Intraday Trading Tips

Aviation industry continues to face turbulence, fall in oil prices likely to offer respite

noreply@blogger.com (Anonymous) — Sat, 05 Jan 2019 04:59:00 +0000

The significant fall in the oil prices in recent months may help airlines reduce fares and witness passenger growth

Indian aviation industry continues to struggle and festive season could not bring cheer to the players in the industry. This is evident from the moderate year-on-year (YoY) growth of 11 percent in passenger registered by the industry in the month of November 2018, the lowest in last four and half years. This was, primarily, due to price hike taken by the airline companies to offset the impact of significant rise in airline turbine fuel (ATF) prices.

The industry continues to add significant capacity which expanded by 978 bps on YoY basis. This coupled with low passenger growth led to YoY contraction of 506 bps in overall load factor. Revenue passenger kilometers (RPK) witnessed a growth of 13.2 percent as compared to 16.4 percent it achieved last year.

The significant fall in the oil prices in recent months may help airlines reduce fares and witness passenger growth. Fall in oil prices would improve the profitability of the companies. We continue to prefer IndiGo and SpiceJet from the space.

IndiGo

Interglobe Aviation (IndiGo), the leader in Indian aviation industry, is the clear winner and beneficiary of the problems at the debt-laden Jet Airways. It registered a YoY passenger growth of 21.2 percent and expanded its market share by 350 bps. Although, the passenger growth was lowest in last six months due to the fuel surcharge that the company started to charge its customers to offset the impact of rise in ATF prices. During the month of November 2018, it grew its capacity by 30.1 percent.

In the month, load factor contracted to 84.9 percent from 90.7 percent it registered in the same month last year.

SpiceJet

SpiceJet slightly underperformed industry with 10.2 percent YoY Passenger growth. Its RPK witnessed a YoY growth of 13.2 percent as compared to 16.9 percent growth it achieved last year. It continues to maintain load factor above 90 percent but the same contracted by 445 bps (YoY). What is noteworthy in case of SpiceJet is its significant capacity addition. Its capacity registered a YoY growth of 18.7 percent.

Jet Airways

Rising fuel prices, significant debt burden and interest outlay have started putting Jet Airways’ day to day operations under pressure. It witnessed a decline of 9.2 percent in its passenger growth and lost 310 bps in its market share. There was hardly any capacity addition by the carrier in the month.

GoAir

A small player in the Indian skies in terms of its market share, GoAir maintained its share for the month. However, it witnessed a very low YoY passenger growth of 9.2 percent as compared to 29.8 percent it achieved last year. Load factor also contracted by 242 bps. GoAir’s capacity addition growth was lower in the November 2018 as compared to last year.

Source:https://www .moneycontrol.com/news/business/moneycontrol-research/aviation-industry-continues-to-face-turbulence-fall-in-oil-prices-likely-to-offer-respite-3354761.html

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Opinion | New rules will curb abuse by ecommerce giants

noreply@blogger.com (Anonymous) — Thu, 03 Jan 2019 06:24:00 +0000

The new rules come just as Amazon and Flipkart’s parent company Walmart threaten to reprise their rivalry in the US here in India, and could stop them from bringing their worst practices to the Indian market.

Last month, the commerce ministry amended rulesgoverning e-commerce companies controlled by foreign investors. Among other things, the new regulations bar Amazon and Flipkart from selling products from entities they fully or partially own.

The new rules have understandably led to apprehension in the United States because both companies are American — since Walmart acquired Flipkart last year — and the two together have a stranglehold over one of the world’s largest ecommerce markets.

Some call the rules a protectionist move that will derail growth and hurt consumers with higher prices. However, viewing ecommerce only through the prism of cost is a blinkered view because it fails to assess broader harm to businesses and society. Such criticism also ignores gross free market distortions created by the monopolistic platforms.

For many years now, Amazon and Flipkart have exploited a loophole in the Indian laws to expand their business.

India’s ecommerce policy has created two broad sets of companies — inventory-led platforms and marketplaces. It is a distinction not made in ecommerce markets elsewhere but has distinct merits.

In the first, companies can stock products and sell them to consumers on their digital platforms. The grocer Bigbasket is one such. In the other, firms run an electronic platform for sellers and buyers, but are themselves barred from being a buyer or seller.

Amazon and Flipkart are modelled on the second but only in letter. In reality, both run a marketplace and also maintain inventory — getting around the existing limitation of not being able to sell directly by creating new companies that, in turn, stock goods and sell on their platforms.

One such Amazon entity is Cloudtail, a joint venture with Infosys cofounder Narayana Murthy’s Catamaran Ventures. Similarly, Flipkart has WS Retail. Both etailers own and operate many such entities.

With the help of these subsidiaries, Amazon and Flipkart don’t control just inventory, distribution and prices, but also use them in some cases to directly undercut sellers on their platforms. For example, both companies have launched private labels that compete directly with other sellers. So, Amazon India sells its own brands of plastic bottles, mattresses and apparel, among others. Flipkart has since 2016 run a private label business in products ranging from home plastics to electronics.

Why is that wrong? It wrong because it creates conflict of interest, distorts free markets and is built on manipulation of big data.

The large etailers leverage a treasure trove of consumer data generated by sellers on their platforms to then selectively enter the most lucrative markets, and undermining their own partners. The data helps Amazon and Flipkart in many ways and is used to, say, offer discounts to select products at an opportune time, or cross-sell other products. Not all this data, or the market intelligence, is available to other sellers.

Besides, electronic marketplaces are expected to enable free commerce, without disadvantaging one seller over another. By pushing their own private labels, they tilt the scales in their own favour, hurting other sellers on the platform.

Tales of abuse by Amazon are abound in the US, where the etailer has a 41% share of a $500 million retail market. Its ‘competitive intelligence’ unit is accused of adopting predatory tactics to deliberately run many small businesses into the ground, mainly on the strength of big data it relentlessly amasses.

Amazon once even used predatory pricing to roll over a company worth hundreds of millions of dollars. How Amazon crushed Diapers.com has been well chronicled. It did so by slashing prices of diapers and other baby products on its platform by up to 30%, forcing Diapers.com to sell its business to Amazon for $540 million.

India’s new rules will plug glaring loopholes and curb abuse of monopolistic power. Under them, an e-commerce entity providing a marketplace will not exercise ownership or control over goods sold on its platform. It will not let them directly or indirectly influence the price of goods or their distribution on coercive terms.

Overall, the rules should create a level playing field, or certainly a fairer marketplace in which Amazon and Flipkart will not be allowed to use big data to squelch small sellers, or run parallel white label business that directly competes with other sellers. In fact, Indian policymakers would do well to extend the rule to all ecommerce platforms, not just the foreign-controlled ones. This would address potential homegrown ecommerce giants that could turn similarly abusive in the future.

The rules are timely too. They come just as Amazon and Flipkart’s parent company Walmart threaten to reprise their rivalry in the US here in India, and could stop them from bringing their worst practices to the Indian market. The rules also come in just as Amazon eyes expansion into more sensitive sectors like groceries and medicine.

It is not clear if Amazon or Flipkart will challenge the new rules in court, or if there is a viable legal challenge. However, if the rules kick in on February 1, both companies will need to re-engineer their businesses, and perhaps shut down some subsidiaries. That is, by no means, a bad thing.

Source: https:/ / www .moneycontrol.com/news/india/opinion-new-rules-will-curb-abuse-by-ecommerce-giants-3349881.html

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'India likely to grow faster than many nations, 2019 to be year of mid and smallcaps'

noreply@blogger.com (Anonymous) — Wed, 02 Jan 2019 05:14:00 +0000

Investors need to be more selective then usual with their decisions by sticking to quality of earnings & corporate governance, strong financials and growth prospects.

AUM Capital Market

2018 turned out to be the most volatile and eventful year for Indian market and economy where the benchmark indices hit an all-time high before witnessing a sell-off mainly driven by rising crude oil prices, depreciating international currencies, increasing trade protectionism, geopolitical updates, outflow by FIIs, macroeconomic data and corporate events.

But moving towards 2019, India has witnessed a huge positive change and a major boost in the economy with a sharp correction in Brent crude prices that helped in appreciation of the Indian rupee. This will further result in narrowing current account deficit, lower subsidy payout, lower risk of inflation and increased room for RBI to cut interest rate.

Politics along with economic headwinds would be a major factor influencing equity market in 2019. All eyes are focused on the general election of 2019 but after the outcome of recent state elections, it is observed that there could be volatility but not much divergence in the market.

Moreover, new reforms by the upcoming government will be the launch-pad that the markets will be looking for.

Steps taken by the government and the Reserve Bank of India (RBI) to ease rules on foreign borrowings and bonds would stabilise the rupee and rein in the current account deficit (CAD). Rising Indian inflation would be one of the most keenly watched numbers and the RBI might impose corrective measures to curb it by controlling liquidity or by increasing the interest rates.

Further, the government and RBI are in consultations over the liquidity squeeze that has gripped non-banking finance companies (NBFC). The government feels RBI opening a special liquidity window for NBFCs apart from banks, honouring credit lines already sanctioned to them will help.

Globally, markets will watch bond yields and how the geopolitical tensions pan out. Turbulence for global markets may emerge from Italy, Turkey, Brexit and the Middle East. The steps of the Federal Reserve would be keenly observed.

Moreover, the incremental tariffs by the US on Chinese goods may dominate market moods in the coming year. Brent crude prices will float

around $60 a barrel and will halt the recent fall as the OPEC and non-OPEC members' new deal takes effect to reduce oil output.

Valuation parameters after the recent correction have become reasonable and the market looks attractive with visible growth earnings and strong fundamentals. 2019 will be the year of small-cap and mid-cap stocks along with positive participation from FIIs.

Significant fall in the commodity prices would also help markets to outperform other global markets. Indian rupee will remain strong and keep trading at around 70 and below against dollar.

The market scenario would be flat to mildly positive, at least until the general elections and Nifty will close the FY19 at around 10,500.

Going ahead with positive macro newsflows, there is a possibility of Nifty hitting 12,000. Nevertheless, in an unforeseen event, levels of 9,700 cannot be ruled out.

It's easy for emotions to overwhelm investing decisions, but now is the time to put the rule of 'buy low and sell high' into action.

Indian markets will maintain its upmove with a fair share of volatility. Investors need to be more selective than usual with their decisions by sticking to earnings quality and corporate governance, strong financials and growth prospects.

On the whole, we expect India to grow faster than many nations and long-term outlook for the domestic market continues to be strong.

We recommend buying the following stocks with an upside potential of around 15-20 percent from the current level with an investment horizon of 9-12 months:

Larsen & Toubro

L&T is well-placed to benefit from several big-ticket projects, as it satisfies all basic requirements, i.e., balance-sheet size, strong track record, technical expertise and adequate liquidity to bid for such projects.

Recovery in domestic business, order inflow and execution in domestic infra segment, focus on improving RoE and working capital, healthy execution of large order backlog and strong performance of key subsidiaries will strengthen the growth trajectory ahead.

Maruti Suzuki India

MSIL is working towards its commitment to bring electric vehicle in India by 2020. MSIL's largest distribution network across the country, strong performance, strong product pipeline, new launches, next level of excellence in product design with updated technology, better product mix and ramp-up of Gujarat plant would moderate margins in the long run.

Phillips Carbon Black

Government's 'Make in India' programme and anti-dumping duty on imports of CB from China has resulted in PCBL's high sales volume. Its increase in cash flow and improved working capital management has helped in reducing the leverage burden and overall reduction in debt.

