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11 stocks in focus today: RIL, HDFC Bank and more (01-09-2015)

Sensex, stocks in focus

Reliance Industries stocks will be in focus as government has permitted the company to sell up to 1.2 lakh tonnes of LPG produced at its plants to private cooking gas marketers.(PTI)

The BSE Sensex and NSE Nifty opened  in negative terrain on Tuesday following weak global cues. At 9.28 am, Sensex was down 185.61 points at 26,097.48. Similarly, Nifty was down 71.40 points at 7,899.90 during the same time.

Sensex The 30-stock BSE index on Monday settled down 109.29 points, or 0.41 per cent, at 26,283.09. The NSE Nifty traded between 8,043.60 and 7,947.95 intra-day before it signed off below the 8,000-mark, falling 30.65 points, or 0.38 per cent, to 7,971.30.

Below are the stocks that may remain in focus today:

SBI and ICICI Bank: Both the banks were identified by RBI as systemically important banks on Monday, subjecting them to higher levels of supervision to prevent disruption to financial services in event of any failure.

HDFC Bank, Canara Bank and Axis cuts: Private lender HDFC Bank and state-run Canara Bank on Monday lowered their lending rates by up to 0.35 per cent, while Axis Bank cut its deposit rates by up to 0.50 per cent across maturities.

Bank of Baroda: The public sector lender said it has fixed issue price for preferential allotment of shares to the government at Rs 192.74 per share.

HCL Technologies: The company on Monday announced the launch of a United Xperience Lab Offering to institutionalise co-innovation process for building Digital solutions for and with its customers.

Ruby Mills: The company’s board of directors on Monday approved issue of bonus equity shares in the ratio of 1:1 i.e. 1 new equity share against one equity share held. The announcement was made after market hours.

Reliance Industries(RIL): The government has permitted Reliance Industries to sell up to 1.2 lakh tonnes of LPG produced at its plants to private cooking gas marketers.

Syngene International: The contract research arm of Biocon is planning to set up a new manufacturing plant in Mangalore with an investment of about $100 million (over Rs 660 crore).

Oil marketing companies (OMCs): The stocks of the OMCs will be in focus as they cut the price of petrol by Rs 2 per litre and diesel by Rs 0.50 per litre.

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Spooked by China, FIIs sell $2.6 bn of equities in August (31-08-2015)

China stocks market

Foreign funds took risk off the table spooked by the wild gyrations in Chinese stocks last week as also profit-taking in many other markets across the globe. (Reuters)

Foreign portfolio investors (FPIs) pulled out $2.6 billion from the Indian markets in August — the worst monthly outflows since October 2008. Foreign funds took risk off the table spooked by the wild gyrations in Chinese stocks last week as also profit-taking in many other markets across the globe. In the last five sessions alone, FPIs offloaded some $2 billion worth of stock and foreigners were net sellers for 20 out of 25 sessions in August, Bloomberg data showed.

In contrast, domestic institutions picked up equities in the cash segment worth approximately $2.3 billion (Rs 15,769.83 crore), the biggest quantum bought since Sebi started maintaining the data in 2007. Surprisingly, despite the volatility in the markets, mutual funds received inflows of Rs 1,535 crore in August, Sebi data showed.

UR Bhat, director, Dalton Capital Advisors, said, he foresees FPIs paring their exposure to riskier assets, including equities, primarily due to problems arising out of China.

“FPI selling is expected to continue albeit more mildly until the next sell-off happen in the Chinese markets,” Bhat, who advises many FPIs on their strategies on Indian equities, told FE.

Gr6

The selling by FPIs saw the index of blue-chip stocks fall more than 6% in August, wiping out Rs 3.01 lakh crore in market capitalisation of the top 30 companies. The rupee breached the 66-mark against the dollar to fall to its two-year low.

The outflow scenario was prevalent through out the Asia and Emerging Markets. South Korea witnessed outflows worth $3.6 billion, while Taiwan and Thailand saw FPI pulling out $1.6 billion and $1.25 billion, respectively.

Bhat highlighted a major difference in the FPI selling trend compared to 2008. He said, “About seven to eight years ago, when FPIs sold equities there was hardly anyone with enough muscle to absorb the selling pressure, that too without a significant price damage. However, markets have received some cushion recently from DII buying and they been able to absorb most of the impact of FPI selling.”

Overseas funds had sold $4.36 billion at the peak of the previous bull run in January 2008, followed by $2.92 billion in October 2008 in the aftermath of Lehman Brothers’ bankruptcy that triggered the global financial crisis.

