Monday 31 August 2015

Market Brief (31st August 2015)

Markets saw a severe crash last Monday (24th Aug ’15) on the back of Chinese market meltdown, fall in overall Global markets, and drop in commodity prices. Moreover, the short and medium term trend being down, it ended the last day of this trading week (Friday) on a flat note, giving a weekly return of  negative 3.6 percent each (Sensex and Nifty), amid rally in US and Asian markets barring Hong Kong, weak European cues, weak rupee versus dollar, falling crude oil prices. A dash of positive sentiments aroused amid hopes of delay in Fed rate hike, China pumping in money to boost its economy, and mild hopes of rate cut by RBI this September.

Technically, markets have discounted all the factors, its short and intermediate (medium) term trend still being down. Volatility in the markets will continue for some more time to come. Nifty will stoop down more if it closes below the level of 7670, and can jump higher if it closes above the level of 8230. Markets are poised and will be trading between the critical levels of 7800 and 8300, until and unless huge news comes in way, negative or positive.



Export oriented companies are going to do well in the coming week, belonging to sectors like Information Technology, Healthcare, and some Oil Exporting companies.



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Wednesday 26 August 2015

Recipe for Loss Making



Ingredients:

Interest - too much

Debt - very much

Derivatives - trading much

Bad Governance - fully required


Method:

Mix all the ingredients and serve them in a platter to the public.

Ready to bear losses.







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Tuesday 25 August 2015

Why did the Markets dwell in the bloodbath on Monday


 Reasons why Markets dwelled in the bloodbath on Monday:




1. Resignation of Greek PM leaving bailout funds in risk.

2. China's Debt crisis exposure.

3. Collapsing Global markets and falling currencies.

4. Former Fed. Reserve Chairman warning of bond market bubble and expectation of rising interest rates in US.

5. North Korea announcing "wartime state" with South Korea.

6. China's PMI index falls six-year low to 47.1.

7. Indian rupee hits 2-year low at Rs.66 per $.

8. Pending decision on the fate of the FII's.

9. Foreign funds withdrawing investments from markets.

10. Falling Oil prices.






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Wednesday 19 August 2015

New 'Payment Banks' on the way

The Reserve Bank of India (RBI) on Wednesday allowed 11 business houses, including Reliance Industries, the Aditya Birla group and leading telecom companies Airtel and Vodafone to commence payments banks.
Bharti Airtel and Reliance Industries had earlier tied up with Kotak Mahindra Bank and State Bank of India, respectively, for payments bank operations.

The Reliance-SBI payments bank has a determined plan to cover 250,000 villages and 5,000 towns in three years. While it plans to begin with a Rs 100-crore capital base, this will be pumped up to Rs 400 crore in three-four years, depending on trade volumes.

NEW BANKERS ON BOARD
  • Reliance Industries
  • Aditya Birla Nuvo
  • Vodafone
  • Bharti Airtel
  • Department of Posts
  • Vijay Shekhar Sharma (CEO of One Communications, which runs PayTM)
  • Cholamandalam Distribution Services
  • Tech Mahindra
  • National Securities Depository Ltd
  • Fino PayTech
  • Dilip Shanghvi (Sun Pharma promoter)

“This partnership brings together the combined strengths of two of India’s Fortune 500 corporations committed to making a transformative impact on India's financial inclusion landscape. We see this licence as an opportunity to promote financial inclusion,” said SBI Chairman Arundhati Bhattacharya.

The Department of Posts and Aditya Birla Nuvo, both ineffective in competition for universal bank licences last year, succeeded this time. Content with RBI's decision to announce payment banks, Finance Minister Arun Jaitley called the move an important one. He said it will fetch more money into the system and extend the contact of banking to rural areas. “RBI giving payments bank licences is a significant and important step. Payments banks will reach out to people in rural areas.”

Vijay Shekhar Sharma, chief executive of One Communications (which operates mobile wallet company Paytm), and telecom major Vodafone were also among the successful candidates. The other applicants that received RBI's approval for starting out payments banks were Sun Pharma promoter Dilip Shanghvi (who had applied in his own name, and not as Sun Pharmaceutical Industries), information technology (IT) firm Tech Mahindra, payments technology provider Fino PayTech, financial services provider Cholamandalam Distribution Services, and National Securities Depository Ltd (NSDL).