PCBL with its technical superiority and cost efficient operating model is expanding its product portfolio which will help in reporting better numbers.

RBL Bank

RBL's robust and diversified loan growth trajectory, well-maintained asset quality coupled with healthy margins, leveraging technology to acquire-engage and service clients, enhancing distribution through a combination of owned branches, and business correspondents, partnerships and acquisitions and highly capable management give a positive outlook for the bank.

Tamil Nadu Newsprint and Papers

Tamil Nadu Newsprint and Papers (TNPL) has emerged as the third largest player in the Indian paper industry with a wide range of portfolio. Consistent economic growth and greater emphasis for education show there is a big market/scope for the company like TNPL to grow going forward.

Paper industry has to face continuous YoY increase in zero duty imports of paper and packaging board under Free Trade agreements along with shortage of raw materials but TNPL has managed the above challenges by matching its capability, increasing capacity, performance and continuous R&D towards recycling and reuse.

Source: https://www. moneycontrol.com/news/business/markets/india-likely-to-grow-faster-than-many-nations-2019-to-be-year-of-mid-and-smallcaps-3344051.html

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Tokyo court says extends detention of Nissan's Carlos Ghosn until January 11

noreply@blogger.com (Anonymous) — Mon, 31 Dec 2018 03:54:00 +0000

The latest extension will see Ghosn remain in Tokyo's main detention centre, where he has been confined since his first arrest on November 19 on allegations of financial misconduct.

The Tokyo District Court said on Monday it has extended the detention of ousted Nissan Motor Co chairman Carlos Ghosn by 10 days until Jan. 11.

Ghosn, accused of aggravated breach of trust, is facing allegations of making the carmaker shoulder 1.85 billion yen ($16.8 million) in personal investment losses.

The latest extension will see Ghosn remain in Tokyo's main detention centre, where he has been confined since his first arrest on November 19 on allegations of financial misconduct.

Since then, he has been re-arrested twice over the latest allegations and on claims that he underreported his Nissan salary for a prolonged period. He denies the allegations.

Calls to the office of Ghosn's lawyer, Motonari Otsuru, were not answered on Monday, a holiday in Japan.

The decision comes a day before Ghosn's 10-day detention period for the latest allegation was set to expire on Tuesday, and follows the release of former Nissan executive Greg Kelly on bail last week after a court ruled against extending his detention while he awaits trial.

Both Ghosn and Kelly were initially arrested in late November and have been charged with underreporting Ghosn's salary at Nissan over a five-year period from 2010. Both deny the charges.

Nissan's board in November fired Ghosn as chairman and Kelly as representative director, although both men technically still remain board members who can only be removed by shareholders.

Ghosn's arrest has rocked the auto industry and strained Nissan's ties with French automaking partner Renault SA, where Ghosn still remains chairman and CEO.

It has also put Japan's criminal justice system under international scrutiny and sparked criticism for some of its practices, including keeping suspects in detention for long periods and prohibiting defence lawyers from being present during interrogations, which can last eight hours a day.

Source: https://www .moneycontrol.com/news/business/tokyo-court-says-extends-detention-of-nissans-carlos-ghosn-until-january-11-3337931.html

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SEBI gives fund houses option to segregate bad assets; fund managers' bonuses will be cut

noreply@blogger.com (Anonymous) — Sat, 29 Dec 2018 04:47:00 +0000

After giving the green signal to side-pocketing, SEBI has given the option to fund houses to segregate bad assets. But there are strict conditions to prevent misuse.

Debt mutual funds will now be able to segregate their portfolios and carve out bad securities. The capital market regulator, Securities and Exchange Board of India (SEBI) said, in a circular issued on 28 December, that in case where the credit rating of an instrument held by a debt fund gets downgraded to "below investment grade" (below BBB-rating) then fund houses can choose to segregate such bad securities and allow investors to continue to buy or sell the good portion of the scheme. The segregated portfolio will not allow any fresh investments.

In simple words, your holding in the scheme would be split into two; the good part and the bad part, with an equal number of units in both. You can choose to sell the good units and exit, but the bad units will be frozen until your fund recovers the dues from the bad assets. Both the good and bad (segregated) part of your scheme will have net asset values (NAV).

SEBI has given the option to fund houses to decide whether or not they want to go ahead and segregate assets. But fund houses will not be able to do this immediately. The market regulator has mandated that those fund houses who think they may use this facility need to first mention it in their Scheme Information Documents (SID).

"It would take another month and half to two months for fund houses to modify their existing SIDs to be ready for side-pocketing," said the head of operations of a fund house requesting anonymity.

Not everyone is happy with SEBI giving the option to the fund house. "This may not be fair because different fund houses will give different treatments to the same credit event. Say, there are two investors who have invested in two different funds. Both these funds invest in the same security, which now defaults. But if the first fund segregates its portfolio and the second fund doesn't, the latter's investor is worse off than the former's. Investors will be subject to different treatments," said the head of fixed income funds at a large fund house who did wish to be quoted.

R Sivakumar, head-fixed income, Axis Asset Management disagrees. "Keeping it optional is necessary because although two affected funds may have the same security, one fund could have a small allocation, say, 0.5% and the other fund can have a larger allocation, say, 5% of the portfolio. The first fund may not find it necessary to side-pocket, given the small exposure," he said.

Joydeep Sen, founder, wiseinvestor.in added, "it has to be optional and left open to fund houses to decide if they want to segregate their assets or not. We see many times, two funds with apparently similar strategy perform differently during different time periods, e.g. two large cap funds or two long bond funds. A matter of fund management strategy will vary from fund house to fund house."

Many fund houses have been clamoring to be allowed to segregate bad assets, known as side-pocketing in mutual fund (MF) parlance, ever since the Infrastructure Leasing & Financial Services Ltd (IL&FS) crisis broke out in the months of August and September 2018.

Back then, the firm and some of its subsidiaries' credit ratings were downgraded. Debt funds that had invested in these scrips got impacted. Some fund houses that had invested in these scrips took a hit as they wrote down their investments in these scrips resulting in a fall in their net asset values. Investors were caught off-guard as the net asset values (NAV) of these schemes fell overnight and those who panicked and withdrew had to do so at a loss.

To ensure that fund houses do not misuse side-pocketing -- or do it frequently -- SEBI has said that fund houses to not charge asset management (AMC) fees for the segregated portfolios. Of the total expenses that schemes can charge to investors (a maximum of 2.5 percent by equity funds and 2.25 percent by debt funds; this has undergone a revision but the final circular on expense ratios is awaited), a portion goes into the kitty of the fund house.

This is called fund management or asset management charges. Infact, the segregated portfolio cannot charge any fees (total expense ratio) until the time the fund house recovers money. Once the money is recovered by the segregated asset, only then it can charge the expenses to the tune of what the main portfolio had charged during the segregated period, but without AMC fees.

Further, the market regulator has told trustees of mutual funds segregating portfolios to penalise fund managers' compensation responsible in buying those securities in the first place. The penalised bonus must be added to the affected scheme, thereby benefiting investors.

Some grey areas remain. SEBI has said that side-pocketing can be initiated when there has been a downgrade of an instrument to "below investment grade". But what if an instrument is AAA-rated and then suddenly defaults? "Sebi has not made this clear. Ideally, Sebi should have said that it should be either downgrade or default," said a senior fund official who did not want to be quoted.

SEBI has also said the portfolios -- both the main as well as the segregated -- would be valued as per prevailing valuation norms. This means the main portfolio would see its NAV fall and subsequently the segregated portfolio will have its own separate NAV. That's fine so far. But what happens if the fund or the segregated asset to be precise, recovers its dues? Will the main portfolio's NAV go up simultaneously?

Sivakumar said that from an initial reading of SEBI's circular, it seems that just the segregated portfolio's NAV would go up, but perhaps not the main portfolios. "If that is the case, then the main scheme’s returns will be impacted for a long, long time to come, despite having recovered its dues," he pointed out.

If your fund house does indeed segregate its portfolio, you will hear about it. Right from declaring publicly its intention to segregate (on the day the event occurs) to sending text messages on mobile phones or emails informing you about the segregation and how it would impact you, SEBI has asked fund houses to keep its investors informed.

Source: https://www .moneycontrol.com/news/business/personal-finance/sebi-gives-fund-houses-option-to-segregate-bad-assets-fund-managers-bonuses-will-be-cut-3334811.html

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Oil prices slide as concerns about global economy, oversupply weigh

noreply@blogger.com (Anonymous) — Fri, 28 Dec 2018 04:06:00 +0000

Concerns about slowing global economic growth have dampened investor demand for riskier asset classes and pressured crude futures.

Oil prices fell on Thursday, retreating from an 8 percent rally in the previous session as the oil market focused on signs of faltering global economic growth and record production of crude.

Brent crude futures dropped 4.24 percent, or $2.31, to settle at $52.16 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $1.61 to settle at $44.61 a barrel, down 3.48 percent.

"The market is giving back some of its gains from yesterday that were brought along with the euphoria in the stock market," said Andrew Lipow, president of Lipow Oil Associates in Houston.

Prices surged on Wednesday, tracking a spike on Wall Street after President Donald Trump's administration attempted to shore up investor confidence.

U.S. stocks retreated for most of the session on Thursday, dragging oil prices, before roaring back to end in positive territory.

Brent and WTI have lost more than a third of their value since the beginning of October and are heading for declines of more than 20 percent in 2018.

Concerns about slowing global economic growth have dampened investor demand for riskier asset classes and pressured crude futures.

Market participants are also worried about a glut of crude.

U.S. crude stocks rose by 6.9 million barrels in the week ended Dec. 21 to 448.2 million, data from industry group the American Petroleum Institute showed on Thursday. Analysts had expected a decrease of 2.9 million barrels.

Official U.S. government data will be released on Friday.

Three months ago it looked as if the global oil market would be undersupplied through the northern hemisphere winter as U.S. sanctions removed large volumes of Iranian crude. But other oil exporters have compensated for any shortfall, depressing prices.

The Organisation of the Petroleum Exporting Countries, along with Russia and other producers, agreed this month to reduce output by 1.2 million barrels per day (bpd), equivalent to more than 1 percent of global consumption.

But the cuts will not take effect until January and oil production has been at or near record highs in Russia, Saudi Arabia and the United States, now the world's top crude producer pumping 11.6 million bpd.

Russian Energy Minister Alexander Novak said the country will cut its output by between 3 million and 5 million tonnes in the first half of 2019. It then will be able to restore it to 556 million tonnes (11.12 million barrels per day) for the whole 2019, on par with 2018, he added.

Although U.S. sanctions have put a cap on Iran's oil sales, Tehran has said its private exporters have "no problems" selling its oil.

Source: https://www .moneycontrol.com/news/business/commodities/oil-prices-slide-as-concerns-about-global-economy-oversupply-weigh-3331881.html

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Govt hands massive blow to Amazon, Flipkart.

noreply@blogger.com (Anonymous) — Thu, 27 Dec 2018 03:59:00 +0000

Online retailers have also been banned from entering into exclusive deals to promote brands

Amazon and Walmart-owned Flipkart will suffer a big blow as the government has barred them from selling their own goods while also putting an end to deep discounts and cashback schemes offered by them.

The government’s move comes after local traders complained that they were being put out of business because of steep discounts these e-commerce companies offered.

