RBI Governor Urjit Patel had argued for avoiding “premature policy action” and waiting for more inflation data at the meeting of the interest rate setting panel earlier this month.


Nifty Movers: The top gainers on Nifty were Power Grid up by 0.99%, Wipro up by 0.88%, NTPC up by 0.63%, Sun Pharma up by 0.62% and TCS up by 0.48%. On the flip side, Indiabulls Housing down by 4.51%, Indian Oil Corporation down by 2.96%, Bank of Baroda down by 2.15%, Bosch down by 2.07% and Tata Steel down by 2.03% were the top losers.

Top Sectoral& Stock Screening:The top gaining sectoral indices on the BSE were IT up by 0.28% and TECK up by 0.14%, while Realty down by 2.06%, Metal down by 1.42%, Basic Materials down by 1.33%, Industrials down by 1.30% and Auto down by 1.24% were the losing indices on BSE.

 

 

On the global front: On the global front, Asian shares were trading mostly in green, with China in focus after the country’s banking regulator sought more information on credit risks linked to loans to major companies that bought major assets abroad. Japanese manufacturing activity slowed in June as new orders grew at the slowest pace in seven months, a sign of a slight weakening in domestic demand.

 

Global Signals:The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 0.26 points or 0.01% to 1,777.69, KOSPI Index increased 6.79 points or 0.29% to 2,377.16, Hang Seng increased 9.72 points or 0.04% to 25,684.25 and Nikkei 225 increased 13.65 points or 0.07% to 20,124.16.On the other hand, Shanghai Composite decreased 25.89 points or 0.82% to 3,121.56 and Taiwan Weighted decreased 20.91 points or 0.2% to 10,378.15.Jakarta Stock Exchange was closed on account of ‘Commemoration Day’ holiday.

 

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Company Overview:

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.

Key Points:

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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BANKING SECTOR UPDATE

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.

 

KEY TAKEAWAYS

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  !!

US stocks hit new highs even as Trump reforms see little progress, while oil hits fresh 6 month low. Globally this week to see decision on Brexit and Trump legislation-could be decisive for market trend going forward.

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Major headlines:

·         Trade partners worried over cash flow in run up to GST

·         Asia stocks shake off Wall Street blues, sterling steady before Brexit talks

·         India to allow late filling in first two months of GST

 

Indian Indices: Asian markets opened in the green led by the Japanese 'Nikkei", which traded above 20000 as the weaker ‘Yen’ aided gains. With important decisions like Brexit and Trump legislation, this week could be decisive in marking the market trend for the next few weeks and months.


Nifty saw weakness creep in the second half as Pharma, IT and Metals counters dragged the Nifty lower. This week could see Nifty break the small range it has been in for over 3 weeks as global and local cues emanate a decisive trend. For today expect Financials, Banks and Auto stocks to see buying while Pharma and IT to remain under pressure.  


The BSE Sensex is currently trading at 31184.44, up by 128.04 points or 0.41% after trading in a range of 31163.35 and 31247.69. There were 20 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.08%, while Small cap index was up by 0.11%.

The CNX Nifty is currently trading at 9618.30, up by 30.25 points or 0.32% after trading in a range of 9618.25 and 9638.75. There were 32 stocks advancing against 19 stocks declining on the index.

MARKET INDICATORS

·           

 

Group ATopGainers

 

 

Company

Price (Rs)

% chg

Hathway

42.50

5.99

Tataelxsi

1610.40

4.24

NLCINDIA

106.40

3.75

Wabag

734.90

3.08

Group ATopLosers

 

 

Wockard

595.55

-5.83

Amtekauto

23.45

-19.97

Videoind

21.10

-4.95

Polaris

233.45

-2.36

INDEX PERFORMANCE

 

 

Indices

Support

Resistanes

Sensex

30990

31195

Nifty

9550

9615

 

Technical view: Nifty is range bound between 9560-9660 and this week should see breakdown or breakout of the range. Bank Nifty also finds support around 23300 while 23750 acts as resistance, either side breakdown/out will see further direction.


 

COLPAL (BUY Above 1096 with Stop Loss at 1077.5 for Target of 1133): The stock has been consolidating for over seven trading sessions and has finally broken out from a Flag Pattern on the daily charts. The price outburst has been accompanied with credible volumes. Other oscillators also indicate that the current momentum is here to stay.


