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Buy rating on Oil India Ltd: Levered to oil price (22-11-2015)

Q2FY16 results were in-line: OIL reported net profit of R6.7 bn (lower 13% q-o-q but higher 11% y-o-y). OIL earned $46.4/bbl on crude oil sold to state refiners after a subsidy payout of R845m. While oil production volumes at 0.8mmt saw a marginal downtick, gas production volumes were higher 9.3% q-o-q and 1.2% y-o-y. We believe that gas production will be ramped up further to meet the requirements of the Assam Gas Cracker (AGC), which is likely to get commissioned by FY16-end. As a result, we assume flat gas volumes for FY16e, with a volume uptick in FY17e. OIL is producing crude oil at an annualised rate of 3.3mtpa, which should sustain in our view.

Recent indications on subsidy sharing are positive but gas price a near-term dampener: The government has fixed its fuel subsidy payout at R12/litre for Kerosene and R18/kg for LPG for FY16 with the balance subsidy to be paid by the upstream companies. This formula has potential to be adopted in the future too as the formula provides a fixed subsidy outgo for government while providing a reasonable visibility to Oil India’s realisation on sale of its oil to state refiners. We estimate that this formula will result in Oil India earning more as oil price increases but will find its revenue capped at the oil price of c$60/b. This is because, as per the subsidy sharing formula, OIL will find a majority of its incremental revenue towards meeting its subsidy obligation. Additionally, starting Oct’15, the domestic gas price was reduced from $4.66/mBtu to $3.82, an 18% drop. We further estimate that the domestic gas price will decrease to c$3.4/mBtu starting Q1FY17.

Gr3

Valuation and risks: With 43% upside we reiterate our Buy rating but marginally cut our target price to Rs 575 (from Rs 583). We lower our FY16/17/18 net profit estimates by 2%/5%/1% to factor in the lower gas prices and minor changes in crude oil production. We continue to value OIL at a P/E (price to earnings ratio) of 9.0x FY16 core EPS estimates (a c20% discount to global peers as there is a lack of complete clarity regarding subsidy sharing in India).

We value OIL’s 5% stake in the listed Indian Oil Corporation at the market price and with a holding company discount of 20% (we were earlier valuing this at cost price). We continue to value OIL’s 5% stake in the Mozambique gas block at Rs 64/share (as per our NAV estimate, which translates into a c40% discount to the purchase price).
Key downside risks include a higher subsidy share than estimated and lower-than-expected oil/gas production.

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Neutral rating GSK Consumer Healthcare: Slowing volume growth a concern (22-11-2015)

Action: Cut FY16F/17F EPS by 4.1%/9.7%; maintain Neutral

GSK Consumer’s Q2FY16 results fell short of expectations, missing our/consensus net sales estimates by 6.6%/6.2%. Ebitda margin expanded by 390bps y-o-y to 21.1%, vs our expectation of 18.5%. Adjusted PAT (profit after tax) of R1.6 bn was 8% below our expectation. With volume growth still a concern and the anticipated pick-up in urban consumption taking longer than expected, we are cutting our FY16F/17F earnings forecasts by 4.1%/9.7%. That said, we expect margins to stabilise at around the 19.5% level for the full year, as the company reaps the benefits of low input prices, cost-saving initiatives, and network optimisation.

Catalysts: Urban consumption doesn’t seem to be picking up; input prices stable for the time being

Input prices should be stable for the company for the time being; milk and barley prices were up 2% y-o-y and down 5.2% y-o-y, respectively, as of Oct 2015. However, the steady slowdown in volume growth over the past few quarters is a concern, with the company registering sequential volume growth rates of -1.5% to 0%. While the company is optimistic that consumer sentiment is on the rise, we remain cautious on the pace of recovery, and cut our estimates accordingly.

Valuation: Value core business at 35x one-year forward EPS

The shares are trading in line with the sector average one-year forward P/E (price-to-earnings ratio) of 32x, but this is on reported earnings. In our SOTP (sum of the parts) valuation, we value the core operating business at 35x one-year forward EPS (earnings per share) of R160.1 and cash at book value to arrive at our new TP (target price) of R6,117. We retain our Neutral stance on the stock as we believe that the near-term earnings are at risk and we prefer to wait for a significant pick-up in consumption.