The government also banned the online retailers from entering into exclusive deals to promote brands. This means, Xiaomi will not be able to sell its Mi phones exclusively on Flipkart, a practice typically adopted at the time of a product launch.

Besides, e-commerce companies will now have to furnish a certificate along with a report of statutory auditor to the Reserve Bank of India (RBI), confirming compliance of these guidelines, by September 30 of every year for the preceding financial year, indicating that the violations will be strictly dealt with.

The changes have been made to provide clarity to Foreign Direct Investment (FDI) policy on e-commerce sector and will be applicable from February 1, 2019, Department of Industrial Policy and Promotion (DIPP) said in a statement.

According to the new rules, ‘inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25 percent of purchases of such vendor are from the marketplace entity or its group companies’.

“An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity,” the DIPP said.

This means that a seller has some stake in the e-commerce entity or its group companies or its sales amount to more than a fourth of total sales from a single seller (on the e-commerce portal) will not be allowed to sell its products on the platform.

“In light of the deeming fiction, any sale beyond 25 percent from a single vendor will automatically be treated as inventory and thus be barred,” Atul Pandey, Partner, Khaitan & Co said.

The government has also clarified that cash back discounts provided by e-commerce companies should be ‘fair and discriminatory’.

At present, online retail firms such as Amazon, Flipkart, Snapdeal, among others, follow a marketplace model, wherein they merely help sellers and buyers connect with each other by providing a technology platform.

In 2016, much to the ire of the offline traders, the government had allowed 100 percent foreign direct investment (FDI) in e-commerce firms following a marketplace model.

Under this rule, e-commerce firms looking for capital from foreign investors cannot have an inventory model. This means they cannot stock goods or services and then sell it to buyers coming to their website.

As per the FDI policy, 100 percent foreign direct investment is allowed in business to business (B2B) e-commerce, but not in business to consumer (B2C) commerce.

Under the rules, large online retail firms were classified as B2B because they were earning commission from the vendors who sold goods and services on their platforms.

The development comes at a time when the government is also working on a comprehensive e-commerce policy.

In July, it came up with the first leg of the draft e-commerce policy, which talked about allowing e-commerce companies that have FDI of up to 49 percent to switch from a marketplace model to an inventory-led model.

The idea was to promote the sale of domestically-produced goods on online platforms under the government’s 'Make in India' initiative by allowing B2C online retail companies to keep limited inventory.

However, offline traders did not take to the proposal kindly and criticised it for acting as a backdoor entry for FDI in B2C retail.

Source: https://www .moneycontrol.com/news/business/govt-hands-massive-blow-to-amazon-flipkart-bars-deep-discounts-cashback-schemes-exclusive-deals-3326901.html

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Farmer support schemes should evolve into basic income schemes

noreply@blogger.com (Anonymous) — Wed, 26 Dec 2018 04:18:00 +0000

It’s well-known that farm loan waivers are nothing more than vote winning gimmicks and end up hurting the interests of farmers over the long term

In a season of loan waivers, at least some states are thinking about providing long-term structured income or investment support for farmers.

Last week, Jharkhand anounced a plan to give Rs 5,000 per acre aid to small and marginal farmers from the next financial year. Odisha has gone a step further and promised Rs 10,000 per family “as financial assistance for taking up cultivation” for the next three financial years. These are good starts but more could be done.

It’s well-known that farm loan waivers are nothing more than vote winning gimmicks and end up hurting the interests of farmers over the long term.

Typically, only the large, and relatively well-off farmers, benefit from such loan waivers. They constitute a moral hazard; repeated farm loan waivers would prompt borrowers to renege on their loans in the hope that the next election cycle will bring more loan waivers.

That said, it’s nobody’s case that the agriculture sector is not in distress and does not desperately need support. The terms of trade are weighed against the farmer. An OECD-ICRIER report calculates that since the turn of this century, farmers are paying an implicit tax of 14 percent on their gross farm receipts. Thus, a long-term solution by means of income or investment support is warranted.

Telangana’s Rythu Bandhu, announced earlier this year, which provides Rs 8,000 per acre per year to farmers was the first such scheme to provide direct support to cultivators. While such a scheme is no doubt an improvement over loan waivers, it suffers from excluding landless labourers and tenant farmers.

As Ashok Gulati, chair professor for agriculture at ICRIER, pointed out recently, “government records still show only 10 percent of tenancy in the country while ground realities are very different.” Clearly, a lot of tenant farmers who actually make a living from agriculture, and landless families, miss out from the benefit of such schemes.

Odisha’s KALIA scheme tries to solve this problem by including all families who are engaged in agriculture. But why do we need to stop at that? As India rapidly urbanises, there is a huge swathe of population in urban spaces which suffers equally. Some estimates forecast that in another decade almost 45 out of every 100 Indians would be living in urban agglomerations.

Thus, the time is ripe for income support schemes to gradually morph into a quasi-universal basic income scheme that would cover most of the poor households. As the 2016-17 Economic Survey pointed out, such a scheme would be less prone to exclusion errors because it would be executed through direct transfers to bank accounts.

As for creating the fiscal space for such schemes, remember that the central government itself runs or sponsors about 950 schemes. They cost around 5 percent of GDP and are badly targetted with benefits being cornered by the well-off and the middle class.

A fiscal space for a basic income scheme can thus be carved out by shuttering many of these. In the agriculture sector alone, for example, market distorting schemes like the minimum support price could go. A basic income scheme, that would cover the majority of the poor, would be the most equitable scheme under current circumstances.

While its implementation may not be easy, the experience of direct benefit transfers and the early farm income support schemes should help in a basic income scheme design. It would only be an improvement over loan waivers and badly targeted welfare schemes.

Source: https://www .moneycontrol.com/news/business/economy/quick-take-farmer-support-schemes-should-evolve-into-basic-income-schemes-3324701.html

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5 major lessons that investors can learn from market

noreply@blogger.com (Anonymous) — Tue, 25 Dec 2018 05:23:00 +0000

It has been a tough year for the market as benchmarks have posted gains of 3-5 percent so far against 29-30 percent they had posted during 2017.

Focusing on quality, looking at valuations and looking at long-term factors are some of the few lessons that an investor could learn from 2018 markets, experts said.

It has been a tough year for the market as benchmarks have posted gains of 3-5 percent so far against 29-30 percent they had posted during 2017. The year has been even more challenging for mid and smallcaps, each index shedding 12-15 percent during the year. In 2017, both categories returned around 50 percent.

Though such times come and go in the market, experts tell you to keep these five lessons in mind to make an informed investment decision.

Experts believe that an investor must pay heed to valuations of stocks that they wish to buy, sell or hold. Last year witnessed valuations being very expensive and the correction in 2018 was just getting these at the right levels.

“In end of January 2018, the midcap forward PE was closer to 23x as compared to 19x forward PE of Nifty. Today, post the steep correction, the midcap forward PE has come down to 16x forward PE as compared to 17x forward PE of Nifty,” explained Rusmik Oza, Head of Fundamental Research at Kotak Securities.

AK Prabhakar of IDBI Capital says that investors must know when to cash in on their profits. Whenever valuations have gone haywire, people must know how to generate cash, he said. “When the stocks have performed well and valuations do not justify, investors must take their profit back from the market,” he told Moneycontrol.

Focus on quality

Choosing the right kind of quality stocks remains the key. Companies with strong fundamentals and steady management would always remain a good bet and stand tall during the storm of a correction.

One could also switch from bad or poor quality stock at the peak of the market. “As and when Nifty goes 1 Standard Deviation above its 10-year average valuation and the midcap index goes 2 Standard Deviation above its 10-year average valuation then one should shift from bad/poor quality stocks to good quality stocks,” Oza said.

Meanwhile, Prabhakar of IDBI Capital said that quality holds key in stock selection. “PC Jeweller, Vakrangee and Kwality are all stocks one should avoid. Investors must stick to quality names,” he added.

Avoid sectors with too much one-way consensus

Investors could avoid stocks that are close to perfection (i.e. close to historic high valuations). An example to that, Oza explains, is the case of non-banking financial companies in 2018.

“Similarly, look at good RoE-driven sectors that are out of flavour and have already gone through a 2-year pain cycle. Here, if valuations are lower than the 10-Year averages then it is ideal to take a contra call in the sector with a three year view. Example of this is Information Technology sector that was out of flavour for past 2 years but delivered more than 50% return in 2018.”

Sell the greed, buy when you see blood

Investors must focus on getting the right timing while choosing a stock. “The moral of 2018 is sell when you see greed and buy when you see blood on the Street. The biggest development for the year is return of financialisation of savings with retail investor firmly buying equity as an asset class with 5-7 year perspective,” Sanjiv Bhasin, EVP (Markets and Corporate Affairs) at IIFL Securities said.

Believe in long-term returns

Lastly, experts advise investors to always look at the long-term view, while choosing to invest in equities. Historical data suggests that the Sensex and Nifty have given positive returns over the course of decade or two.

As the ace investor Rakesh Jhunjhunwala said,“I’m always bullish on India and do not see any reason to be bearish,” it is important to believe in the return potential of equity markets. While a low-risk investor could look for other savings instruments, equities may tend to give a lot more returns.

Source: https://www .moneycontrol.com/news/business/markets/2018-review-5-major-lessons-that-investors-must-learn-from-market-3322051.html

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Scheme of amalgamation for merger of BoB, Dena and Vijaya Bank likely by month-end

noreply@blogger.com (Anonymous) — Mon, 24 Dec 2018 04:12:00 +0000

As per the requirement, the scheme of amalgamation will be placed before Parliament, which is in session till January 8.

The scheme of amalgamation spelling out the contours of the merger of Bank of Baroda (BoB), Vijaya Bank and Dena Bank is expected to be finalised by the end of this month, sources said.

As per the requirement, the scheme of amalgamation will be placed before Parliament, which is in session till January 8.

The scheme is being worked out and will subsequently get vetted by respective boards of the three banks. It will have details of share swap ratio and requirement of capital from the promoter, sources said.

The government has already committed funds for facilitating the first three-way merger in the public sector banking space.

The government expects that the new entity will be operational from the beginning of the next financial year, the sources added.

The move follows top lender State Bank of India last year merging five of its subsidiary banks with itself and taking over Bharatiya Mahila Bank, catapulting it to among the top 50 global lenders.

Earlier in September, the 'Alternative Mechanism' (AM) headed by Finance Minister Arun Jaitley decided to merge the three banks with a view to creating a global-sized lender which will be stronger and sustainable.

The finance minister assured capital support to the merged entity. Other members of the AM included Railways Minister Piyush Goyal and Defence Minister Nirmala Sitharaman.

The merged entity will have a combined business of Rs 14.82 lakh crore, making it the third largest bank after SBI and ICICI Bank.

It will have better financial strength. The net NPA ratio will be at 5.71 per cent, significantly better than the public sector bank (PSB) average of 12.13 per cent.

Besides, Provision Coverage Ratio (PCR) would be better at 67.5 per cent against the average of 63.7 per cent and cost to income ratio would come down to 48.94 per cent as compared to average 53.92 per cent.

Capital Adequacy Ratio (CAR) at 12.25 per cent will be significantly above the regulatory norm of 10.87 per cent, and the stronger amalgamated bank will be better positioned to tap the capital markets.