EconomicSnippets:       

India’s forex reserves slipped USD11.5mn, to stand at USD381.156bn in the week to June 9. In the previous week, they had risen USD2.4bn to touch a record-high of USD381.167bn. Gold reserves remained unchanged at USD20.095bn. (BL)


The Department of Telecommunications (DoT) has expressed its inability to meet its revenue target of Rs473.05bn for FY18 and has asked the finance ministry to revise the projection to Rs295.24bn almost a 40% fall. (BS)

Corporate India's mergers and acquisition deals stood at USD1.89bn in May, taking the year to date tally to USD35.44bn. (BL)

 

Net income tax collection till June 15 grew at a healthy 26.2% to Rs1.01trn from across the country as of June 15 this fiscal from Rs 800.75bn in the year ago period.


Nifty Movers: The top gainers on Nifty were Adani Ports up by 1.98%, BhartiInfratel up by 1.88%, Reliance Industries up by 1.44%, Tata Steel up by 1.31% and TCS up by 1.27%. On the flip side, Cipla down by 1.43%, AurobindoPharma down by 1.24%, Yes Bank down by 1.17%, Lupin down by 1.11% and Tata Motors down by 1.02% were the top losers.

Top Sectoral& Stock Screening:The top gaining sectoral indices on the BSE were Energy up by 0.81%, FMCG up by 0.67%, Metal up by 0.60%, Telecom up by 0.57% and Consumer Durables up by 0.54%, while Realty down by 0.94% and Healthcare was down by 0.61% were the only losing indices on BSE.

 

 

On the global front: On the global front, Asian markets were trading mostly in green at this point of time, as traders took some comfort with a member of the US president’s legal team stating that President Donald Trump isn’t under investigation by special counsel Robert Mueller. The US markets ended modestly in red in the last session on another round of downbeat economic data.

 

Global Signals:Asian markets were trading mostly in green; KOSPI Index gained 7.75 points or 0.33% to 2,369.58, Jakarta Composite rose 13.49 points or 0.24% to 5,737.13, Shanghai Composite increased 20.61 points or 0.66% to 3,143.77, Taiwan Weighted surged 85.04 points or 0.84% to 10,241.77, Nikkei 225 added 129.58 points or 0.65% to 20,072.84 and Hang Seng was up by 241.53 points or 0.94% to 25,868.02.

On the flip side, FTSE Bursa Malaysia KLCI was down by 2.72 points or 0.15% to 1,788.59.

 

Weekly Nifty Trading View for the Week June 19, 2017–June 25, 2017

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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:

Date

Country/Area

Release/Event

Sun, 18 Jun

France

Final round – parliamentary elections

Mon, 19 Jun

United Kingdom

Brexit negotiations commence

Wed, 21 June

United States

Existing home sales

Thurs, 22 June

United States

Leading economic indicators

Fri, 23 June

Global

Flash purchasing managers indices

Fri, 23 June

Canada

Consumer price index

Date

Country/Area

Release/Event

Sun, 18 Jun

France

Final round – parliamentary elections

Mon, 19 Jun

United Kingdom

Brexit negotiations commence

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):

BAJAJFINANCE

1425.00

BEML

1463.85

COLPAL

1098.10

NEW 52-WEEK LOWS BSE (A):


AMTEKAUTO

28.35

BLUEDART

4160.00

VIDEOIND

22.20

MAJOR WEEKLY GAINERS IN BSE A CATEGORY(%):


JAIPRAKASH ASSO

20.50

GMR INFRAST..

14.75

BEML LTD

13.45

MAJOR WEEKLY LOSERS IN BSE A CATEGORY:


BIOCON

-66.90

WIPRO

-52.50

VIDEOCON

-22.24



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.

NIFTY ENDS BELOW 9600, SENSEX FALLS FOR 2ND DAY; LUPIN DOWN 4%

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Major headlines

·         No plan to issue next list of defaulters any time soon

·         IT spend in indian banking and securities industry to grow 8.6% in 2017

·         TDP MP incident at Vizag airport to be probed

Indian Indices: Indian equity benchmarks remained range-bound in late afternoon session, though some good buying was being witnessed in Realty, FMCG and Consumer Durables stocks amid higher European markets. There was some optimism as India's exports grew 8.32 per cent to $24.01 billion in May, mainly on account of robust performance by sectors like petroleum, chemicals, engineering goods as well as gems and jewellery. 

Some support also came with the report that India has moved up six places from 66th in last year to reach 60th position in this year's Global Innovation Index (GII), an annual global ranking that assesses the innovation capabilities of 127 countries. 

However, gains were limited as the current account deficit (CAD) soared to $3.4 billion or 0.6 per cent of gross domestic product (GDP), in the fourth quarter of fiscal 2017, from $0.3 billion a year ago. Meanwhile, India Inc's foreign investment witnessed a sharp 56 percent decline at $1.26 billion in May this year.

The BSE Sensex is currently shut down at 31056.40, down by 19.33 points or 0.06% after trading in a range of 31059.41 and 31182.73. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.18%, while Small cap index gained 0.36%.