Q2FY16 results: below expectations

GSK Consumer’s Q2FY16 results were below our forecasts at revenue and PAT levels. While revenue was 6.6% and 6.2% below our and consensus expectations, respectively, adjusted PAT was 7.5% and 12.9% below, despite higher-than-expected Ebitda margins of 21.1% due to a higher tax rate.

Key details:
* Revenues at Rs 11.26 bn increased 1.1% y-o-y, versus our estimates of R12.06 bn and consensus estimates of R12 bn.
* Ebitda totalled Rs 2.38 bn, an increase of 21.4% y-o-y.
* Gross margins expanded 394bps y-o-y to reach 66.8% for the quarter, in line with the softness in input prices.
* Despite the company increasing their A&P spend this quarter (96bps y-y), Ebitda margins were able to expand 390bps y-o-y due to a significant fall in other overheads.
* The company recognised an exceptional item of Rs 560.5m, which represented the write-back of a tax provision no longer required.
* As a result, adjusted PAT was disappointing at Rs 1.63 bn, compared to Nomura’s estimates of R1.77 bn and street expectations of Rs 1.87 bn.

Management commentary
* The company witnessed 5% growth in gross sales, primarily driven by price and mix.
* Single digit growth was witnessed in the base Horlicks brand, and double digit growth was observed in its variants.
* The company was able to gain market share in the North and West parts of the country. The company also mentioned that the growth rates in these parts of the country are higher than the rest of India.
* Volume growth: The company witnessed negative volume growth on a company level, primarily driven by de-growth in sales of their sachets as well as their international business (Nepal).
* Market share: The Health food drinks (HFD) category gained 1.2% share during the quarter, Horlicks gained 0.4% market share.
* Regarding consumer sentiment, the company mentioned that they are observing a slowdown in the rural
economy.
* The other expenses of the company have seen a decline of 10% y-o-y—the company attributes this to their cost initiatives and network optimisation. •
* Capex plans for the company remain at R10 bn over the next three years. However, given the current consumer sentiment, plans have been shifted to the later part of 2016. •
* As a part of its outlook, the company mentioned that consumer confidence is gradually on the rise. The company is looking to strengthen the category growth overall, due to which they have increased their A&P spends recently. As a percentage of sales, A&P now accounts for 17.3% as compared to 16.3% a year ago.

Cutting FY16F/FY17F earnings

After the company’s 2QFY16 results, we cut earnings for FY16F/FY17F by 4.1%/9.7% respectively on slower-than-expected recovery in urban consumption and a further slowdown in rural expansion. We now expect the company to achieve revenue growth of 10% over FY16F and expect this to increase to 14% in FY17F and 16% thereafter as consumption picks up.

On the Ebitda margins front, we expect them to expand ~150bps over FY15 due to favourable input prices and initiatives taken by the company on cost control and network optimisation. We expect margins to stabilise around the 19.5% levels in FY17F.

New TP at Rs 6,117— retain our Neutral stance

For FY16F, we estimate that ~30% of the company’s net income should be derived from ‘other income’. For other consumer companies in the sector this is a very small portion of their income and hence we are able to value them on a reported P/E basis after making adjustments for non-operating income or losses. For GSK Consumer since the number is nearly 30%, we do a SOTP. We believe this is essential as cash on the books should not be given the same multiple that we give to the operating assets of the business as it does not generate similar returns.

We roll forward our valuation and keep our valuation multiple unchanged at 35x, in line with movements of the multiples across the sector. Based on this, we arrive at our TP of Rs 6,117. We retain our Neutral stance for the following reasons:
* There has been a significant slowdown in the growth trajectory for the past five quarters. While the recent slowdown can be explained by the poor retail sentiment, the slowdown the company experienced in May last year was surprising given its strong and continued impetus on A&P and new product launches. This makes us slightly sceptical on the pace of recovery that the company will experience going into FY17F.
* Current valuations seem to be capturing the margin uptrend expected for the stock due to softness in commodity prices.

However, the long-term potential of the malted drinks category remains intact, and GSK’s ability to diversify into various sub-segments such as Mothers Horlicks, Women’s Horlicks etc. should help it achieve revenue growth in the future. Apart from this, another key growth driver over the next few years will be expansion in the north and west regions, currently the regions which are underpenetrated.