Source: https://www .moneycontrol.com/news/business/economy/scheme-of-amalgamation-for-merger-of-bob-dena-and-vijaya-bank-likely-by-month-end-3319301.html

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Swiggy's $1billion funding does not mean it can win the food delivery sweepstakes

noreply@blogger.com (Anonymous) — Sat, 22 Dec 2018 04:53:00 +0000

Swiggy has competition from other food delivery companies and even ride-hailing companies Uber and Ola have entered the market.

How Swiggy uses the $1billion or Rs 7,000 crore it has raised from existing and new investors, will determine if it can take a convincing lead in the food delivery market. On December 20, food delivery company Swiggy raised $1 billion from existing investors Naspers, DST Global, Meituan Dianping, Coatue Management and new investors Tencent, Hillhouse and Wellington Management Company.

While this round of funding values Swiggy at $3.3 billion, it may not be enough to ensure the five-year old start-up hogs the last mile to the Indian consumer’s stomach. Food delivery in India is still a top-town phenomena, and the market is overcrowded due to low-entry barriers.

Swiggy has competition from other food delivery companies and even ride-hailing companies Uber and Ola have entered the market. These companies too are well-funded, even though food is not their core offering. Uber Eats and Ola's FoodPanda will keep investing in food delivery. That means competition will keep getting tougher. Plus, there’s Zomato with a wider presence and it is also raising funds.

True, Swiggy has grown fast in the past six months. It added 42 cities, and its gross merchandise value doubled. But it is not easy to sustain that pace of growth. Even Swiggy co-founder Sriharsha Majety, in an e-mail to employees after the latest round of fund raising, said: "Fundraising makes sure we don’t lose but does not make sure we win."

Majety has also said, in an interview in August, that Swiggy’s priority is growth, and not profitability. To be sure, Swiggy does not make money. It reported a loss of Rs 397 crore in the year to March 2018, up from Rs 205 crore the previous year. Its revenue was Rs 468 crore in FY2018, as compared with Rs 146 crore the year ago.

Still, investors were convinced by Swiggy’s growth plans, enough to fork out $1billion in hard cash. Now, Swiggy has to find a niche or a business model, where it earns enough from supplying food to consumers.

It is debatable if plain food delivery can be that model. Swiggy’s gross merchandise value doubled due to fresh customer acquisition. Most of these customers turned to Swiggy because of the discounts on offer.

If discount is the driver then more can play that game. Everyone in this space offers discounts, and higher the discount, more are the orders.

Consumers need to be able to see what makes Swiggy better than its rivals, such as Zomato, Uber Eats, Ola's FoodPanda, or others. All of them are going hyper local, and most restaurants are there on all these food delivery platforms.

This market will remain hyper-competitive, with a scramble to sign on restaurants and consumers and become a permanent link between the two. There were some 400 food delivery apps that were functioning between 2013 and 2016 in India, with most of them serving one or two cities. Every now and then, new hyper-local firm enter the food delivery market, forcing the bigger players to fight back.

If discount is the strategy to build scale, then fund-raising becomes the main fuel. But raising money may not be easy going forward. Also, this market has seen new firms such as artificial intelligence based Dishq and B2B player HungerBox that are attracting investor interest.

Swiggy has said it wants to use the money for expansion, to enter new hyper-local services, and next-generation technology such as artificial intelligence. These are expected to help the company find new areas of growth.

Some of the funds raised are likely go towards discounts too. Besides, Swiggy has been investing in food-making companies to establish kitchens dedicated to food delivery. There is the risk that some of these companies will take their business to other food delivery apps later.

The company expects to use the raised funds over next 2-3 years. But, if rivals also raise funds and pump in more money, then Swiggy's Rs 7,000 crore will burn sooner.

Though it may not be an apple-to-apple comparison, this could lead Swiggy to a Flipkart-like situation. When Flipkart, India’s e-commerce poster boy, raised $1 billion in 2014 it was considered to be a clear winner. But the company went through many rounds of fund raising, to keep pace with rival Amazon, and finally got sold to Walmart earlier this year.

A lot also depends on how much the market for food delivery expands. This is a problem area at present. India is a country where people predominantly cook at home. That’s why, even after 10 years, food delivery is still restricted in around 4,000 PIN codes, while e-commerce covers about 97 per cent of 19,100 PIN codes in the country. Food delivery will be more popular in metro markets.

However, some factors could help Swiggy stay ahead. Just as it it acquired 48East in December 2017 and Scootsy in August 2018, Swiggy can acquire smaller, city-specific hyper-local firms for expansion and consolidate its hold in these markets. But, that would require a lot of money, and Swiggy will have to do multiple rounds of fund-raising. Even then, it still risks meeting the same fate as Flipkart did.

Source: https://www .moneycontrol.com/news/business/startup/quick-take-swiggys-1billion-funding-does-not-mean-it-can-win-the-food-delivery-sweepstakes-3316741.html

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Opinion | Bird Watching at the Reserve Bank of India

noreply@blogger.com (Anonymous) — Fri, 21 Dec 2018 04:59:00 +0000

We explore the minutes of the last Monetary Policy Committee meeting to decipher the ornithological profiles of the members.

Members of the Reserve Bank of India’s Monetary Policy Committee are used to being classified as hawks or doves. But this is doing them, as well as the birds, an injustice. Surely their many-splendoured personalities cannot be limited to being mere hawks and doves? Former RBI governor Raghuram Rajan had expanded the range of bird tags by claiming the RBI top brass consisted of owls. "We are neither hawks nor doves, we are actually owls," he had insisted. Whether as wise as an owl or as blind as an owl is open to question. Be that as it may, we build on that deep insight and explore the minutes of the last Monetary Policy Committee meeting to decipher the ornithological profiles of the members.

Let’s start with Urjit Patel, the former governor, who left the RBI like a bat out of hell. A bat, though, is not a bird. This meeting was his swan song, which I suppose makes him a swan, though a rather unlikely one. Some have said a goose would be more appropriate because his goose was cooked, but the flaw in that reasoning is he wasn’t cooked but his goose was, although there’s some difference of opinion on that. The government, of course, has no doubt whatsoever that he was an albatross around its neck.

Ravindra Dholakia has been classified as a dove ever since we started giving them bird names and there’s no reason to change it now. I would merely like to emphasise he isn’t a turtle dove, since he doesn’t bill and coo, at least not in monetary policy meetings. The latest meeting however does open up the possibility of him being a wet hen since he ranted that ‘retaining the stance of calibrated tightening seems totally inconsistent and unjustified.’ He seems as mad as a wet hen against the decision to keep interest rates high.

There can be absolutely no doubt that Chetan Ghate is an owl. Only someone as wise as an owl could say ‘two interlaced variables pose the potential of un-anchoring inflationary expectations, and thereby making it difficult to ensure price stability on an enduring basis’ without batting an eyelid at the monetary policy meeting.

Some say Pami Dua is neither fish nor fowl, more of a dark horse really. But she might be a turkey, on the rather slender basis that she talks turkey. Thankfully, she survived the Thanksgiving cull.

What about Michael Patra? He’s traditionally been known as a hawk, although his enemies who want lower interest rates say he’s a loon, no doubt inspired by the ‘crazy as a loon’ idiom. But we don’t have loons in India. His statement at the monetary policy meet that it was ‘apposite to persevere with the stance of calibrated tightening to head off inflation pressures from potentially corroding the foundations of the growth path that is evolving over the medium-term’ may or may not make him as graceful as a swan, but there’s no doubt he’s in fine feather. A swan? Nah, not really, those are borrowed plumes, you can’t hide the hawk in him.

We come then to Viral Acharya. In the last monetary policy meeting, his eagle eye spotted a ‘divergence in the direction of price movements in data in key food items provided by the Department of Consumer Affairs (DCA) and realised food inflation for October.’ Such divergence, he said, is rarely observed. That firmly makes him an eagle.

Others say his famous speech on the independence of the RBI that so rattled the government was the canary in the coal mine. That makes him a canary, but it’s not known whether he sings like one at monetary policy meetings. Others believe that, given what the government thinks of him, he is most likely a sitting duck. On the other hand, the whole controversy may well be water off a duck’s back. Either way, he’ll be a duck.

Everyone is agog to know what Shaktikanta Das, the new RBI governor and chairman of the MPC, will be. But there is little doubt he’ll be cock of the walk, besides being happy as a lark.

Source: https://www .moneycontrol.com/news/business/economy/opinion-bird-watching-at-the-reserve-bank-of-india-3311441.html

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IDFC shelves plan to sell AMC business

noreply@blogger.com (Anonymous) — Thu, 20 Dec 2018 04:24:00 +0000

Two sources in the know of the development, including a senior executive, confirmed to Moneycontrol that IDFC Ltd has shelved its plans to sell the asset management company.

After spending months searching for a buyer, IDFC Financial Holding Company - a part of IDFC - has decided to retain its fund management business. IDFC Asset Management (AMC) will not be sold.

Moneycontrol reached out to IDFC AMC but the fund house refused to comment or confirm the news.

Two sources in the know of the development, including a senior executive, confirmed to Moneycontrol that IDFC has shelved plans to sell the asset management company. “The board of the group company felt that it makes sense to hold the fund house and grow it over time rather than sell it,” said one of the two people who spoke to us on condition of anonymity.

The other person said IDFC has now decided to focus on making its underlying businesses more retail-focused. On December 18, IDFC Bank and Capital First, a retail-focused non-banking financial company, merged to form IDFC First Bank which is said to focus mainly on building its retail loan book.

Industry officials said the fund house failed to elicit the kind of valuation it sought. The first person said that the recent spate of regulations by the capital market regulator, Securities and Exchange Board of India (SEBI) may have also impacted the fund house’s valuations, something that IDFC AMC did not accept.

Throughout the year of 2018, SEBI took a string of measures to reduce the fees that mutual fund schemes collect from investors that, many industry officials say, will impact a fund houses’ future earnings.

Industry officials had earlier told us while the fund house expected around Rs 5,000 crore, it got bids in the range of Rs 3,500 – 4,000 crore. According to investment bankers who did not wish to be named, Avendus Capital, Reliance Nippon Life Asset Management, IndusInd Bank, BlackRock Inc were among the firms that expressed interest in buying. Of the above bidders, its talks with Avendus were in the final stages. However, the deal did not go through.

Established in the year 2000, IDFC AMC is India’s 12th largest fund house. In early 2017, IDFC had bought out Natixis Global Asset Management Asia’s 25 per cent stake in the AMC. In 2010, Natixis is a French-based fund house.

Source: https://www .moneycontrol.com/news/business/mutual-funds/idfc-shelves-plan-to-sell-amc-business-3308961.html

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Can Jet Airways avoid a crash landing?

noreply@blogger.com (Anonymous) — Tue, 18 Dec 2018 04:15:00 +0000

Jet Airways is clearly struggling to stay afloat. Recent news flow are only confirming the worst

Two news items hit the Jet Airways stock on December 17, resulting in its share price falling nearly 4 percent, on a day when the market was up. The first news was that SBI, the lead banker for Jet Airways, had ordered a forensic audit of the company’s books for the period between April 1, 2014, and March 31, 2018.

Any banker ordering a forensic audit on a company is not good news since the impression it gives is that the bank suspects something. Why else should it not trust the books of accounts? In the case of Jet Airways, it is even more intriguing as the chosen period of 2014-2018 is right after Etihad invested over Rs 2,000 crore for a 24 percent stake in the company in 2013.

Some bankers have been quoted as saying ordering a forensic audit on the company is merely a procedural matter as Jet Airways has approached the banks for a restructuring of its loans. If that is indeed the case and the banks are seriously considering restructuring Jet’s loan then it is good news for the company that is struggling to keep afloat.