The CNX Nifty is currently closed up at 9588.05, up by 10.00 points or 0.10% after trading in a range of 9575.40 and 9615.85. There were 29 stocks advancing against 21 stocks declining on the index, while 1 stock remained unchanged.

MARKET INDICATORS

·           

 

Top Movers (Group A)

 

 

Company

Cmp

% chg

Gainers

 

 

Aban

194.20

11.64

FSL

33.00

8.02

BEML

1455.45

7.68

GVLPIL

6.28

4.67

Losers

 

 

Videoind

22.20

-4.93

Lupin

1131.00

-4.40

Fortis

190.65

-3.61

Ipcalab

471.70

-8.08

INDEX PERFORANCE

 

 

Index

Close

% Chg

Sensex

31,056.40

-0.06

Nifty

9,588.05

0.10

CrporateFront: Following the Reserve Bank of India (RBI) identifying 12 accounts that are responsible for 25 per cent of non-performing assets (NPAs), the central bank on Friday said it has no plans to come out with a next list any time soon.
"If you look at it (NPAs), RBI had a detailed circular. Twelve cases have been referred for resolution by Insolvency and Bankruptcy Code (IBC). Other (bad loan) cases, banks are encouraged to resolve in six months' time," RBI Deputy Governor S.S. Mundra said.

 

Macroeconomic front: Dismissing all talk of job losses in Indian information technology (IT) industry as being "motivated", the government on Friday outlined its vision for building the sector into a $1 trillion economy by 2022 that would become a global hub of low-cost digital technology.
"There has been a lot of debate, and by any standards of economy, this talk of job decline in the IT sector is motivated," Electronics and Information Technology Minister Ravi Shankar Prasad said while addressing the industry leaders at an event here to launch work on the blueprint to realise a $1 trillion IT economy.

 

On the global front:

On the global front, European markets were trading in green as investors digested news of a fresh disbursement to Greece and focus on wider political events. Asian markets were also trading in green.  Back home, in scrip specific development, Filatex India jumped higher after the company completed financial closure with the lenders for Rupee and Foreign Currency Loan for capacity expansion project.


Commodity Updates:

Commodity Prices (MCX):

Commodity

Rs

% Chang

Gold

28738.00

-0.1

Silver

38724.00

0.01

Crude oil

2879.00

0.07

Natural Gas

197.30

-0.15

Alluminium

120.45

-0.21

Copper

365.40

-0.31

Top Sectoral& Stock Screening:The top gainers on the Sensex were ITC up by 2.22%, Tata Motors up by 1.86%, GAIL India up by 1.02%, Axis Bank up by 0.81% and NTPC up by 0.69%. On the flip side, Lupin down by 4.41%, Wipro down by 1.97%, Cipla down by 1.80%, Sun PharmaInds. down by 1.61% and Dr. Reddys Lab down by 1.07% were the top losers.

Top Nifty Movers:The top gainers on Nifty were Tata Motors - DVR up by 2.69%, ITC up by 2.27%, Tata Motors up by 1.92%, AurobindoPharma up by 1.41% and BhartiInfratel up by 1.31%. On the flip side, Lupin down by 4.26%, Wipro down by 2.34%, Cipla down by 2.07%, Indiabulls Housing down by 1.91% and Sun PharmaInds. down by 1.60% were the top losers.

 

Global Signals:

Asian markets were trading mostly in green; KOSPI Index increased 0.18 points or 0.01% to 2,361.83, Hang Seng increased 61.15 points or 0.24% to 25,626.49, Taiwan Weighted increased 68.38 points or 0.68% to 10,156.73 and Nikkei 225 increased 111.44 points or 0.56% to 19,943.26. On the flip side, Jakarta Composite decreased 47.85 points or 0.83% to 5,728.43, Shanghai Composite decreased 9.32 points or 0.3% to 3,123.17 and FTSE Bursa Malaysia KLCI decreased 0.11 points or 0.01% to 1,789.90.

All European markets were trading in green; UK’s FTSE 100 increased 24.93 points or 0.34% to 7,444.29, France’s CAC increased 52.84 points or 1.01% to 5,269.72 and Germany’s DAX increased 56.1 points or 0.44% to 12,747.91.

 

US stocks recover losses as US Dollar regains strength while yields rise in tandem. Oil prices slump again as demand concerns see concerted weakness.

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Major headlines:

·         In latest sign of crude glut, ageing supertankers used to store unsold oil

·         India equity markets open marginally higher

·         Indian’s GST launch spawns tech cottage industry for compliance

 

Indian Indices: Asian indices opened in the green as overnight US stocks staged a sharp pull back even as Tech stocks saw weakness. The US Dollar rose along with bond yields while oil prices saw weakness. Friday will see quiet trade as the week will see most indices close with losses after almost 3 months of relentless gains.


