P-Notes, mostly used by overseas HNIs (High Net Worth Individuals), hedge funds and other foreign institutions, allow such investors to invest in Indian markets through registered foreign institutional investors (FIIs).

Investments through Participatory Notes (P-Notes) into India’s capital market dropped to Rs 2.72 lakh crore (about $41 billion) at the end of July.

P-Notes, mostly used by overseas HNIs (High Net Worth Individuals), hedge funds and other foreign institutions, allow such investors to invest in Indian markets through registered foreign institutional investors (FIIs).

This saves time and cost for them, but the flip side is the route can also be used for round-tripping of black money.

According to Sebi data, total value of P-Note investment in Indian markets (equity, debt and derivatives) declined to Rs 2.72 lakh crore at July-end, from Rs 2.75 lakh crore in the previous month.

Prior to that, investments through P-Notes had hit a seven-year high of Rs 2.85 lakh crore in May. This was the highest investment since February 2008, when the cumulative value stood at Rs 3.23 lakh crore.

The total outstanding value of P-Notes witnessed a steady rise since January and the momentum continued till March. The investments through this route registered a drop in April, but hit a seven-year in May. The inflows slipped in the last two months (June-July).

The drop in investment via P-Notes come amid Supreme Court-appointed Special Investigation Team (SIT) on black money asking Sebi to review its regulations on participatory notes to help identify the end-users of these instruments.

However, the government last month said that there was no requirement for “much change” in the regulations for P-Notes as the existing norms make it ‘almost impossible’ to misuse this route.

Besides, the quantum (percentage) of FII investments via P-Notes decreased to 11.1 per cent last month from 11.5 per cent in June.

Till a few years ago, P-Notes used to account for more than 50 per cent of total FII investment, but their share has fallen over the years after Sebi tightened disclosure norms and other related regulations.

As things stand, P-Notes make up around 15-20 per cent of the total FII investment in India since 2009. While it used to be much higher – 25 to 40 per cent – in 2008. The reading was as high as over 50 per cent at the peak of stock market bull run in 2007.
In absolute terms, the value of P-Note investment rose to a record of Rs 4.5 lakh crore in October 2007, but dropped to Rs 3.22 lakh crore in February 2008 and Rs 60,948 crore in February 2009.

Shares of Amtek Auto plunged 9 per cent, while that of its subsidiary Castex Technologies lost 5 per cent on Thursday after market regulator Sebi began a probe into alleged manipulation of the latter’s stock price. (Reuters)

Shares of Amtek Auto plunged 9 per cent, while that of its subsidiary Castex Technologies lost 5 per cent on Thursday after market regulator Sebi began a probe into alleged manipulation of the latter’s stock price.

Sebi has begun a probe into alleged share price manipulation at Castex Technologies through forced conversion of foreign bonds.

Reacting to the development, shares of Castex fell 5 per cent and got locked in a lower circuit limit. The stock had also dropped nearly 5 per cent to close at Rs 42.45 on the BSE on Wednesday.

Amtek Auto counter also saw huge selling as the stock opened on a weak note at Rs 28, then fell 8.86 per cent to an intra-day low of Rs 27.75.

Over the last one month, Amtek Auto stock has tumbled over 80 per cent.

Sources said Sebi is seriously looking into the matter following allegations by some bondholders that efforts are being made to manipulate the share price of Castex
Technologies by forcibly asking investors to convert their bonds.

In the wake of these complaints, the watchdog has started a probe into the issue, they added.

On July 31, Castex Technologies informed the BSE that its board of directors has decided to mandatorily convert all the outstanding bonds of $80.80 million out of FCCB (Foreign Currency Convertible Bond) issue of $130 million.

The date for conversion of bond into equity shares, would be September 10, 2015, it had said.

Auto component maker Amtek is grappling with financial issues and its shares have also taken a beating in the recent weeks, while exposure to its bonds have created ripple effects in the mutual funds and other market segments as well.

Indian companies with revenue exposure or investment plans in Brazil are likely to be affected after the rating agency S&P downgraded the country to junk rating. (PTI)

Indian companies with revenue exposure or investment plans in Brazil may get affected after the rating agency S&P downgraded the country to junk rating, citing mounting political problems that have disturbed economy policy.

Standard & Poor’s said in a note that Brazil’s hard-fought investment grade status that it held for seven years was gone and that its outlook on the country was negative, just as the nation enters recession and is expected to see an even worse 2016.

“Companies which export majorly to Brazil will be affected,”Chokkalingam G, founder & CEO at Equinomics Research & Advisory said.

Moody’s Investors Service had also downgraded Brazil less than a month ago to the brink of junk.

Many Indian companies’ that have exposure to Brazil saw their stocks coming under pressure on Thursday. Videocon Industries and Oil and Natural Gas Corporation that have heavy investments in Brazil declined more than 1 per cent on Thursday on BSE.