Tech Mahindra said it would partner with Mahindra Finance for payments bank. “This will allow both the digital and physical aspects of business to come together. Technology is breaking barriers and creating opportunities for new business models to emerge,” said Tech Mahindra Chief Executive & Managing Director C P Gurnani.

DO'S & DONT'S
What payments banks can and cannot do
CAN
  • Accept demand deposits from individuals, small businesses and other entities
  • Hold a balance of up to Rs 1 lakh per individual
  • Set up branches, ATMs, correspondents; issue debit cards; offer internet banking
  • Accept remittances to be sent to multiple banks, or receive remittances from them
  • Distribute mutual fund products, insurance products and pension products; undertake utility bill payments
CAN'T
  • Accept NRI deposits
  • Issue credit cards
  • Set up subsidiaries to undertake non-banking financial services activities
  • Offer other financial/non-financial services of promoters along with payments bank services

Norwegian telecom giant Telenor has entered into a deal with Dilip Shanghvi and infra financier IDFC to endeavour into the payments bank space. “We believe payments bank facilities are a step in the direction of enabling last-mile connectivity to consumers,” a joint statement from Shanghvi and Telenor said.

Payments banks will chiefly deal in remittance services and accept deposits of up to Rs 1 lakh. They will not lend to customers and will have to position their funds in government papers and bank deposits.

These bodies, which are required to have an preliminary capital of Rs 100 crore each, will have to start operations within 18 months. The promoter's minimum initial contribution to equity capital will have to be at least 40 per cent for the first five years.

This is for the first time in the history of India's banking sector that differentiated licences are being set out by the central bank for undertaking precise activities. RBI is expected to come out with a second set of such licences - for small finance banks - and the development for those is in its final stage. The shift is seen as a major step in promoting financial inclusion in the country. Bringing more people into the formal banking system has been a stated objective of both RBI and the government.

By granting 11 banking licences in one go and promising that licences will be offered 'on tap' after acquiring experience from the current implementation, the central bank has also discarded the label of being customary. The time taken to give these licences was less; the process was completed within a year, compared with four years for universal banking licences given out last year.

The 11 candidates for payments bank licences were chosen from among 41 applicants, after applying fit-and-proper criteria, and successful track record in conducting business for five years. An external advisory committee (EAC), headed by RBI board member Nachiket Mor, examined all applications and sent its recommendations.

"The recommendations of the EAC were an input for an Internal Screening Committee (ISC) consisting of the RBI governor and the four deputy governors. This ISC prepared a final list of recommendations for the Committee of the Central Board (CCB)," RBI said in a statement.

The CCB, which met on Wednesday, permitted the announced list of applicants.

"In arriving at the final list, the CCB noted it would be difficult at this stage to forecast the likely most successful model in the emerging business of payments. It further noted that payments banks could not undertake lending and, therefore, believed the payments banks would not be subject to the same risks as full-service banks," RBI added.

Among the unsuccessful applicants were the prepaid payment instrument (PPI) providers like One MobiKwik Systems and Oxigen Services.
RBI, however, kept the way open for the unsuccessful candidates, saying they could be eligible in future. "Going forward, the Reserve Bank intends to use the learning from this licensing round to appropriately revise the guidelines and move to giving licences more regularly, that is, virtually 'on tap'. The Reserve Bank believes that some of the entities that did not qualify in this round could well be successful in future rounds," RBI added.




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Thursday 13 August 2015

Nifty reclaims 8,350 on rate cut hopes; Rupee breaches 65-mark


 Benchmark indices have ended the session on a flat note amid volatility as pharma shares gained amid the slide in the rupee while the rally in the banking shares on the hopes of a rate-cut by the central bank on the back of easing consumer price inflation and growth in industrial production also aided the sentiment. However, the upside was capped as the monsoon session of the Parliament came to an end without the passage of any key legislation coupled with the depreciation of rupee.

The 30 share Sensex ended at 27,550 levels, up by 37 points while the 50-share Nifty ended at 8,356 levels, up by 6 points.