FPIs encompass all foreign institutional investors, their sub-accounts and qualified foreign investors under a new regime that came into force on June 1, 2014. Sebi data show that there are more than 8,200 FPIs registered in the Indian capital market.

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Buy SKS Micro, target Rs 743: Anand Rathi Institutional (31-08-2015)

Maintain ‘buy’ on SKS Microfinance (SKS) with a target price of Rs 743 a share.

At the current market price, the stock trades around a P/BV of 2.7x FY18e. At our target price, it would trade at a P/BV of 4.15x FY18e. We have valued the core business at R716 (P/BV of 4x FY16e) and the deferred tax assets at Rs 27 a share.

SKS is witnessing the benefits of an improved funding environment. Healthy disbursement, coupled with activation of inactive members across the country, will pave way for AUM growth at a CAGR of ~46% between FY15-FY18e.

SKS has been consolidating its branch network and employee strength; the operating leverage benefits will accrue as we expect growth to drive earnings in the next couple of years. Looking at the growth, coupled with improvement in return ratios, we believe the stock is at attractive valuations.  The long-term loan (LTL) portfolio forms ~24% of the AUM. The increase in LTLs has led to an increase in the AUM growth-to-disbursement ratio from -1.7% in Q1FY15 to 26.3%. Across NBFC peers, barring Shriram City Union Finance, the duration of loan book has fallen on account of an increase in lending towards shorter-tenure assets; while SKS has been raising the asset tenure of its book through LTLs.

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Upgrade GAIL to ‘buy’, target Rs 400: Kotak Institutional Equities (31-08-2015)

Upgrade GAIL to ‘buy’ from ‘add’ with a sum-of-the-parts (SoTP) based target price of Rs 400 per share.

We expect the company to benefit from an upward revision in regulated tariffs, higher gas volumes, lower domestic gas price and recovery in crude price. The stock offers a good entry point pricing in key negatives, as we see the possibility of partial usage of spot LNG as feedstock for petchem and negotiation on RasGas contract, which can allay key overhangs.

We have revised our EPS estimates to R20.2 (-1%) in FY16, R25.9 (-3.1%) in FY17 and R31.6 (-2.1%) in FY18 to reflect details from FY15 annual report, lower crude price assumptions by $2.5-5 per barrel, 10-20% proportion of spot LNG in raw material for petchem segment and weaker rupee-US dollar exchange rate forecasts of KIE economists.

We have assumed nil subsidy burden from FY16 onwards. Our FY17 EPS will increase by R2-3, if we assume about 10-15% increase in GAIL’s blended tariffs from upward revision in regulated tariffs. On the other hand, our EPS estimates will decline by R0.9 in FY16 and R1.8 in FY17, if we were to build in interest cost for contractual advance to RasGas pertaining to 20% shortfall in off-take volumes.

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Brokerages trim target for Indian markets as growth story lags (31-08-2015)

A combination of domestic and global economic problems has once again prompted Indian brokerages to trim their year-end targets on the Sensex and the Nifty. Top firms, such as Barclays, Macquarie and Ambit Capital, cut their respective Sensex and Nifty target by 5.6-12.5% on Friday, citing weakness in second quarter corporate earnings.

Barclays has revised its 12-month Nifty target to 9,642 from 10,219. Macquarie has lowered its December 2015 target to 8,700 from 9,600, while Ambit Capital cuts its March 2016 Sensex target from 30,000 to 28,000 with a high risk of it further falling to 22,000 levels.

Ambit Capital advised investors to “exit the fantasy, enter the reality”. In its note, Ambit researchers, led by Saurabh Mukerjea, said: “We we cut not just our FY16 GDP growth estimate, but also our end-FY16 Sensex target. There is a high risk of the Sensex dropping to 22,000 as the odds appear to be in favour of a continued yuan devaluation. The combination of an enfeebled banking system, a sliding real estate sector and a PM determined to reset the way the Indian economy works makes India a risky investment destination.”

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India’s economic growth decelerated to 7% in the first quarter of fiscal 2016 compared to 7.5% in the previous quarter and 6.7% from the corresponding quarter last fiscal. This belied all expectations of economic revival that the government was pinning its hopes on.

Barclays cut its 12-month forward Nifty owing to postponement in earnings recovery. The British multinational investment bank observed that Indian earnings have now remained stuck in single-digit growth territory for the past three years and were following a similar pattern with downgrades to FY16 estimates persisting.