The money and more importantly the business which came in with Eithad was good enough for Jet Airways to survive for a few years. But a big reason for its survival was the low oil prices prevailing at the time. As soon as oil prices started rising, Jet was back in trouble.

There have been reports of Jet Airways not paying salaries on time, cutting unviable routes and moving towards a no-frills airline by stopping free meals. Jet Airways had earlier said it intends to cut its operating cost by Rs 2,000 crore over the next two years.

But this is where the restructuring story takes a U-turn, especially after the second news that hit the stock on December 17. Nikos Kardassis, the former CEO of Jet Airways, who was advising the company on restructuring and tasked with turning around the company has bailed out.

Investors generally look for cues like insider buying or selling, management recruitment or layoffs, to get an idea on the goings on within a company. Recently, a number of companies in India saw senior management quit, especially their CFOs, resulting in their stocks being hammered.

For Jet Airways, Kardassis quitting the company is one such moment where the man spearheading the restructuring has quit. His exit from the company suggests either Kardassis was not given a free hand to bring the company back in shape or he was found to be not good at his job. For a man who was the CEO of Jet Airways for 14 years and was brought in by the promoter Naresh Goyal himself in May 2018, it is unlikely that he was not good at his job.

The fact remains that Jet Airways is gasping for air and its fundraising efforts have not been successful. Plans of raising money from the Tata group or its knight in shining armour – Etihad--- have not been fruitful. Banks led by SBI seems to be biding their time by ordering a forensic audit at a moment when every day is important for the airline.

The view from Jet’s cockpit is clear--the airline is approaching stall speed and it is too close to the ground.

Source: https://www .moneycontrol.com/news/business/quick-take-can-jet-airways-avoid-a-crash-landing-3299541.html

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Wealth creators of 2018: While benchmarks gave muted returns, 15 stocks surged 40-76%

noreply@blogger.com (Anonymous) — Mon, 17 Dec 2018 05:17:00 +0000

The best sectoral performers were private banks (up 7%), financial service (up 8%), FMCG (up 13%) and technology (up 27%).

Many experts predicted low returns from market in 2018, and the forecast is turning to be accurate as we head towards the end of the year. The Indian benchmark indices are heading towards 2019 with flat-to-single digit returns and the broader markets are also expected to see a negative close.

The 30-share BSE Sensex has, so far, gained just 5.6 percent and the 50-share NSE Nifty, only 2.6 percent, in the current calendar year. Meanwhile, the BSE Midcap index and Smallcap indices have shed 15 percent and 25 percent, respectively.

After the spectacular run of 2017 when the Sensex and Nifty climbed around 28 percent each, it was obvious for the market to close the following year with single-digit returns given crude and rupee volatility, US-China trade tensions and state elections, experts said.

In 2017, midcap index rose 49 percent, while smallcap index shot up by nearly 60 percent.

In July 2018, Ratnesh Kumar, MD and CEO, BOB Capital had told CNBC-TV18 that the returns in 2018 could be in single digits. "I would still be happy if the market ended the year with single-digit returns."

The imposition of long-term capital gain tax in the Union Budget and the IL&FS-triggered liquidity crisis, which hit earnings in Q2 after good Q1FY19 performance, were among the biggest domestic reasons that dampened sentiment.

Crude is down only 4 percent year-to-date (YTD), but it rallied 29 percent to $86.29 a barrel (on October 3), the highest level since November 2014. This was followed by sharp correction with crude trading around the $60-mark now.

It was expected that majority of stocks will either turn flat or underperform in 2018, but there were still many that turned out to be wealth creators.

A little over one-fifth of BSE 500 stocks have given positive returns so far, while the rest have fallen between 1 percent and 90 percent.

Among stocks that are in the green, the top 15 have given returns of 40-76 percent, including many technology and consumption stocks.

Sharp rupee depreciation (down 12.6 percent YTD), improved earnings growth in major segment, and a strong US economy were among the factors that gave IT stocks a shot in the arm. The consumption numbers were good for 2018, and are expected to remain positive in the run up to the general elections in 2019.

NIIT Technologies, HEG, Larsen & Toubro Infotech, VIP Industries, Tata Consultancy Services, Bata India, Mindtree, Bajaj Finance and Jubilant FoodWorks are among top 15 wealth creators.

However, there are more wealth destroyers than creators in 2018. Weak corporate governance, high debts and liquidity crunch were among the major reasons for most of top 15 losers which corrected between 66 percent and 92 percent.

IL&FS Transportation, 8K Miles, PC Jeweller, Manpasand Beverages, Jaiprakash Associates, Jet Airways, HCC, SREI Infrastructure Finance, etc. were among the top 15 losers.

The best sectoral performers were private banks (up 7 percent), financial service (up 8 percent), FMCG (up 13 percent) and technology (up 27 percent).

However, PSU banks (down 19.5 percent), infra (down 15 percent), metals (down 21 percent), pharma (down 9 percent), auto (down 23 percent) and realty (down 32 percent) were among the major losers.

The recent bout of volatility which started in 2018 is expected to continue in the first half of 2019, followed by relative stability in second half, experts said, adding that the market could touch record highs after the general elections.

"Post heightened volatility of 2018, we expect stability in the market in 2019 though the initial few months will see upcoming general election-related uncertainties. Our 2019 year-end target for Nifty is 11,800, 19x FY20 EPS," Vineeta Sharma, Head of Research, Narnolia Financial Advisors told Moneycontrol.

Naveen Kulkarni, Head of Research at Reliance Securities said the massive victories in state elections still do not ensure that the Congress will have the requisite strength to form a stable government at the Centre post-2019 Lok Sabha elections Instead, they have managed to considerably weaken the ruling party’s chances of re-election.

This is an incremental negative for the market and will result in higher volatility over the next six months, resulting in further compression for market valuation multiples, he added.

At cap and theme levels, Vineeta Sharma expects very similar price returns in 2019 as unlike in the immediate past. The earnings growth of various subsections of the market, whether at cap level or at theme level, will be quite similar.

Source: https://www .moneycontrol.com/news/business/markets/wealth-creators-of-2018-while-benchmarks-gave-muted-returns-15-stocks-surged-40-76-3296361.html

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RBI board meet: Members discuss liquidity issues; silent on PCA

noreply@blogger.com (Anonymous) — Sat, 15 Dec 2018 05:16:00 +0000

The RBI board did not discuss issues pertaining to the Prompt Corrective Action framework or the surplus reserves of the central bank

Liquidity issues in the economy was one of the key discussions points at the Reserve Bank of India (RBI)'s board meeting on December 14.

The meeting, which was chaired by newly appointed RBI Governor Shaktikanta Das, was centred around the current economic situation, global and domestic challenges, matters relating to liquidity and credit delivery to the economy.

"The Board deliberated on the governance framework of the Reserve Bank and it was decided that the matter required further examination," said RBI in a statement.

On December 11, RBI said it will infuse Rs 10,000 crore into the market through open market operations (OMOs) on December 13. This was to improve liquidity conditions in the market.

IL&FS debt crisis

The shortage of liquidity in the market was part of the fallout of defaults by infrastructure lender IL&FS and its group entities, which are facing a debt crisis. The IL&FS group had missed several interest payments to corporates since June 2018.

The first signs of trouble in the IL&FS group emerged in June, when it defaulted on inter-corporate deposits and commercial papers (borrowings) worth about Rs 450 crore. Over the next three months, rating agencies downgraded its long-term credit ratings.

This had a spill-over effect on other non-banking financial companies (NBFCs). Borrowing rates in the debt market had climbed to a four-year high in October 2018, which increased NBFCs' cost of funds. Mutual funds too became more cautious about buying their debt instruments.

RBI silent on PCA framework discussions

Surprisingly, the RBI's statement did not include anything on the Prompt Corrective Action (PCA) framework, which was a discussion point at its nine-hour marathon board meeting on November 19.

A total of 11 public-sector banks are under the PCA framework of the RBI. Those under PCA face several restrictions, including restrictions on non-core activities and lending.

During the tenure of former RBI Governor Urjit Patel, the government and the central bank were unable to arrive at a consensus on relaxing these PCA rules for loss-making banks. RBI was asked to make the rules flexible so as to ensure easier availability of credit for these banks.

No discussion on RBI's surplus reserves

One of the most serious differences between the government and the RBI was about the central bank's holding of reserves. The government wanted RBI to transfer a higher amount of capital as dividend so that it could be used for activities like recapitalisation of ailing banks.

In today's meeting, there was no mention of the Economic Capital Framework (ECF) of the RBI, for which a committee was to be set up in accordance with a decision taken at the central bank's November 19 board meeting.

At the November meeting, the board had decided to constitute an expert committee to examine the ECF, the membership and terms of reference, which will be jointly determined by the government and the RBI.

Other issues discussed in the board meeting

The board also discussed issues pertaining to currency management and financial literacy. The draft report on Trend and Progress of Banking in India (2017-18) was also discussed.

It is likely that the next meeting of the RBI board will be in January 2019.

Source: https://www . moneycontrol.com/news/business/economy/rbi-board-meet-members-discuss-liquidity-issues-silent-on-pca-3291781.html

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Why the stock market is being myopic in celebrating Urjit Patel's resignation

noreply@blogger.com (Anonymous) — Fri, 14 Dec 2018 04:05:00 +0000

There is no free lunch. The market is forgetting there will be a price to pay for loosening the government’s and RBI’s purse strings.

If the outcome of the state election and sudden resignation of RBI governor Urjit Patel was a stunner, what was even more surprising was the market’s reaction to the unfolding events.

Impending rate cut?

The irrational exuberance got a boost from the recently released retail inflation number that showed CPI inflation easing to 2.33 percent in November. While the base effect was favourable for a lower print, a sharp contraction of 2.6 percent in food inflation triggered the decline.

To be sure, RBI should have reverted to a neutral stance in the December policy itself and will likely turn more dovish going forward, thereby opening the gate for future rate cuts. However, having acknowledged the soft inflation outlook, RBI has been hamstrung by the deteriorating fiscal picture, which will likely worsen post the recent state election outcome.

A pliant RBI?

The euphoria doesn’t stop with rates and cyclical stocks. Market reaction seems to suggest that we are quite okay having a pliant regulator. Only time will tell how the new regime at RBI would turn out to be. For now, markets are celebrating the probability of relaxation of PCA (prompt and corrective action norms) norms, without paying much heed to the inadequate capital position of these PSU banks that should have been addressed first.

The possibility of relaxed NPA (non-performing assets) recognition norms is also taken positively, with little worry about the impending risk building up in the system that has already paid a heavy price in the last few years as large part of corporate credit turned toxic.

The assumption that seems to have also comforted the traders is a dilution in governance standards of RBI that will result in relaxing standards over bad loans and governance lapses at a private bank, relax the promoter holding criteria of a few other private banks and grant exemption to small finance banks from listing within a stipulated period. While individual stocks might gain on company-specific relaxation, a dilution in governance standards from RBI should be a cause for worry and not celebration.

The IL&FS crisis led liquidity tightness has eased quite a bit with RBI injecting liquidity through its open market operation. For credit-worthy borrowers, there is no dearth of funds as the issue was more of risk aversion than liquidity. Opening a special tap for NBFCs indiscriminately will only benefit the not so credit worthy and might increase credit to the subprime – again not something to rejoice about.