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Banking and Financial institutions: Fall in earnings led by weak revenue growth (22-11-2015)

Another quarter of muted performance: Q2FY16 performance was broadly no different from that of the previous few quarters. Earnings declined 3% y-o-y led by weak revenue growth and high provisions. Fresh impairments have declined but slippages are still high. SBI, HDFC Bank, IndusInd and Yes Bank reported another quarter of strong performance while Axis, BoB, BoI disappointed. As for NBFCs, NIM expansion supported earnings while loan growth was weak. Bajaj Finance, SKS, Chola and LIC HF reported strong performance while HDFC, MMFS, Magma and Muthoot were weak in Q2.

Trends unchanged; revenue growth sluggish due to weak NII performance: As in the past few quarters, earnings are still sluggish with Q2 reporting a decline of 3% y-o-y while we expected it to move to the positive zone. Revenues grew 11% y-o-y with NII (net interest income) growth struggling at 9% y-o-y and non-interest income growth at 16% y-o-y. NII growth for private banks was stronger at 17% y-o-y and weak for public  banks at 9% y-o-y, reflecting the weak trends in loan growth. Overall provisions increased 31% y-o-y but loan-loss provisions increased 41% y-o-y with a large share of provisions for impaired loans. SBI among public banks and HDFC Bank, IndusInd and Yes Bank among private banks reported strong results.

Loan growth recovery still not visible; revenue growth sees support from treasury: Loan growth (under coverage) is still weak at 10% y-o-y, the slowest in recent years as we are not seeing any recovery in demand from the corporate segment and alternate channels have opened up meaningfully. Divergence continued between public (6% y-o-y) and private (19% y-o-y) banks primarily due to the nature of the loan portfolio and private banks looking to rebuild growth in the corporate segment. We see loan growth—and consequently revenue growth—as the key challenge that is likely to continue in FY2016-17 as we see little evidence of corporate demand (~45% of loans) as banks have negligible sanction pipelines. Revenue growth and earnings growth should sustain/improve largely as the treasury book shows positive contribution.

Gr2

Fresh impairments slow, reflecting change in guidelines; stress levels remain high: Fresh impairments declined marginally to 3.7% from ~3.9% of loans in Q2 but slippages increased 30 bps q-o-q to 3.2% while fresh restructuring was at 0.5% of loans with the decline representing the closure of the restructuring window. Gross NPLs increased 7% q-o-q (10 bps of loans) to 4.3% (5.3% for public and 2.1% for private banks). Outstanding impaired loans declined after six consecutive quarters of increase by 33 bps q-o-q to 9% of loans. Weakness in trends on recovery/upgrade and high write-offs still indicate that the stress levels remain high in the system. Outstanding restructured loans declined 50 bps q-o-q to 4.8% of loans. Most banks have now started using the 5/25 window to change the cash flows of long-term projects, raising fresh concerns on these exposures.

Gr1

NBFCs: NIM supports earnings; business momentum weak: NIM expansion supported earnings of most NBFCs on the back of lower interest reversals and decline in borrowing costs. While lower interest reversal (on the back of lower slippages) is an encouraging trend, muted disbursements make it challenging to predict the timing and pace of recovery. Bajaj Finance, SKS, Chola and LIC HF reported strong performance while HDFC, MMFS, Magma and Muthoot were weak during Q2FY16. Decline in bank base rates will benefit most NBFCs in Q3 and will be the key earnings driver in the second half of 2016.

Outstanding impaired loans decline after six consecutive quarters of increase; recovery/upgradation stable but low: The broad trends on outstanding impairment ratios showed an improvement with a decline of 33 bps q-o-q to 9% of loans. This is the first quarter where we have seen a decline after FY2014. Gross NPLs increased 20 bps q-o-q to 4.3% while restructured loans declined 40 bps to 4.8% of loans.

Q2 also saw further improvement in the underlying fresh impairment ratios although the improvement was negligible on a sequential basis. Fresh impairments declined 20 bps q-o-q to 3.7% of loans but slippages were higher by 30 bps at 3.1% and fresh restructuring declined sharply to 0.5% of loans. The qualitative assessment of the slippages for the quarter continues to appear that a large share of slippages for banks is coming from the increasing rate of failures of previous restructured loans, especially from the iron and steel sector.