The broader markets, however, showed a divergent trend with BSE Midcap and Smallcap indices ending at 0.2% and 0.8% respectively. The health of the market was strongly negative with 1,837 declines against 1,011 advances.

RUPEE

The slide in the rupee post the devaluation of yuan continued even in today’s trades.  The Indian rupee breached 65/dollar for the first time today since September 2013. The currency was quoting at 65.08, depreciating by 31 paise.

ECONOMIC UPDATE

The consumer inflation for the month of July eased out to 3.78%. The sharp decline in the CPI from 5.4% for the month of June has raised hopes of a rate-cut by the central bank. The industrial output accelerated to 3.8% in June from 2.7% in the previous month.

The monsoon session of the Parliament was a complete washout and the key legislations including the passage of the goods and services tax (GST) bill, which will now have to see the winter session for it to be passed.

STOCKS IN FOCUS

Sectorally, BSE Healthcare and Bankex indices were among the gainers with leads of 0.7% each while BSE Metal index was the biggest loser with losses of 2.7%.

Banking shares saw a renewed buying interest on the hopes of a rate-cut by the central bank post the easing of macro-economic data.  Axis Bank, SBI, HDFC Bank gained between 1-1.5% each.

Pharma space also rallied on the hopes of gains in the export revenues on the back of weakening rupee. Lupin, Cipla, Sun Pharma  all surged between 1.4-2.7% each on the Sensex.

Metal stocks continue to lose their sheen post the devaluation of yuan.  Hindalco, Tata Steel, Vedanta slipped between 5-10% each.

Coal India's consolidated net profit fell 6.66% to Rs 3764.35 crore on 4.93% fall in total income to Rs 20965.20 crore for FY16 Q1 year-on-year.. However, the stock ended with 1.5% gains.

ONGC posted its Q1 results for FY16. The net profit increased by 14% to Rs. 5,460 crore. The revenues for the state run oil explorer was at Rs.22,825 crore, which was a rise of 4.5% year-on-year.  The stock ended flat with 0.2% gains.

Nestle India shined today after the Bombay High Court set aside the ban on Maggi noodles set by food regulator Food Safety and Standards Authority of India. The stock ended with 3% gains.

Among other shares, Tata Motors, Reliance Industries , Bharti Airtel and ITC dropped between 0.1-3.4% each on the Sensex.




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Saturday 1 August 2015

RIL Q1 net up 4.4% at Rs 6,222 cr as GRM hits 6-year high

Reliance Industries on Friday reported a 4.4% increase in net profit for the April-June quarter of this fiscal at Rs 6,222 crore against Rs 5,957 crore in the April-June quarter of last fiscal. A Bloomberg poll of analysts had expected RIL to post a 5-6% increase in its first quarter at Rs 6,211 crore. Sales declined to Rs 77,130 crore, down 23%. RIL reported sales at Rs 104,640 crore during the first quarter of last fiscal. 



“Our financial performance reflects the benefits of integrated hydrocarbon chain activities in a benign oil price environment. The sharp increase in demand for transportation fuels helped us realize strong refining margins,” said Mukesh Ambani, Chariman and Managing Director, RIL. 



“Our petrochemicals business recorded a strong quarterly performance supported by high operating rates and margin strength in the ethylene chain. In our retail business, we have reached significant milestones over the past couple of years and continue the high growth trajectory for this business,” he added. 




 Gross refining margins -- earning from turning every barrel of crude oil into fuel -- hit a six-year high of $10.4 per barrel against $8.7/bbl reported in the first quarter of last fiscal and $10.1/bbl in the quarter ended March 2015. Analysts had expected the gross refining margins (GRMs) to come in between $9.3-9.5 per barrel. 

Strong gasoline cracks and discount offerings by Middle East producers could have resulted in RIL beating analyst’s expectation on the GRM front.

Operating profit before other income and depreciation increased by 13.2% on a Y-o-Y basis from Rs 8,989 crore to Rs 10,177 crore with higher contribution from refining and petrochemicals business. 

Earnings per share (EPS) jumped 4.3% to Rs 21.1 from Rs 20.3 on an annual basis. 

RIL shares on the BSE closed 1.97% lower on Friday at Rs 1025.05. 



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