Can markets run on the oxygen of populism?

The credit party which the market seems to be looking forward to seem to dovetail well with the political strategy post the state election verdict – that of boosting consumption to mask agrarian distress and urban joblessness.

Time and again such short-term doles do little to boost agricultural income as poor crop realisation and too many people trying to make a living from farming lies at the heart of the problem. Unless alternative employment generation is facilitated through massive job creation in industries, the problem is likely to persist.

Moreover, there is a fiscal cost of freebies, so a short-term spurt in consumption always evens out in due course. The usual fad about chasing consumption companies pre-election therefore has its limitations.

As discussed earlier, the fiscal situation is grave and can get worrisome with populist spending and loan waivers. The quick fix solution of bridging the fiscal gap with RBI’s capital will leave us with a weaker central bank to face a volatile global landscape.

The lack of checks and balances with the government fully controlling the central bank, the probability of a fractured mandate in the upcoming general election and the negative implications on the fiscal front from heightened populism seem to have been completely ignored.

While a pro-growth agenda is always welcome, incremental returns with much higher risk certainly warrant caution. Amidst the hype and whoop-la in the markets, long-term investors need to keep that in mind.

Source: https://www .moneycontrol.com/news/business/markets/why-the-stock-market-is-being-myopic-in-celebrating-urjit-patels-resignation-3286891.html

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Government appoints Shaktikanta Das as new RBI Governor

noreply@blogger.com (Anonymous) — Wed, 12 Dec 2018 04:20:00 +0000

The announcement comes after Urjit Patel announced his resignation from the post on December 10.

Shaktikanta Das, member of the 15th Finance Commission and former Economic Affairs Secretary, will take over as the new Reserve Bank of India (RBI) Governor, the government said on December 11.

Das’s appointment comes a day after Urjit Patel unexpectedly resigned as the central bank chief, amid festering disagreements between the RBI and the Finance Ministry on several issues.

The Appointments Committee of the Cabinet (ACC) has approved the appointment of Shri Shaktikanta Das, former secretary, department of economic affairs, as the Governor, Reserve Bank of India (RBI), for a period of three years," a government statement said.

FM Arun Jaitley also welcomed Das’s appointment as the RBI top boss.

"Besides his experience as the Revenue Secretary and Economic Affairs Secretary, he also had the experience in preparing several Budgets as Joint Secretary in charge of Budget division. Subsequently, he has been a G20 Sherpa on behalf of India. He's been a member of 15th Finance Commission. I think he has the right credentials and has been extremely professional. He has worked under various governments has excelled himself & I am sure he will excel in meeting the challenges before India's economy as a Governor of RBI," he said.

It was not immediately known whether Das was shortlisted and selected through a process of search committee, a practice that was adopted during Patel's appointment. Das takes over three days before the RBI's scheduled board meeting on December 14, slated to discuss several contentious issues.

DEA Secretary Subhash Chandra Garg said that the RBI board meeting as of now will be held as per schedule on December 14.

"It is for RBI to decide about board meeting. If RBI decides otherwise, we will get to know," he said.

Unlike Patel or his predecessor Raghuram Rajan, Das will move straight into the top job at Mumbai's Mint Street without an overlap at the RBI headquarters.

While Patel was an RBI deputy governor for nearly three years before taking charge as the central bank chief, Rajan had come had come on board as the then governor D Subbarao's officer on special duty (OSD) to manage the transition, in August 2013, a month before he officially took over as the Governor.

Also, unlike Patel and many of his predecessors, Das, a retired Tamil Nadu cadre IAS officer, is not a trained career economist. A former Economic Affairs secretary, he is currently India’s Sherpa to G20, tasked with steering the negotiations at one of the most strategically important groups of countries. Subbarao, a former finance secretary, was the last IAS officer to serve as the RBI Governor.

Das, who studied history at Delhi University's St Stephen's College, was to remain India's G20 Sherpa was until December 31, 2018. Das (62) is also a member of the 15th finance commission, a Constitutional body mandated to recommend measures and methods on how revenues, which the government earns through various taxes, need to be distributed between the Centre and states.

He will have to quit his existing official positions—as India's G-20 Sherpa and a finance commission member—after taking over as the 25th RBI governor.

Das, who retired as the Economic Affairs Secretary in the finance ministry in February 2017, had become the face of demonetisation, the surprise move to outlaw Rs 500 and Rs 1000 notes from the midnight of November 8, 2016.

He, along with Patel as the RBI Governor, were tasked with the responsibility of carrying out the world's largest currency culling exercise.

It was pitched as government's broad strategy to clamp down on India's bustling parallel economy by launching an attack on the hidden wealth held in undisclosed cash. The move triggered howls of protest as serpentine queues outside ATMs became of lasting image of the shock currency recall plan.

Das will be familiar with the RBI’s functioning, and will have to dig deep into his pocket of experience as a former member of the central bank, which he served in his capacity as the economic affairs secretary.

He takes over at a time when the relationship between RBI and the finance ministry has been marred by disagreements on several contentious issues, including reported plans by the government to get the central bank transfer its surplus reserves to help plug the budget deficit.

Patel’s deputy Viral Acharya had first obliquely flagged the dangers of the government treading onto the central bank’s territory, eroding its autonomy.

The RBI Act, the key legislation that defines the central banks functioning, role and reporting relationship with government, has become part of mainstream public discourse, with a strong body of opinion on both sides of the fence.

The finance ministry was reportedly looking to invoke "Section 7" of the RBI Act that allows the government to ask the RBI take certain decisions after consulting the central bank.

The finance ministry is also in favour of the RBI giving more funds to non-banking finance companies (NBFCs) to keep the credit flow flowing for India’s small enterprises.

The RBI has made it clear it doesn’t believe that NBFCs need more funds now. After a marathon board meeting that lasted more than nine hours on November 19, RBI made concessions on capital adequacy of banks, while two contentious issues of transfer of surplus reserves and relaxing norms for weak banks were referred to committees.

The board has advised RBI to let banks recast loans up to Rs 25 crore given to micro, small and medium enterprises (MSMEs).

Source: https://www .moneycontrol.com/news/business/economy/government-appoints-shaktikanta-das-as-new-rbi-governor-3279441.html

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Corporate India surprised and worried as RBI governor Urjit Patel steps down

noreply@blogger.com (Anonymous) — Tue, 11 Dec 2018 03:57:00 +0000

Corproate executives and economists that Moneycontrol spoke to expressed concerns of instability at the RBI and the impact it will have on attracting long-term investments.

The corporate sector in India was taken by surprise on December 10 with Reserve Bank of India Governor Urjit Patel's decision to step down.

Patel has resigned from the post citing personal issues.

Analysts attributed the resignation to the simmering differences between RBI and government over the former's autonomy as the Centre has sought to reduce curbs on lending and to gain access to RBI reserves.

"On account of personal reasons, I have decided to step down from my current position effective immediately," Patel said in a brief statement.

Corporate executives and economists that Moneycontrol spoke to have expressed concerns of instability at RBI and the impact it will have on attracting long-term investment in India.

One executive on the board of a public sector bank called the resignation a "sensitive" matter at this juncture.

The executive said he didn't expect Patel to resign as the RBI had recently signaled that the government and central bank had compromised by agreeing to study a demand for sharing a part of its capital.

A chief executive officer of a South-based bank echoed the same.

"The news of the exit had died down after the board meeting. But we had heard that the surplus transfer issue was not resolved amicably. With its autonomy at stake, I believe that the governor took this call," he added.

"RBI Governor #UrjitPatel resignation gives me mixed emotions. There should always be healthy creative tension between RBI and government; but when it turns to destructive tension one of the parties have got to wilt," Harsh Goenka, Chairman of RPG Group, tweeted.

"It will be interesting to see how the monetary markets react. Rupee may fall against all major currency. Will rupee hit Rs 75 against US dollar," said an aviation executive who didn't want to be named.

Sending wrong signals to global investors

"This was unexpected," said Sujan Hajra, Chief Economist at Anand Rathi Financial Services.

"This seems the culmination of the differences of opinion between government and RBI on a large range of issues. We had the feeling that the difference are bridging but today’s event suggests otherwise. This will create uncertainty. Appointment of a credible governor quickly can dispel the situation," Hajra said.

A chief investment officer of a large private life insurance company said that Patel's sudden exit will present a wrong picture about the Indian market and that foreign inflows could be curtailed for the next few weeks.

"Instability in the role of RBI and its independence is not good for attracting long-term investment in India," said Bhagwan Chowdhry, Professor of Finance, UCLA Anderson School of Management and Visiting Faculty, ISB.

Source: https://www .moneycontrol.com/news/business/economy/corporate-India-surprised-and-worried-as-rbi-governor-urjit-patel-steps-down-3274141.html

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With state election results announcement this week, investors can deploy ‘Bull Call’ in Bank Nifty

noreply@blogger.com (Anonymous) — Mon, 10 Dec 2018 04:17:00 +0000

Some cool off in India VIX could be expected after the political outcome becomes apparent.

Trade war woes, RBI monetary policy, along with upcoming state election results caused frequent gyrations in the market last week. The December series kick-started on a volatile note with Nifty making swing high of 10,974 and a swing low of 10,611 to end the week with a loss of 1.4 percent.

The Nifty created shorts in the initial few trading session while at the fag end, longs were added in the system. Bank Nifty too saw wild swings between 27,065 to 26,234 levels and ended the week at 26,726, a loss of 0.7 percent; however, it continued its long- long unwinding cycle.

The IT sector outperformed while huge selling was seen in the pharma sector (mainly Sun Pharma), auto, metals, and energy with a price cut of 2.5 to 6 percent. Private sector banks saw some buying coming in the last trading session.

Volatility index, a sentiment indicator to gauge greed and fear, saw minor downtick and quoted tad above 18 percent. While we still have a full trading session pending before the state election results start coming in, we might see an uptick on Monday.

Some cool off in India VIX could be expected after the political outcome becomes apparent.

Put Call Ratio, another sentiment indicator which denotes extreme sentiments, corrected sharply from 1.7 levels to 1.47 level. Move back to the average has cooled off over-optimism.

We are close to the lower band of OIPCR observation since the start of November expiry, and it will be interesting to see how Option writers react to the event.

The Nifty Option data saw incremental activity in 10600 and 10300 Put with OI addition of 7 and 11 lakhs shares respectively. On the higher end 11,000 and 11,200 Call saw the addition of 11 lakh shares. The market could gyrate within the band of 10,500-11,000 in the December series.

Bank Nifty reversed sharply from its highest put strike of 26,000. Overall, weekly options open interest depict higher Put base compare to Call base, keeping the room open on the upside.

With Future too seeing significant addition of 11 percent in Friday’s session, continued positive momentum could be witnessed.

Large-cap stocks are placed close to their important support level, providing comfort on respite.

However, with event outcome at the start of the week, low-risk Bull Call strategy could be deployed in Bank Nifty.

Bull Call Spread is a Bullish strategy where we buy one lot of lower strike Call and sell one higher strike Call. It is is a safe strategy to play long bias as maximum risk and reward are well defined.

The maximum loss is limited to initial outflow while gains are capped at the difference of strikes less initial outflow.