SBI, PNB, Canara Bank and OBC among public banks while HDFC Bank, IndusInd Bank and Yes Bank among private banks reported better performance on fresh impairment ratios. Axis Bank, BoB and BoI had a disappointing quarter.

Overall gross NPLs increased 7% q-o-q at 4.3% of loans (30 bps increase to 5.3% of loans for public banks and flat q-o-q to 2.1% of loans for private banks). Large private banks have now started indicating that the stress levels in the balance sheet is gradually easing and believe that FY2014-15 was probably the weakest period from an impairment perspective. However, public sector banks continue to be impacted by the restructured portfolio where they are currently witnessing a higher share of slippages. A few banks continued to resort to sale of loans, both standard, NPL and written-off loans to ARCs at a steep discount.

Recovery/upgradation was broadly similar to the previous quarter at 1% while the write-offs were flat q-o-q at ~1.1% of loans. Typically the second half of the year is stronger on recovery and upgrades. It could be seasonal and probably not cyclical and we would need to see the trends to establish the trend on impairment ratios.

Managements, especially for public banks, continue to highlight that a disproportionate bandwidth is towards impairment management but the efforts can pay off only when there is recovery in the economy, which at this stage appears to be promising. The earliest sign that we would need to read to gain confidence on the impairment cycle would be the reduction in slippages, which at this stage is not visible although one would argue that it has probably stabilised. We should, after a few quarters, notice stronger trends on recovery/upgrades.

Provision coverage showed some improvement, albeit nothing substantial, especially among public banks. SBI reported one of the best improvements in provision coverage ratios while ICICI Bank reported a sharp decline q-o-q.
Restructured loans show a decline of 50 bps q-o-q; net NPL and restructured loans decline 40 bps at ~7% of loans: The overall restructured loans declined by 50 bps q-o-q at 5% of loans. Public banks reported a decline of 50 bps q-o-q to 6% of loans while the share of restructured loans for private banks increased by ~40 bps to 1.9% of loans.

The decline on a sequential basis was broadly on expected lines given that the window for fresh restructuring has come to a close. Loans restructured in the SEB segment were stable q-o-q at 46% from 50% in the past few quarters.

There would be no further fresh disbursements from FY2016 to SEBs as a part of the financial restructuring package.

This is expected to decline with the implementation of the recently announced package on discom reform.

Overall stress (net NPL and restructured loans) stands at 3.0% of loans (20 bps q-o-q decline) for private banks and 8.8% of loans (40 bps decline q-o-q) for public banks. We do note that there are high slippages into NPL from the restructured loan portfolio as the restructuring package implemented in these corporate portfolios has not been successful.

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Overweight rating on Tata Motors: Tata Motors posts loss of Rs 4.1 bn (22-11-2015)

Tata Motors reported a second quarter loss of -Rs 4.1 bn; adjusting for a one-off loss, adjusted Q2 PAT has come in at 18.5 bn (-44% y-o-y). Margins at JLR came in lower at 12.2% (-420bp q-o-q) on launch costs, unfavourable product mix as well as an unfavourable FX charge of 80m euros (~160bps). The India business though is well on course for recovery as the Ebitda margin is at 6.7% (+210bp q-o-q).

Our View: We are OW on Tata Motors as the OEM has an aggressive product launch portfolio—both in India and at JLR. Over FY16-17e, we expect Jaguar’s new models i.e. XE, F Pace to drive sales. Further, an improving local economy and new passenger car launches should drive growth in India.

* Conference call takeaways: JLR Outlook—Over H2, the OEM is expected to benefit from healthy growth in Western markets (particularly the US and Europe) as well as from the ramp-up in production of its new models—the XE is being rolled out in the US and China, and Discovery Sport production has commenced in the China JV. October retail has been healthy at +24% y-o-y, which is reflective of product momentum.

JLR has had a robust month in the US, with retail +76% y-o-y at over 8,000 units. While Ebitda margins were impacted over Q2 due to multiple factors, we expect profitability to improve from hereon as production ramps up. The exceptional charge of £245m relates to expenses of the Tianjin explosion.

* India Business: An improving economic outlook and higher utilisation levels are benefiting the local segment as margins have risen to 6.7% in second quarter (+210bp q-o-q). The OEM (original equipment manufacturer) will continue to launch new products to drive sales—it recently appointed Lionel Messi as its brand ambassador for the passenger car segment as it will launch new products over FY16-17. Tata will get more aggressive in the India passenger car segment.