Companies which made acquisitions in Brazil also edged lower. Shree Renuka Sugars fell 1 per cent, UPL declined 3.6 per cent while Lupin lost 1.5 per cent in the afternoon trade on Thursday.

Meanwhile, Hero MotoCorp has also announced  a plan to set up manufacturing facilities in Mexico, Argentina and Brazil and expects to utilise the new Colombian plant as a hub to export to nearby countries. The share price of the company was trading 0.30 per cent down at Rs 2341 in the afternoon trade.

“Going forward in terms of manufacturing facility, we are looking at some other countries in the region like Mexico, Argentina and Brazil,” Hero MotoCorp’s Chairman, Managing Director and CEO Pawan Munjal said.

Other Asian stocks also moved southward after the news. Singapore’s Sembcorp Industries fell 3.7 per cent, Global Logistic Properties declined 1.9 per cent while Sembcorp Marine slid 2.9 per cent.

South Korea’s LG Electronics fell 0.6 per cent while Samsung Electronics, which said in January that it would acquire Brazil’s Simpress declined 1.3 per cent.

China’s Citic Heavy Industries lost 3 per cent, China’s TCL Corp declined 2 per cent and Shenzhen Absen Optoelectronic lost 1.4 per cent.

(With agency inputs)

Vedanta shares fell as much as 4.7 per cent on BSE in the morning trade on Thursday (Photo: PTI)

Vedanta shares fell as much as 4.7 per cent on BSE in the morning trade on Thursday on reports that rating agency Standard & Poor’s on Wednesday said that the completion of the proposed merger of Cairn India with Vedanta appears uncertain.

At 11.15 am, Vedanta was trading 2.40 per cent lower at Rs 97.45. It opened at Rs 97 and had touched a high and low of Rs 98.50 and Rs 95.10, in trade so far. Meanwhile, the S&P BSE Sensex was down 303 points or 1.18% at 25,415.61.

Standard and Poor’s Ratings Services on Wednesday said it is placing the ratings on Vedanta Resources PLC’s ‘BB-‘ foreign currency long-term corporate credit rating and the ‘BB-‘ long term issue ratings on the firm’s guaranteed notes and loans on CreditWatch with negative implications.

The placement reflects S&P’s view that Vedanta’s move to merge two of its Indian units – Vedanta Ltd., and Cairn India Ltd., – “is critical for the company to withstand a weakness in commodity prices,” credit analyst Mehul Sukkawala, wrote in his note on Wednesday. “However, the completion of the merger is uncertain, in our view.”

Earlier this year, Vedanta Resources has announced to merge two of its Indian subsidiaries Cairn India and Vedanta Ltd., to create a commodities and resources company. But, some of the minority shareholders are against the move, as it give the London-based debt-laden company access to Cairn India’s cash reserves.

So far around 4.74 lakh shares were traded on the BSE as against average daily volume of 10.18 lakh shares in the previous two weeks.

For the quarter ended June 2015, Vedanta India posted a consolidated net profit of Rs 865.94 crore, up 130.57 per cent, against Rs 375.56 crore in the corresponding quarter a year ago.

This calendar year, Sensex has corrected around 10 per cent at 24,893.81 on September 7. The index is now just 770 points higher from the level of 16 May, 2014, when Modi-government was formed. (PTI)

The BSE Sensex fell below 25,000 mark for the first time in the past 15 months on September 7, 2015. During the period, the index touched its closing high of 29,681.71 on January 29, 2015 and low of 24,805.83 on June 4, 2014. According to a brokerage house Sharekhan, the Indian equity market got caught in the wave of global volatility driven by a meltdown in the Chinese equity market that was followed by a knee-jerk reaction from the Chinese authorities to control the situation and support the economy.

In the past two-trading sessions, the Sensex gained 825 points. However, it pared some of its gains in early trade today (September 10) and was trading down over 400 points.

Amid the rising uncertainty, foreign investors pulled out of risky assets including equities of emerging markets (EMs) like India, which witnessed record outflows of over Rs 17,000 crore in August this year. On the other hand, the domestic institutional investors remained buyers providing vital cushion to the stock market.

This calendar year, Sensex has corrected around 10 per cent at 24,893.81 on September 7. In the BSE 500 index, 234 stocks underperformed the Sensex during the period. Out of 234, 28 stocks declined over 50 per cent during January 1 and September 7. Share price of RISA International declined the most — 95.94 per cent to Rs 12.72 on September 7 from Rs 313.40 on January 1. It was followed by PMC Fincorp (down 95.60 per cent to Rs 1.71), CCL International (down 91.19 per cent to Rs 43.90) and PS IT Infrastructure & Services (down 88.01 per cent at Rs 10).