Source:https://www .moneycontrol.com/news/business/markets/with-state-election-results-announcement-this-week-investors-can-deploy-bull-call-in-bank-nifty-3268681.html

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Here's how you can trade the volatile market ahead of state election results

noreply@blogger.com (Anonymous) — Fri, 07 Dec 2018 05:54:00 +0000

The results of state elections in Chhattisgarh, Madhya Pradesh and Rajasthan, where BJP is the incumbent political party, will be keenly watched by market participants

The Sensex, which rose around 5 percent in November, has lost almost 2 percent so far in December due to weak global cues and uncertainty around the results of the five state elections currently underway, which are slated to be announced on Tuesday, December 11.

The results of state elections in Chhattisgarh, Madhya Pradesh and Rajasthan, where BJP is the incumbent political party, will be keenly watched by market participants.

Opinion polls suggest a win for BJP in Chhattisgarh, a loss for it in Rajasthan and a close contest in Madhya Pradesh. The market expects BJP to retain Chhattisgarh and Madhya Pradesh, but lose Rajasthan.

Kotak Institutional Equities said in a note that a 3-0 score for BJP may extend the market's current rally, whereas a 0-3 or 1-2 loss (Madhya Pradesh and Rajasthan) for it may result in a sharp correction.

The one thing that will certainly happen over the next couple of days is an increase in volatility. But there is a way you can make money from the wild swings.

“As a play on volatility, the trade is still difference gauged between current implied volatility and future realized volatility. If the implied volatility is higher, then sell both Call & Put with protection i.e. simultaneous longs in higher Call and lower Put. Otherwise, go long on options just for the event,” Shubham Agarwal, CEO and Head of Research at Quantsapp, told Moneycontrol.

“As far as the directional trade go, it makes sense to lock the trades with protection. Supremely high implied volatility structure does advocate selling options in conjunction with the existing trades but looking at the situation right now, that does not seem like a case,” he said.

If we take a look at the Gujarat and Karnataka elections, implied volatility was mostly in the 16–18 range on the upside and 11–13 range on the downside, with an average of 14.50-15.

Experts pointed out that following the announcements of almost all recent elections, the Nifty has moved 400-500 points in either direction.

“We have seen up to 500 point movement in the Nifty post the election outcome event, and investors who are risk averse and want to hedge their long positions can buy ATM put options of 10800 which is trading @ 174; however, loss in premium due to a fall in VOLATILITY cannot be ruled out,” Rajesh Palviya, Head Technical and Derivative Analyst, Axis Securities told Moneycontrol.

Source: https://www . moneycontrol.com/news/business/markets/heres-how-you-can-trade-the-volatile-market-ahead-of-state-election-results-3260351.html

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Here is why Kotak prefers Adani Ports, Gujarat Pipavav Port over Container Corp

noreply@blogger.com (Anonymous) — Thu, 06 Dec 2018 05:45:00 +0000

Kotak advises buying Adani Ports with a target price at Rs 390 as it believes that the company is better placed to benefit from the uptick in gateway and transshipment volumes

Continued growth in export-import volumes for India and improving profits of shipping lines bode well for the Indian logistics ecosystem, according to Kotak Institutional Equities. The brokerage believes private port operators are better placed to capture the upside than container train operators.

Private port operators are going to benefit from increasing trans-shipment volumes and share gains from major ports, whereas container train operators face margin pressures because of the recent increase in rail haulage charge, 5 percent reduction in road freight rates in November and flattening of double-stacking benefits, Kotak said.

Based on this assessment, it prefers Adani Ports and Gujarat Pipavav Port over Container Corporation of India.

Kotak said a recent report by Maersk suggests that the broad-based growth in India's containerised trade will continue in Q3CY18. Exports grew 10 percent on year in the quarter gone by, while imports grew 9 percent.

The deferral of stiff trade tariffs on Chinese goods by the US and efforts to resolve disputes reduce the risk to growth and thus profitability of shipping lines. This bodes well for the business prospects of port operators and container rail operators who have been taking price increases to leverage good growth in EXIM volumes, Kotak believes.

Beyond good growth in EXIM, port operators are also benefitting from an uptick in trans-shipment volumes which now account for more than 5 percent volume share for all Indian ports based on October 2018 data versus a negligible share earlier.

The brokerage said a dominant portion of such volumes is going to Mundra and Hazira ports. "In addition to such trans-shipment volumes, Adani Ports' container portfolio is also benefitting from share gains in gateway volumes, a common feature for non-major ports on the west coast during times of good growth (overall container volumes up 12 percent YoY over the first half of FY19)."

Hence, Kotak advised buying Adani Ports with a target price at Rs 390 as it believes that the company is better placed to benefit from the uptick in gateway and trans-shipment volumes.

"The recent normalisation in currency rate (reversal of forex loss) and Gujarat cabinet approval for revision in power purchase agreement (PPA) terms will mitigate other non-business overhangs," it said.

The research house also maintained positive stance on Gujarat Pipavav Ports on uptick in volumes (up 20 percent YoY over seven months of FY19) and a potential uptick in pricing. It has advised buying the stock with a target price at Rs 140.

According to Kotak, EXIM growth is likely to continue, however, container train operators (CTOs) are likely to see margin pressure on various counts.

"Firstly, CTOs will find it difficult to fully pass on the recent 5 percent increase in haulage charge due to the decline in competing road freight rates and secondly, margin benefit from higher double stacking seems to have flattened for CTOs as the data from Indian Railways suggests that a decline in its Rs/NTKM earnings has halted," it reasoned.

Hence, Kotak remains cautious on the scope of market share gains/margin improvement for Container Corporation hereon. Hence, it advised selling the stock with a price target at Rs 630.

Source: https://www.moneycontrol.com/news/business/markets/here-is-why-kotak-prefers-adani-ports-gujarat-pipavav-port-over-container-corp-3255361.html

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Revealed | SFIO interim report blows the lid off extent of fraud in IL&FS

noreply@blogger.com (Anonymous) — Wed, 05 Dec 2018 04:16:00 +0000

Moneycontrol has reviewed the SFIO interim report the MCA submitted to the National Company Law Tribunal Mumbai.

The Serious Fraud Investigation Office (SFIO) has uncovered shocking details of wrongdoing in the embattled IL&FS Group, with instances of misreporting of income, dubious transactions, conflict of interest, ever-greening of loans and personal enrichment of key employees being shown as rampant. These have been revealed in SFIO's interim report, which the Ministry of Corporate Affairs (MCA) submitted to the National Company Law Tribunal (NCLT) Mumbai on December 3. Moneycontrol has reviewed a copy of the report.

Below are the key highlights from the report.

Over the past three years, IL&FS witnessed a sharp rise in fee-based income. Its revenues accruing from brand fee, consultancy fee, guarantee fee, project advisory fee and infrastructure advisory fee went up from Rs 64.6 crore in FY2015-16 to Rs 212.3 crore in FY18. However, the SFIO suggests that some of these revenues may have been "fabricated, inflated or not real", given the nature of the transactions from which they were derived.

For instance, for a particular project, IL&FS charged a brand fee and advisory fee, IL&FS Financial Services (IFIN) charged loan syndication fee, merchant banking fee and success fee while IL&FS Transportation Network Ltd (ITNL) changed project management fee and claim management fees. "It was easy for the IL&FS Group to impose these as the same individuals were present on different companies' decision-making positions including company’s directors," the SFIO report said.

IFIN had been used for evergreening of loans of companies. “SFIO found multiple instances where borrowers of IFIN, other than group companies were extended additional credit facility by IFIN so that they could service their outstanding, interest and principal repayments obligations and avoid defaulting or classifying the account as a non-performing asset.”

Such evergreening arrangement was observed in the case of loans provided to IL&FS group companies and others such as Ind-Bharath group, Gayatri Group and A2Z group.

IFIN also inflated its performance by ensuring that interest income is generated on the loans that have been regularised through this fresh funding. Fresh interest income was generated through the disbursement of the above-mentioned loans and provisioning for NPA was deflated to display a strong balance sheet and healthy asset quality on these loans. "The evergreening of the loans resulted in inflated profits, suppressed provisioning and non-disclosure of possible NPAs in the books of IFIN. To this extent, the financial statements were misstated to show a window-dressed view or a rosy picture of the financials," according to SFIO.

There were some instances where an account was written off in the books of IFIN as bad debt and fresh loans were advanced to the company despite the fact that company had written off previous debts of the same borrower group. "It is observed that Shiva group had been a defaulter in its loan commitments from 2011 itself. IFIN extended another loan facility of Rs 175 crores to Shiva Shelters and construction private limited and an amount of Rs 50 crores in February 2018," said the report, adding that these loans were sanctioned without clear purpose or against a specific project in hand.

The report also talks about wrongdoing in the way the IL&FS Group Employees Trust (IGET) was formed and run.

IGET is similar to the IL&FS Employee Welfare Trust (EWT). In this case, no permission of the board of directors of IL&FS Ltd was obtained to create an entity with the same acronym. In this trust, shares/warrants were distributed to the employees with a restriction on their further transfer by the employees without the permission of IL&FS Employee Welfare Trust.

Further, IGET had aggregated all the shares held by the employees and sold the same to Life Insurance Corporation (LIC) at Rs 1,100 per share. All the employee were paid by IGET at the same price at which it sold shares to LIC. However, in the past, these shares were distributed by EWT to employees at Rs 84 per share and Rs 132 per share. This transaction resulted in a windfall gain of approximately 10 times.

The report also talks about IL&FS’ attempted merger with Piramal Group in 2014, which fell through. Around the same time, the report says that EWT held about 1.5 crore shares in IL&FS Ltd. The trust itself was 90 percent held by select employees of the group, who had acquired those shares for as little as Rs

The report further says EWT trustees met regularly till 2008 and resolutions were undertaken regularly. Since 2008, meetings became only informal and no documentation for events/decisions taken exist. “The books of accounts were never adopted and financial statements were never approved by the board after 2008.”

The report also talks about a transaction with HDFC. In FY14, EWT acquired 8 lakh shares of IL&FS Ltd from HDFC at a price of Rs 1,184.5 per share. “The acquisition of shares at such a high price was made without any valuation being done”. This was done around a time when the trust was not even able to generate cash flows to service its own debt.

The shares acquired by the trust was through a loan advanced to it by HDFC Ltd. Part of the loan continues to exist on the trust’s book and interest continues to be paid on it.

Further, the collateral against the loan were shares that HDFC itself had sold to EWT. An HDFC report later said the value of the collateral stood at Rs 80 crore – meaning the asset coverage ratio was lower than 100 percent.

After the loan was repaid in 2015, HDFC issued a fresh loan of Rs 95 crore within a month against the same collateral without doing a fresh valuation.

When contacted by Moneycontrol, a HDFC spokesperson did not comment on the nature of the first transaction but said, "the amount of Rs 95 crore has been fully provided for."

The SFIO report also details assets of key IL&FS executives:

Former Ravi Parthasarathy had declared Rs 98.98 crores movable properties besides four immovable properties. Ex-MD Hari Sankaran declared Rs 19.04 crore movable properties and three immovable properties. Ex-Joint MD Arun Saha declared Rs 59.49 crores movable properties besides nine immovable properties. Former CIO Vibhav Kapoor declared Rs 22.47 crore movable properties and two immovable properties. Former IFIN MD and CEO Ramesh Bawa declared Rs 32.72 crore movable properties and five immovable properties. Former ITNL MD K Ramchand declared four immovable properties.