* Price Target: We are revising our Mar-16 based sum-of-the-parts PT to Rs 470 to factor in lower margins at JLR, which is being partially offset by the improving outlook in India.

Key Risks: Increase in discounting trends by luxury OEMs, weak response to new product launches.

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Buy rating on Coal India: CIL revenues up by 4% at Rs 170 bn (22-11-2015)

Higher realisations and OBR reversal drive Ebitda outperformance: Coal India’s Q2 revenues of Rs 170 bn (up 8% y-o-y) were 4% higher than our expectations on account of: (i) higher FSA and e-auction realisations; and (ii) higher e-auction volumes. This coupled with a reversal of the overburden removal provision of Rs 4.3 bn (as the actual strip ratio in Q2FY16 was at 2.2x, higher than the average of 1.8x for existing mines) resulted in Ebitda of Rs 28 bn (up 28% y-o-y), which was significantly higher than our estimate of Rs 13.5 bn. We highlight that Q2FY16 e-auction realisations were at Rs 1,788/t (8% above our estimate of Rs 1,650/t). We cut our FY16/17/18 EPS (earnings per share) estimates by 3%/7%/2% each, as we cut our e-auction realisation estimates by 5-7%; we also cut our e-auction volume estimate for FY17, as we factor in delay in auction on non-power linkages, which would be partially offset by 25% of incremental volumes being auctioned under non-power linkages. We cut our DCF-based (discounted cash flow) TP (target price) by 3% from Rs 425/share to Rs 410/share (22% upside). At CMP, the stock is trading at an FY17e P/E (price to earning ratio) of 13.2x vs the historical average of 12.7x.

Results overview: Coal India reported Q2 revenues of Rs 169.5 bn, up 8.2% YoY, as volume growth of 10.3% was partially offset by decline in blended realisation by 2%. Revenues were 4.4% above our estimate. Revenue outperformance coupled with reversal of the overburden removal provision of Rs 4.3 bn resulted in Ebitda of Rs 28 bn (up 28% y-o-y), which was significantly higher than our estimate of Rs 13.5 bn. Adjusted PAT was at Rs 25 bn, up 16% q-o-q and 36% above our estimate of Rs 18.7 bn, as the Ebitda outperformance was partially offset by lower-than-expected other income and provision of Rs 3.2 bn.

*  Higher FSA and e-auction realisations: FSA realisations were at Rs 1,294/t (up 3% y-o-y) and were 3% above our estimates. E-auction realisations were at Rs 1,788/t but 8% above our estimate of Rs 1,650/t.
* Higher e-auction sales: Overall offtake volume growth of 10.3% y-o-y was the highest in the last 17 quarters. E-auction volumes at 14.7mt were higher than our estimate of 13mt.
* Blended realisations: Higher FSA as well as e-auction realisations coupled with higher e-auction sales resulted in average blended realisation of Rs 1,392/t.
* Revenues: We highlight that the 28% y-o-y decline in e-auction realisations was largely offset by the 38% y-o-y increase in e-auction volumes, resulting in flattish e-auction revenues on a y-o-y basis.
* OBR reversal results in lower-than-expected costs: In Q2, four of CIL’s subsidiaries (ECL, BCCL, NCL and CCL) made an OBR (Over Burden Removal) provision reversal of Rs 4.3 bn. This was largely offset by OBR provision of Rs 4.7 bn made by the other three subsidiaries (MCL, SECL and WCL), resulting in a net OBR provision of Rs 0.4 bn vs our estimate of Rs 6 bn and Q2FY15 provision of Rs 5.5 bn. The management highlighted that the strip ratio in Q2 was at 2.2x vs 1.6x in Q2FY15 and the required average of 1.8x for existing mines, and hence a reversal had to be made. This is reflected by the fact that OBR growth for first half of fiscal 2016 was 37% vs production growth of 8%, and contractual expenses on a per tonne basis grew 25% y-o-y. The management highlighted that since production in second half of this fiscal is higher, the machinery is likely to be diverted towards higher production growth and hence, OBR growth in second half could be lower than first half.
* Ebitda up 28% y-o-y: Higher realisations coupled with OBR provision reversal resulted in Ebitda of R28 bn (up 27% y-o-y), significantly above our estimate of Rs 13.5 bn, and PAT of Rs 25 bn, up 16% q-o-q and 36% above our estimate of Rs 18.7 bn.