On the other hand, share price of Rajesh Exports, Tata Elxsi and Chennai Petroleum Corporation jumped 210 per cent, 185 per cent and 174 per cent to Rs 461, Rs 1725 and Rs 200 respectively during January 1 and September 7.

In a research note Sharekhan said, “After the correction, the valuation of the Sensex has declined to around 15x FY2016E earnings, which is close to the long-term mean, though on a relative basis (compared with the other emerging markets), the premium has gone up due to a sharp correction in these EM indices. Given there are limited triggers in the near term and global sentiment is adverse, the domestic stock market may remain volatile and fluctuate in a wider band. We prefer sectors that are likely to benefit from the weakness in commodity prices and a revival in consumer demand, such as pharmaceuticals and information technology, apart from select auto companies, private sector banks and financial service companies, and consumer discretionary stocks.”

After the recent correction various brokerage and research houses are coming up with their research reports on various stocks which are looking attractive post correction.

Below are a few stocks on which experts are bullish on:

NTPC
Recommended By: JM Financial
Target Price: Rs 134
Why Buy: The share price of thermal power giant NTPC has corrected 25 per cent since March 2015. According to JM Financial, the stock is looking attractive due to high earnings visibility on regulated RoEs, strong balance sheet with 21 per cent of CMP in liquid assets, and high growth from FY17/18 which can potentially add 35 per cent to regulated asset base and earnings. Moreover, despite low power demand led low plant utilisations (PLF), NTPC continues to earn regulated RoEs based on its plant availability (PAF), thus limiting downside.

On September 8, NTPC was trading 2.44 per cent higher at Rs 115.40 in the late morning trade.

YES Bank
Recommended By: Bank of America Merrill Lynch (BofA-ML)
Target Price: Rs 1150
Why Buy: On a year-to-date basis the share price of YES Bank declined over 15 per cent to Rs 650.30 on September 7. According to BofA-ML, the share price of the company declined on concerns about asset quality. The global finacial services firm believe the share price of the company can jump further 70 per cent from its present level.

In the noise about the bank’s asset quality, BofA-ML believes that the ‘build-up’ of its branch banking franchise is clearly being ignored. A large part of this is already visible on liability side. The focused approach toward customer acquisition and building a branch-centric model should ultimately lead to the desired/expected full ‘retail’ model. What will aid the “retail-ization” faster is the under-utilized distribution (~40-45% of current branches) and the plan to increase branches by ~2.5x, to 1,500, by March 2018 (vs. 662 now).

Marico
Recommended By: Sharekhan
Target Price: Rs 460
Why Buy: Marico’s stock price has corrected by almost 15 per cent from its high in the current weak market conditions. According to the brokerage house, with less propensity to the effect of lower monsoon, as 33 per cent of its domestic revenue is coming from rural India and benign commodity prices, the recent drop in Marico’s stock price makes it one of the better picks in the mid-cap FMCG space. At the current valuation of 28.5x its FY2017E earnings, Sharekhan believes the downside risk is minimal and hence it upgrades recommendation on the stock to ‘Buy’.

Kotak Mahindra Bank
Recommended By: Nomura
Target Price: Rs 750
Why Buy: Recent 20 per cent correction provides investors with a good entry into the high-quality bank. After the ING Vysya acquisition, investors’ expectations seemed high. However, the brokerage house thinks Q1FY16 integration charges partially explain the lower acquisition cost and also set investors’ expectations on growth and asset quality lower. It feels Kotak’s earnings quality remains one of the best in the sector. Merger cost taken; synergies to follow Kotak upfronted Rs 3 bn of ING-related integration charges (18% of ING Vysya’s net worth) explaining the lower 2.2x valuation on the merger. The quality of Kotak’s CASA and fee growth remains superior with CASA accretion being more granular than peer banks. As well, the brokerage house said exposure analysis suggests that risk to Kotak’s asset quality is very low.

Praj Industries
Recommended by: Edelweiss
Target price: Rs 100
Why buy: Praj Industries’ (Praj) senior management, during a recent interaction with Edelweiss, was reasonably confident about Praj’s medium to long term growth prospects. In the near term, while the ethanol business is likely to have limited impacted by weak crude prices, management maintained strong outlook on its brewery and high purity (PH) businesses. The company has sharpened focus on internationalisation of its PH business and expects strong momentum to emanate from pharma industry. PHS is expected to be a significant contributor to revenues over next 2–3 years. On the Petrobras order (~25% (Rs 9.8 bn) of current order book), management mentioned the order stands firm and there are no chances of cancellation. We believe the company is capable of scaling up its emerging and brewery businesses globally over next 2–3 years, thereby reducing reliance on ethanol business, which could in turn lead to substantial ramp up in RoE profile (FY15 RoE at 18% ex cash) beyond FY17E.

(Disclaimer: The stocks are recommended by the respective brokerage houses and not a recommendation from Financial Express online)