“Weak revenues are ostensibly to blame, though a closer look indicates top-down issues led by high real interest rates and a negative WPI culminating in lacklustre IP growth are the real culprits,” said a team of Barclays researchers, led by Bhuvnesh Singh.

However, Barclays expects the economy and earnings to rebound in the second half of fiscal 2016, led by consumer (staples and discretionary), financials, healthcare and capital goods sectors given the positive expectations from the domestic economy.

Australian investment bank Macquarie also cited weak earnings, but highlighted that India appeared the most attractive among EM countries, being a commodity consumer, a credible reform story and with a relatively high level of monetary independence.

“Risk on trade continue as the China government takes action and the US Fed pushes the timetable for a rate hike.

This has created a window of opportunity for the Indian central bank to cut interest rates in September/October. Government spending to pick up in Q3 to boost sentiment. Market seems well supported,” said Rakesh Arora, MD and head, research, Macquarie Capital Securities.

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Irdai forms panel for simpler products (31-08-2015)

Encouraged by the success of the Prime Minister’s flagship schemes, the Insurance Regulatory and Development Authority of India (Irdai) has formed a committee with the specific objective of bringing in more such simple products.

The committee, which comprises actuaries and heads of several fund houses, will submit its report in two months.

“The main aim of the committee is to come out with more simple products, which are easy to understand with a very clear message,” said the head of a top insurance company who is also a member of the committee. “In the recent past, we have seen many insurance companies coming out with complicated products and mis-selling to investors.

This resulted in customers either surrendering the policy or discontinuing payment of premium. We need to bring in products that are in line with the two Pradhan Mantri schemes,” he said.

In May, the Prime Minster launched flagship schemes — Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana — which received a positive response.

Over 11.13 crore people have subscribed to the three schemes so far.  “Even the Irdai chairman has said that we need to take a leaf out these flagship schemes. Our main focus is to bring in similar policies across the industry. Investors should know what they are paying for and how they can claim it (their money),” added the committee member.

The Pradhan Mantri Suraksha Bima Yojana provides accident and disability cover of up to Rs 2 lakh at an annual premium of Rs 12 whereas the Pradhan Mantri Jeevan Jyoti Bima Yojana offers a term life cover of Rs 2 lakh at an annual premium of Rs 330.

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SC issues notice to RBI and HDFC Bank on regulator’s power to enforce merger scheme (31-08-2015)

The Supreme Court on Monday issued notice to RBI, HDFC Bank and others on a plea seeking clarity on the RBI’s powers to enforce a merger scheme of banks, which was approved by it earlier. The issue relates to the merger of HDFC Bank and the Centurion Bank of Punjab (CBoP), which got the RBI nod on May 20, 2008.

A bench, headed by Justice MY Eqbal, issued notice to the banking regulator, HDFC Bank and others after the HDFC Bank Officers’ Association sought the apex court’s intervention in deciding two issues  — whether the banking regulator has no power to enforce a scheme which was sanctioned by it and if the RBI’s statutory power as a banking regulator to give directions for the proper functioning and management of a bank does not extend to giving directions to enforce a scheme sanctioned by it earlier.

Challenging the Kerala High Court’s order that held that the RBI is helpless in directing a bank to enforce a scheme, which RBI itself sanctioned and approved, the association alleged that discriminatory treatment meted to its members by the HDFC Bank is in violation of the scheme sanctioned by RBI. It also sought a direction to RBI to probe the issue.

As per the scheme of amalgamation entered into between HDFC Bank and Centurion Bank of Punjab, the employees of CBoP became the employees of the HDFC Bank without any break or interruption in service, on terms and conditions which were no less favourable to the employees of CBoP than those on which they were employed with CBoP, the petition said.

After the approval by RBI, the scheme was binding on the banks and any deviation from the same made the amalgamation null and void, it said. However, HDFC later violated this scheme by making the service conditions of the employees much worse than what they were entitled to under the scheme, the association stated.

“RBI has full power and duty to enforce its own scheme under Section 44A read with Section 35A of the Banking Regulation Act, 1949. Section 35A gives wide power to RBI to give directions to any bank to secure the proper management of any banking company. Therefore, the HC erred in holding that RBI is helpless in the face of violation of a scheme which it itself sanctioned and approved as a condition precedent to an amalgamation,” the petition filed through counsel Prashant Bhushan stated.