Source: https://www. moneycontrol.com/news/business/companies/exclusive-sfio-interim-report-blows-the-lid-on-extent-of-fraud-in-ilfs-3253211.html

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RBI credit policy: Status quo likely; lower inflation, slower growth may change tone of policy stance

noreply@blogger.com (Anonymous) — Tue, 04 Dec 2018 04:11:00 +0000

If expectations come true, after a three-day meet from December 3 to 5, the 6-member Monetary Policy Committee will keep its key policy repo rate unchanged at 6.5 percent

A unanimous status quo in key policy interest rate is expected on December 5, the last day of the 14th meeting of the Monetary Policy Committee (MPC). Its commentary on the interest rate and outlook on the policy stance and liquidity will be keenly watched by the market, most experts said.

If expectations come true, the six-member MPC, after a three-day meet, will keep the repo rate unchanged at 6.5 percent. Repo rate is the rate at which banks borrow short term funds from the Reserve Bank of India (RBI).

The resolution of the fifth bi-monthly monetary policy statement for 2018-19 will be placed on RBI website at 2.30 pm on December 5.

“We are expecting a pause (in interest rate) given the current economic environment. What would be of significance is, will the RBI soften its stance or reword its 'calibrated tightening' as the forthcoming inflation prints are likely to remain below RBI target. This could prompt RBI to review its policy stance (to neutral)… They may do it in this policy or create a way for the next policy to shift to neutral," said Shubhada Rao, Chief Economist at Yes Bank.

Surprise 'pause' and 'calibrated tightening' in October

Despite a surprise pause in October, the MPC, headed by RBI Governor Urjit Patel, had changed its policy stance to 'calibrated tightening' ruling out further rate cuts.

In a highly volatile and dynamic global environment, domestic factors such as appreciation in the rupee, easing oil prices and subdued inflation can keep the focus on its policy stance.

According to Shubhada Rao, 'calibrated tightening' and lower inflation do not go in sync. "We should wait for change in language and tone from the central bank. Hence, more tightening probably is ruled out this fiscal,” she explained.

Rupee strengthens; oil, inflation and growth decline

Two months after the October 5 monetary policy, the rupee has returned to 69 levels after touching a low of 74.22 to the dollar.

Crude oil prices have declined 30 percent since then to $58 levels from $84 per barrel.

Yields on the 10-year benchmark government bonds have also declined sharply to 7.62 percent from 8.05 percent (on October 5).

Further, inflation has cooled off to a 13-month low of 3.31 percent, well below RBI's medium term inflation target of 4 percent for the third straight month.

Despite improvement in credit growth in the banking sector at 14.9 percent till early November, GDP growth slowed to 7.1 percent in the September quarter amid continued worries of the fiscal deficit target shooting 3.3 percent of GDP.

Most experts project a further downward revision in inflation numbers going forward.

“We are looking at a pause on December 5 and rest of FY19, with a downward revision in inflation (prevailing trend is 50-60 bps below the central bank’s forecast) and lower full-year growth estimate,” said Radhika Rao, Economist at DBS group.

In the previous policy, MPC had also lowered its inflation trajectory to 3.9-4.5 percent in H2 FY19 and 4.8 percent for Q1 FY20.

However, it had also flagged key risks to domestic prices from volatile global financial markets, surging oil prices and possible fiscal slippages in the run-up to elections—five states hold assembly polls before general elections next year.

A recent Kotak report estimates inflation at 2.9-4.3 percent in H2 FY19 and 4.5 percent in Q1 FY20. It expects MPC to maintain its 'calibrated tightening' stance "until core inflation reduces to around 4-4.5 percent on a sustained basis.”

Liquidity

Radhika Rao feel commentary on liquidity and the tone of the policy would be important.

Amid the ongoing tight liquidity conditions, RBI could infuse more liquidity into the system through tools such as purchase of open market operations (OMOs), extension of facility to avail liquidity for Liquidity Coverage Ratio to non-banking financial companies (NBFCs), use of long-term repo windows and foreign exchange intervention given the appreciation in the rupee.

“We estimate systemic liquidity deficit at around Rs 1.9 lakh crore by March 2019 with core liquidity deficit at around Rs 63,700 crore after additional OMO purchases of Rs 1.2 lakh crore in the rest of FY19," the Kotak report said, adding that liquidity is strained only in pockets and is not a system-wide crisis.

Source: https://www. moneycontrol.com/news/business/economy/rbi-credit-policy-status-quo-likely-lower-inflation-slower-growth-may-change-tone-of-policy-stance-3247851.html

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Stocks in the news: Tata Motors, SpiceJet, Maruti, Escorts, Biocon, Laurus Labs, Prakash Industries

noreply@blogger.com (Anonymous) — Mon, 03 Dec 2018 05:52:00 +0000

Tata Motors, Maruti Suzuki, Escorts, Hero MotoCorp, Merck, Jet Airways, SpiceJet, Biocon and Laurus Labs are stocks which are in the news today.

Here are the stocks that are in news today:

Tata Motors: Company witnessed a drop of 4 percent at 50,470 units in November 2018 as against 52,464 units over last year, due to low consumer sentiments as a result of liquidity crisis in the industry, higher interest rates and rising fuel costs.

Maruti Suzuki: November sales down 0.7 percent at 1.53 lakh units versus 1.54 lakh units YoY.

Mahindra & Mahindra: November auto sales up 17 percent at 45,101 units against 38,570 units YoY.

Escorts: November sales up 56.4 percent at 8,005 units versus 5,119 units YoY.

SML Isuzu: November sales up 1 percent at 688 units versus 681 units YoY.

Eicher Motors: Commercial vehicle sales dropped to 4,720 units in November 2018 against 4,916 units in same month last year.

Atul Auto: Sales increased 12.60 percent to 4,003 units in November 2018 against 3,555 units YoY.

Hero MotoCorp: Company's November sales increased to 6,10,252 units against 6,05,270 units sold in November 2017.

Merck: Company completed divesting consumer health business to Procter & Gamble (P&G) at a cash purchase price of 3.4 billion euro.

Sun Pharma: SEBI likely to re-open an insider trading case against Company; and whistleblower approaches SEBI w.r.t irregularities by promoter Dilip Shanghvi & Others - PTI Sources.

Sudhir Valia, ED, Sun Pharma told CNBC-TV18: The company has no idea about the insider trading case against itself, has no communication.

Jet Airways, SpiceJet, InterGlobe Aviation: ATF prices for domestic airlines cut by 11 percent to Rs 68,051/kL.

Biocon: Company gets European Union regulator nod for biosimilar Pegfilgrastim.

Vodafone Idea: Company seeks shareholder nod to appoint Balesh Sharma as CEO.

Laurus Labs: Company and Aspen Pharmacare, South Africa launched a new HIV drug with the triple combination of Dolutegravir, Lamivudine and Tenofovir Disoproxil Fumarate (DLT) in South Africa.

Bank of Maharashtra: AS Rajeev is appointed as Managing Director & Chief Executive Officer of the bank for a period of three years.

Vodafone Idea: NCLT approved the Scheme of Amalgamation of Aditya Birla Telecom Limited (a wholly owned subsidiary) with Vodafone Idea Limited.

GOCL Corporation: NCLT sanctioned the Scheme of Arrangement for merger of two wholly owned subsidiaries namely, IDL Buildware Limited and Gulf Caressorie India Limited with the company.

Mindtree: NCLT approved the Scheme of Amalgamation of Magnet 360, LLC (transferor company), the wholly owned subsidiary of the transferee company with Mindtree Limited (transferee company).

Vikas Proppant & Granite: Company planned to manufacture Proppants and mining of granite and fractured debris near Jodhpur.

Narayani Steels: Board meeting is scheduled on December 3 to consider the proposal of migration of the company from SME Platform to the Main Board of BSE Limited.

Monte Carlo Fashions: Board appointed Raj Kapoor Sharma as CFO of the company.

Monte Carlo Fashions: Board approved the proposal for buy-back of fully paid-up equity shares not exceeding 10 lakh shares (representing 4.60 percent of the total paid up equity) at a maximum price of Rs 550 per share for an aggregate maximum amount of Rs 55 crore.

TV Today Network: Vivek Khanna resigned from the position of Chief Executive Officer of the company to pursue other professional opportunities.

RMG Alloy Steel: India Ratings & Research Private Limited assigned BBB-/stable rating for long term borrowings.

Orissa Bengal Carrier: Board approved loan facility of Rs 7 crore from Kotak Mahindra Bank for the purpose of meeting the working capital requirements.

Borosil Glass Works: Company has made additional investment of Rs 2.45 crore by way of subscription towards the first and final call of Rs 5 each in the rights issue of equity shares of Borosil Technologies (formerly known as Borosil Glass Limited), a wholly owned subsidiary company.

Orchid Pharma Q1FY19: Loss at Rs 46 crore versus loss at Rs 114.5 crore; revenue falls to Rs 130.65 crore versus Rs 139.6 crore YoY.

Sun Pharma: Scheme of Arrangement among Sun Pharma Global FZE and Sun Pharmaceutical Industries and their respective members and creditors for demerger of the Specified Undertaking of Sun Pharma Global FZE into the company, is effective from December 1.

Cadila Healthcare: Zydus receives final approvals from the USFDA for Teriflunomide tablets, which is used to treat relapsing forms of multiple sclerosis.

Sandhar Technologies: Company has signed a joint venture agreement with Kwangsung Corporation Ltd., Republic of Korea.

Prakash Industries: Company is likely to record growth of around 30 percent in sales volumes and 40 percent in sales realisation in Q3FY19 as compared to the same quarter last year.

BHEL: Company despatches its 40th nuclear steam generator to NPCIL for installation at Rawatbhata Atomic Power Project.

Genus Paper & Boards: Company has terminated the lease agreement for Kraft paper manufacturing facility located at Kashipur, Uttarakhand.

Ashiana Housing: Company has entered into a management agreement with Genesis Rehabilitation Services India Pvt. Ltd. to manage and operate, the 'Utsav Care Homes' - Bhiwadi (Rajasthan), a part of Senior Living development 'Ashiana Utsav'.

Brigade Enterprises: Brigade announces the launch of Plumeria Lifestyle at Brigade Meadows, Bangalore.

Warren Tea: Long term rating of the company has been revised from BBB+ to BBB and the short term rating has been revised from A2 to A3+.

United Bank of India: Ashwini Kumar Jha is appointed as Chief Financial Officer of the bank.

Mahindra & Mahindra Financial Services: Company has achieved its highest ever volume of financing 84,000 vehicles/tractors in November.

Vaarad Ventures: Company has transferred its all equity share (39.58 percent) held in Anewera Marketing Private Limited to ATCOM Technologies.

VIP Clothing: Company will not be continue, the Eminence licence agreement entered with Eminence group for manufacturing and marketing of undergarment under brand name called EMINENCE, which is due for expiry on December 31, 2018. The contribution towards sales from Eminence brand was not significant and hence company won't be renewing said agreement further.

Vimta Labs: M Murali Mohana Rao, Chief Financial Officer has resigned from his services of the company.

Shanti Educational Initiatives: Company received in-principle approval from BSE for migration of equity shares of company from SME to main board of BSE.

Orient Bell: Board approved appointment of Himanshu Jindal as Chief Financial Officer (CFO) of the company.

Indsil Hydro Power and Manganese: Company has leased out a part of specified plant & machinery at Raipur to Nikita Metachem Private Limited, Raipur for an initial period of one year.

Source: https:// www .moneycontrol.com/news/business/markets/stocks-in-the-news-tata-motors-spicejet-maruti-escorts-biocon-laurus-labs-prakash-industries-3243501.html

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