Gr

Where do we go from here? We factor in delay in non-power linkages: And now we factor them in as and when they expire. We also factor in 25% of incremental volumes to be sold under non-power linkages incrementally over FY17-20e. A combination of these results in a cut to our FY17 e-auction volumes estimates from 110mt in FY17 to 90mt now and increase in our FY18 e-auction estimates from 111mt to 124mt. We also cut our FY15-17 e-auction realisation estimates by 5-7% each over FY16-18e. As a result, we cut our blended realisation estimate for FY17 by 2%.

We remain positive on CIL’s volume growth trajectory, which is likely to drive stronger earnings growth. Key catalysts for the stock are: (i) sustained volume CAGR of ~9-10% over FY15-20e; (ii) better visibility over the next one year on partial completion of the three key railway lines is likely in the next two-three years; and (iii) progress towards auction of non-power linkages over the next six months.

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FPIs take out $1 bn from capital markets in November (22-11-2015)

fpis

Since the beginning of the year, overseas investors have made a net investment of Rs 21,984 crore in equities and Rs 52,531 crore in debt market. (Reuters)

Overseas investors have pulled out more than USD 1 billion from the Indian capital markets since the beginning of the month due to lacklustre quarterly earnings and concerns over a possible rate hike by the US Federal Reserve.

The sell-off came after Foreign Portfolio Investor (FPI) inflow in the capital markets (equity and debt) had hit a seven-month high in October.

As per the data compiled by the depositories, net outflow in equities stood at Rs 5,713 crore between November 2-19, while it was Rs 2,565 crore from debt, translating into a total of Rs 8,278 crore (USD 1.26 billion).

Earlier, FPIs had made a net investment of Rs 22,350 crore last month, making it the highest investment by investors since March, when they had poured in Rs 20,723 crore into the Indian market.

The huge inflows during October also reversed the outflows seen during the last two months. FPIs pulled out over Rs 23,000 crore from the capital markets in the last two months (August-September) on fears of an economic slowdown in China, which triggered a global sell-off.

The minutes of latest US Fed meeting showed that it’s ready for a December lift-off provided subsequent actions are strongly tied to consistent improvements in the economy, which prompted investors to withdraw money.

Investor mood remained fragile because of disappointing quarterly earnings by blue-chips.

“Lingering concerns about earnings and the worsening global risk environment have prompted FPIs to pull-out from the Indian markets,” said Vijay Singhania, Founder-Director, TradeSmart Online, a leading discount brokerage firm.

Further, macroeconomic data also impacted investor sentiment. Industrial production slackened to a four-month low of 3.6 per cent in September, while retail inflation inched up to 5 per cent in October, as per the latest data.

Since the beginning of the year, overseas investors have made a net investment of Rs 21,984 crore in equities and Rs 52,531 crore in debt market.

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Mutual funds invest Rs 2 lakh cr in debt market (22-11-2015)

mutual fund

Mutual funds are investment vehicles that pool funds collected from investors to park in securities such as stocks, bonds, money market instruments and other assets. (Thinkstock)

Mutual fund managers remain bullish on the debt markets and have pumped in more than Rs 2 trillion (Rs 2 lakh crore) in them during the ongoing fiscal so far.

This is on top of Rs 5.87 lakh crore already invested by them in the entire last fiscal, 2014-15.

According to the latest Sebi data, fund managers have invested a net Rs 2.06 lakh crore in the debt markets during the current fiscal, started April 1, till November 19.

In contrast, Foreign Portfolio Investors (FPIs) have made net investments of Rs 52,531 crore during the period.

Apart from debt markets, MFs have invested a little over Rs 55,000 crore in equity markets during the period under review.

The latest inflow has helped the mutual fund industry to hit all time high of Rs 13.24 lakh crore mark in assets under management (AUM).

Market experts said that 50-basis point repo rate cut by the Reserve Bank of India (RBI) recently has led to the lowering of bank deposit rates. The move has helped investors to park funds in the debt markets.

When RBI lowers its lending rate, bond prices rise as bank deposit rates become less attractive than the interest rates on bonds.