Nifty saw selling from foreign investors get absorbed by local mutual funds as liquidity is seeing all minor corrections get bought into. FMCG and Pharma saw value buying while Auto, Banks and Media saw selling. For today expect more range bound consolidation with select pockets of mid-cap stocks/sector outperforming with Aviation stocks hitting fresh 52 week highs.


The BSE Sensex is currently trading at 31128.69, up by 52.96 points or 0.17% after trading in a range of 31092.19 and 31182.73. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.47%, while Small cap index gained 0.63%.

The CNX Nifty is currently trading at 9600.80, up by 22.75 points or 0.24% after trading in a range of 9593.00 and 9615.85. There were 32 stocks advancing against 19 stocks declining on the index.

MARKET INDICATORS

·           

 

Group ATopGainers

 

 

Company

Price (Rs)

% chg

Aban

187.15

7.59

GVKPIL

6.30

5.00

L&TFH

146.80

4.04

GPPL

153.40

3.93

Group ATopLosers

 

 

IPcalab

457.15

-10.91

Amtekauto

30.70

-8.08

Lupin

1138.15

-3.80

Albk

70.40

-2.56

INDEX PERFORMANCE

 

 

Indices

Support

Resistanes

Sensex

30990

31195

Nifty

9550

9615

 

Technical view: Nifty did break the support around 9580 and tested 9560, which if broken can see Nifty test 9500 on the downside, while 9670 acts as resistance on the upside. Bank Nifty also saw a lower bottom around 23311 which if broken can see test of 23000, while 23700 will act as resistance on the upside.


 

Delta Corp (BUY Above 167 with Stop Loss at 163.5 for Target of 174): The stock has been in a strong recovery mode since hitting its 200-DMA in late May 2017. After consolidating for over three trading sessions the stock has broken out from a flag pattern on the hourly charts. The price outburst has also been accompanied with credible volumes. Other oscillators also indicate that the current momentum will further persist.


EconomicSnippets      

India’s current account deficit (CAD) in the fourth quarter widened to USD3.4bn, or 0.6% of gross domestic product (GDP), against USD0.3bn (0.1% of GDP) in the fourth quarter (Q4) of 2015-16, owing to a widening trade deficit. (BS)


Petrol price was cut by Rs1.12/l and diesel by Rs1.24/l, the last of the fortnightly revisions after which daily correction in rates in step with cost will be implemented. (BS)

Country's trade deficit further widened to USD13.84bn in May, its highest in two-and-a-half years, on higher gold imports.


India Inc's foreign investment witnessed a sharp 56% decline at USD1.26bn in May this year.


Nifty Movers: The top gainers on Nifty were AurobindoPharma up by 2.51%, BhartiInfratel up by 2.05%, ITC up by 1.67%, Tata Motors up by 1.27% and Mahindra & Mahindra up by 1.15%. On the flip side, Wipro down by 2.28%, Dr. Reddy’s Lab down by 1.23%, Lupin down by 1.13%, Bank of Baroda down by 0.97% and Cipla down by 0.95% were the top losers.

Top Sectoral& Stock Screening:The top gaining sectoral indices on the BSE were Realty up by 1.48%, FMCG up by 0.83%, Consumer Durables up by 0.68%, Basic Materials up by 0.65% and Industrials up by 0.49%, while IT down by 0.51%, Healthcare down by 0.49% and TECK down by 0.33% were the only losing indices on BSE.

 

 

On the global front: On the global front, Asian shares were trading mostly in green. The Bank of Japan kept monetary policy steady and offered a more upbeat view on private consumption and overseas economies, signaling its confidence that the recovery was gaining momentum. In a widely expected move, the BOJ maintained the 0.1 per cent interest it charges on a portion of the excess reserves that financial institutions park with the central bank.

Global Signals:The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 2.63 points or 0.15% to 1,792.64, Taiwan Weighted increased 60.72 points or 0.6% to 10,149.07, Hang Seng increased 101.52 points or 0.4% to 25,666.86 and Nikkei 225 increased 148 points or 0.75% to 19,979.82.On the other hand, Jakarta Composite decreased 27.61 points or 0.48% to 5,748.67, Shanghai Composite decreased 9.35 points or 0.3% to 3,123.13 and KOSPI Index decreased 0.96 points or 0.04% to 2,360.69.

 

NBFC Sector research report=ICICI Prudential Life by Sharetipsinfo

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NBFC SectorOverview :

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.

 

Conclusion 

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.

 

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