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Dishman Pharma shares gain as company posts robust Q1 net profit figures (31-08-2015)

Dishman Pharma

Dishman Pharmaceutical & Chemicals reported 58.55 per cent Year-on-Year (YoY) rise in a consolidated net profit figures for the quarter ended June 2015. (Photo: Reuters)

Dishman Pharmaceutical & Chemicals shares jumped over 7 per cent intraday on Monday after the company reported 58.55 per cent Year-on-Year (YoY) rise in a consolidated net profit figures for the quarter ended June 2015. During April-June 2015, the company earned Rs 37.75 crore against Rs 23.81 crore in the corresponding quarter a year ago.

At 3.24 pm, the share price of the company was trading 7.58 per cent higher at Rs 225.80. It opened at Rs 209 and had touched a high and low of Rs 226 and Rs 208.25, in trade so far. The BSE Sensex was trading 0.39 per cent lower at 26,290.19.

The shares closed up 5.88 per cent at Rs 222.25.

Net sales of the comanpany jumped 10.64 per cent YoY to Rs 400.04 crore during the quarter under review.

Sarabjit Kour Nangra, vice president, research, pharma, Angel Broking is bullish on Dishman Pharmaceutical shares and said, “We maintain our ‘BUY’ rating on Dishman Pharma shares with a price target of Rs 290.”

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GCPL shares up over 4 per cent as RBI hikes FII investment limit (31-08-2015)

Sensex

Godrej Consumer Products (GCPL) shares rose over 4 per cent on Monday after the RBI said foreign investors can buy up to 40 per cent of the paid-up capital in GCPL under the portfolio investment scheme. (Express Photo)

Godrej Consumer Products (GCPL) shares rose over 4 per cent on Monday after the Reserve Bank of India said foreign investors can buy up to 40 per cent of the paid-up capital in GCPL under the portfolio investment scheme (PIS).

At 1.38 pm, the scrip was trading 2.94 per cent higher at Rs 1343.90. It opened at Rs 1324.80 and had touched a high and low of Rs 1360 and Rs 1324.65, in trade so far.

Foreign Institutional Investors (FIIs)/Registered Foreign Portfolio Investors (RFPIs) can now invest up to 40 per cent, revised from earlier 35 per cent, of the paid-up capital of Godrej Consumer Products Limited under PIS, the Reserve Bank had said on Friday.

GCPL passed resolutions at board of directors’ level and a special resolution by shareholders, agreeing to enhance the limit for the purchase of its equity shares and convertible debentures by FIIs/RFPIs.

The purchases could be made through primary market and stock exchanges, RBI said.

FIIs, NRIs and PIOs (Persons of Indian Origins) can invest in primary and secondary capital markets in India through PIS.

(With inputs from PTI)

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Punj Lloyd shares surge over 8% on securing contract worth Rs 1,094 crore (31-08-2015)

Punj Lloyd Sensex

At 11.21 am, the scrip was trading 6.40 per cent higher at Rs 25.75. (PTI)

Punj Lloyd shares gained as much as 8.68 per cent in the morning trade on Monday after the company announced that it has secured a contract for the EPCC Package 2 at Haldia Refinery, West Bengal from Indian Oil Corporation for a value of Rs 1,094 crore.

At 11.21 am, the scrip was trading 6.40 per cent higher at Rs 25.75. It opened at Rs 24.40 and had touched a high and low of Rs 26.30 and Rs 23.85, respectively, in trade so far.

In a BSE filing, the company said, “The scope of the work involves, Residual Process Design, Detailed Engineering including HAZOP study, engineering, procurement, construction and commissioning of the Sulphur Block comprising the Sulphur Refinery Unit, Amine Regeneration Unit, the Sour Water Stripper including the Utilities and Offsite facilities.”

This project falls under IOC’s prestigious ‘Aishwariya’ Project. IOC’s Haldia project aims to upgrade Black Oil, mainly High High Sulphur Fuel Oil to higher value products like diesel and LPG which will lead to subsequent improvement in Gross Refinery Margins. It will also produce improved quality diesel, conforming to BS-IV specifications as a measure towards environmental protection.

“With this new win, the Group’s order backlog stands at Rs 20,978 crore. The order backlog is the value of unexecuted order on June 30, 2015 plus new order received after that date,” the company said in the BSE realease.

For the quarter ended June 30, 2015, the company posted net loss of Rs 597.87 crore against loss of Rs 363.92 crore in the corresponding quarter a year ago.

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