Unlike bank deposits, debt funds allow investors to gain from falling interest rates as bonds prices have an inverse relationship with interest rates.

Mutual funds are investment vehicles that pool funds collected from investors to park in securities such as stocks, bonds, money market instruments and other assets.

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Market Outlook: Stocks may swing sideways, winter session holds the clue (22-11-2015)

oberoi realty

For the week ended November 20, the Sensex added 257.96 points, or 1 per cent, and the NSE Nifty 94.30 points, or 1.21 per cent — their best weekly show since October 9. (Reuters)

Markets are likely to remain volatile amid derivatives expiry as parliamentary proceedings will largely dictate trend in the holiday-shortened week ahead, experts say.

Inflows by foreign institutional investors and global cues will be other deciding factors.

The winter session of Parliament starts on November 26.

The markets will be closed on November 25 on occasion of Guru Nanak Jayanti.

“Going ahead, all attention will be on the winter session of Parliament and whether the government is able to reconcile differences with the Opposition and pass key legislations,” said Dipen Shah, Kotak Securities Head of Private Client Group Research.

“A rate hike in the US looks imminent in the next policy meeting of the Fed, but that is largely discounted by markets.”

The winter session beginning next week is set to be a stormy affair, with the Opposition buoyed by the Bihar results getting ready to confront the government on a host of issues, which could push back efforts for an early passage of key legislations, including GST.

According to experts, being a truncated trading week with absence of any domestic data point, the market is likely to largely follow its global peers.

“We expect the markets to trade in the negative zone in the coming week. We have advised clients to go short on every bounce till it holds below 7,930,” said Vijay Singhania, founder-Director, Trade Smart Online, a leading discount brokerage firm.

Traders slated to roll over positions in the futures and options (F&O) segment could contribute to volatility.

“With November 2015 derivative series expiry coming up next week, we expect the markets to remain volatile as traders roll over positions to December 2015 series,” Singhania added.

Ravi Shenoy, AVP-Midcaps Research, Motilal Oswal Securities said: “Institutional flows have been balanced with DIIs’ buying balancing out selling by FPIs. Overall, we expect a range-bound market with stock-specific action unless there is positive action in Parliament.”

For the week ended November 20, the Sensex added 257.96 points, or 1 per cent, and the NSE Nifty 94.30 points, or 1.21 per cent — their best weekly show since October 9.

The 30-share benchmark closed at 25,868.49, up 26.57 points, while the broad-based Nifty settled higher by 13.80 points at 7,856.55 on Friday.

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Market cap a mixed scene, six blue-chips gain Rs 31,967 cr (22-11-2015)

BSE Sensex, NSE Nifty, MMTC

For the week gone by, the Sensex added 257.96 points, or 1 per cent, to close at 25,868.49 points, its best weekly show since October 9.(Express Photo)

The market valuation of the top 10 Sensex companies saw a mixed trend last week, with six of them adding as much as Rs 31,967.21 crore and the remaining losing Rs 16,963.72 crore.

The loss capped the total gains of the top 10 firms, which read a modest Rs 14,313.85 crore.

ITC’s rose the most during the week, with its market valuation jumping Rs 12,003.12 crore to Rs 2,76,513.42 crore.

In the case of RIL, the rise in m-cap was Rs 5,101.52 crore at Rs 3,06,398.75 crore while HDFC Bank gained Rs 4,486.88 crore to Rs 2,69,439.91 crore.

Among others, ONGC’s valuation gained Rs 4,149.42 crore to Rs 1,99,899.03 crore while that of HDFC rose Rs 4,052.68 crore to Rs 1,89,982.10 crore.

SBI added Rs 2,173.58 crore to its market valuation at Rs 1,88,635.48 crore.

The biggest loser during the week was Infosys, which saw an erosion of Rs 10,922.70 crore to Rs 2,41,845.30 crore.

The IT major was followed by Sun Pharma, which lost its valuation by Rs 3,669.81 crore to Rs 1,74,827.60 crore and Coal India which declined by Rs 2,716.03 crore to settle at Rs 2,10,556.01 crore for the week.

The IT leader TCS, which was at the top of the chart in terms of market valuation of Sensex companies, shed Rs 344.82 crore at Rs 4,72,025.87 crore.

The total market valuation of these 10 firms came in at Rs 25,30,123.47 crore.

For the week gone by, the Sensex added 257.96 points, or 1 per cent, to close at 25,868.49 points, its best weekly show since October 9.

Going by the pecking order, TCS remains on the top, followed by RIL, ITC, HDFC Bank, Infosys, Coal India, ONGC, HDFC, SBI and Sun Pharma.

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Weekly Review: Sensex, Nifty gain over 1 per cent on value buying, global cues (21-11-2015)

BSE

During the week, Indian rupee appreciated marginally 0.07 per cent to 66.09 on November 20. The currency was at 66.13 on November 13. (PTI)

After three consecutive weeks of downfall and a loss of nearly 7 per cent in this period, the domestic benchmark indices witnessed some buying at lower levels that helped BSE Sensex and NSE Nifty clock a gain of over 1 per cent during the week ended November 20. According to market experts, value buying at lower levels and upbeat global cues supported the market sentiment this week.

The BSE Sensex and NSE Nifty advanced 257.96 points and 94.30 points to 25,868.49 and 7,856.55, respectively, for the week ended November 20.

In the 50-share index, GAIL (India) surged 23.55 per cent in the week under review. The share price of the company jumped from Rs 282 on November 13 to Rs 348.40 on November 20. Vedanta (up 6.65 per cent), Ambuja Cements (up 5.06 per cent), Zee Entertainment (up 4.94 per cent) and Mahindra & Mahindra (up 4.88 per cent) remained among other major gainers in the index.

On the other hand, Axis Bank slid the most 5.10 per cent, followed by Infosys (down 4.52 per cent), Tata Power (down 2.34 per cent), Sun Pharma (down 1.96 per cent) and Hero MotoCorp (down 1.94 per cent) stood amond major losers.

Hitesh Agarwal, head research, Reliance Securities, said, “Having digested the Bihar state election outcome, the slowdown in September IIP and the uptick in CPI Inflation for October in recent weeks, investors opted to do some bottom-fishing at lower levels. Moreover, the strength witnessed in the Indian stock market was in tandem with the buying witnessed in equities across global markets.”

Gaurav Jain, director, Hem Securities, said, “Indian indices registered gains of about 1 per cent in the week gone by aided by hopes of some amendments on GST Bill, positive global cues, rise in crude prices, short covering, and lower level buying. However, continued selling pressure by foreign portfolio investors, Intensifying geopolitical worries in Europe and FOMC minutes indicating a rate hike by next month capped the gains.”

Sectorwise, the BSE Oil & Gas index and BSE FMCG index advanced 4.28 per cent and 2.81 per cent. The BSE Realty index and the BSE IT index slid 1.46 per cent and 1.11 per cent during the week under review.

In the week, government doled out relief to sugar cane farmers by providing them subsidy at the rate Rs 450 per tonne, interest rate subsidy scheme for exporters for five years to counter falling exports and clearing on the war footing stalled road projects worth Rs 35,000 crore. IPO of Cochin Shipyard and FPO for Coal India were also cleared.

Foreign institutional investors, or FIIs remained in the selling mode and sold stocks worth Rs 3,207 crore during the week.

Jimeet Modi, chief executive officer, SAMCO Securities, said, “Confidence is returning, markets are rising gradully on the back of continued pessimism. Government also seems to move ahead with its growth agenda, which will be positive for the market going forward.”

The government this week also offered a gift to 4.2 million central government employees and 5.2 million retirees in the form of 7th pay commission hikes up to 23 per cent, entailing Rs 73,000 crore outflow on the exchequer.

Kotak Institutional Equities in a research note said, “We expect automobiles (4W, in particular), consumer durables and real estate sectors to benefit from the largesse. Although current demand conditions are somewhat subdued in the sectors, the additional funds in the hands of central and state government employees should be a positive for volume growth of the two sectors.”

During the week, Indian rupee appreciated marginally 0.07 per cent to 66.09 on November 20. The currency was at 66.13 on November 13.

For upcoming trading sessions, Agarwal said, “In the absence of any domestic economic data point, the market is likely to largely follow its global peers. However, the November series F&O expiry coupled with the fact that it is a 4-day trading week, could induce some volatility in the market.”

With the Winter Session of the Parliament set to begin on November 26, investors will also keenly watch the fate of important bills like the Goods and Services Tax(GST).

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