Money funds in India and Brazil offer investors the highest nominal yields, according to a report.

The assets of money market funds (MMFs) in Brazil and India have increased significantly compared with the decline seen in Canada and Taiwan and stable asset bases of funds in South Africa and Mexico, Fitch Ratings has said.

“Money funds in Brazil and India offer investors the highest nominal yields when compared with other jurisdictions.

Nominal yields in Taiwan and Canada are near zero, more in line with the typical yield of US money funds. In Europe, even nominal yields on money funds are currently negative,” Fitch said in a report.

Assets under management (AUM) of money funds in China have surged eight fold over the past five years, pushing it past Korea to become the third-largest MMF market.

AUM of money funds in Brazil has almost tripled in the last five years and that of India has more than doubled.

In contrast, AUM in US money funds have shrunk by around 18 per cent since 2009 while Europe money funds have contracted about 3 per cent over the same time period.

The report further said money funds are less utilised in terms of broad money supply in these “second tier” jurisdictions unlike in the US where Fitch estimates that money funds account for over 20 per cent of broad money supply (M2).

Money funds represent less than 5 per cent of broad money supply in India, Canada, Korea and Taiwan.

The lower penetration rate of money funds could suggest potential for growth, it added.

AUM in money funds globally have shrunk 10 per cent over the last five years to approximately USD 4.5 trillion as of end-2014 (excluding Australia).

Korea, Mexico, Brazil, India, Taiwan, Canada and South Africa are ‘second tier’ money fund markets -large in their own right, but too small compared with the US, Europe and, increasingly China, which together account for 93 per cent of the global market.

The impact of a US Fed rate hike will not topple the boat for majority of top corporate borrowers as only around 37 per cent of overall foreign currency debt belongs to corporates with negative sensitivity. (Reuters)

The incremental impact of currency shocks in case of a US Fed rate hike tomorrow will be limited, though the average credit profile of top domestic corporates remains the worst in a decade, says a report.

“While the aggregate credit profile of the top 500 borrowers continues to hover around the worst in a decade, the incremental impact of a currency shock will be limited,” India Ratings said in a report today.

The agency also said that the impact of a rate hike will not topple the boat for majority of top corporate borrowers as only around 37 per cent of overall foreign currency debt belongs to corporates with negative sensitivity and these companies may be more adversely affected in case of the rupee depreciation.

“Among the top 500 corporates by the size of their balance sheet debt, only 13 have a worrisome combination of high leverage and high negative sensitivity,” the report said.

It said the gap between forex outflows and inflows has narrowed since FY13, which has relatively reduced aggregate vulnerability of corporates to forex shocks.

The report further said if the US Fed increases the near-zero repo rate it has been following since the 2008 global credit crisis that began in the US, the resultant spillover effect on emerging market currencies including India could see the rupee fall by 5-10 per cent.

The report, however, said it is not a forecast of the rupee level in case of a spillover effect but these are the levels used for analysis.

Corporates with negative sensitivity, which is the percentage change in absolute EBITDA for 1 per cent rupee fall, declined marginally, while corporates with positive sensitivity improved marginally between FY12 and FY14.

It said 1 per cent rupee fall on a sustained basis, improves the absolute EBITDA (median) of IT companies by 1.8-2 per cent, and pharma by 1.6-1.8 per cent.

However, the efficiency of earning forex in the IT sector has been decreasing since FY12, while for pharma companies it has been decreasing since FY13. “These trends are likely to continue in FY16,” the report said.

However, textile exporters and exporters from the auto ancillaries and chemicals have limited benefit of rupee depreciation due to their cost structure.

The median interest coverage ratio of the 500 largest borrowers was the weakest in 10 years in FY14. In FY15, this had hit a new low of 1.49x, though the rate of deterioration over FY14 was limited.

Sun Pharmaceutical Industries shares jumped over 2 per cent on Wednesday after the company informed stock exchanges that it has entered into an agreement with InSite Vision. (PTI)

Sun Pharmaceutical Industries shares jumped over 2 per cent on Wednesday after the company informed stock exchanges that it has entered into an agreement with InSite Vision to acquire the US-based eyecare firm for around $48 million plus related debt and other transaction costs to strengthen its branded ophthalmic portfolio in the US.

At 12.19 pm, the scrip was 2.23 per cent higher at Rs 886. It opened at Rs 879.70 and had touched a high and low of Rs 889.95 and 876.30, respectively, in trade so far. Sensex was up 1 per cent at 25,962.

One of the company’s subsidiaries has offered to acquire InSite Vision, Sun Pharmaceutical Industries said in a statement.

InSite Vision focuses on developing new specialty ophthalmic products, including three late stage programs. InSite Vision also has two commercialised products based on its innovative DuraSite platform approved for the treatment of bacterial eye infections, AzaSite (azithromycin ophthalmic solution) 1 per cent, and Besivance (besifloxacin ophthalmic suspension) 0.6 per cent, marketed by respective partners.

According to IndiaNivesh Securities, though the current financial performance of the acquired company is muted, Sun Pharma has been able to get access to good NDA pipeline from this acquisition.

Traders also cite optimism tied to launch of Keveyis drug in the US market by unit Taro Pharmaceutical.

For the quarter ended June 2015, the company posted net profit of Rs 478.96 crore, down 60.24 per cent against Rs 1,204.59 crore in the corresponding quarter a year ago.

PFRDA head Hemant Contractor said he is pushing for state pension funds to be allowed to invest up to half of their funds in stocks, up from the current 15 per cent.

The government is considering allowing state retirement funds to invest more in equities and opening them up to private-sector management to improve returns, as Prime Minister Narendra Modi seeks to expand the country’s tiny pensions net.

Hemant Contractor, head of the Pension Fund Regulatory and Development Authority (PFRDA), told Reuters he was pushing for state pension funds to be allowed to invest up to half of their funds in stocks, up from the current 15 per cent.

“We have taken it up very strongly with the government,” Contractor said in an interview. “The moment the government accepts it, we will increase to 50 percent.”

The pension plans handle mostly state employees’ funds.

Finance Minister Arun Jaitley, who wants pension and insurance funds to invest more in equities and infrastructure, could make a decision soon, a ministry official said.

The pension savings of about $15 billion overseen by Contractor’s agency are about just 1 per cent of the Bombay Stock Exchange’s $1.5 trillion market value. But asset managers expect them to grow four-fold over five years, mainly driven by higher deposits following tax exemptions this year.

Jaitley introduced a tax break this year on annual pension contributions of up to Rs 50,000 ($750), a step that could boost enrollments by 40-45 per cent in this fiscal year, Contractor said.

Modi has also urged the $100 billion state-run Employees’ Provident Fund Organisation (EPFO) to start buying stocks to lift its returns.

“There is a broad agreement that state employees should have an option on a par with private workers to invest in equity markets,” said a finance ministry official, who is involved in the policy process and spoke on condition of anonymity.

But most of India’s workforce is employed in the cash economy and has no formal retirement cover at all. Only about 12 per cent of those in work actually have a pension plan.

Funds overseen by the PFRDA have returned more than 10 per cent a year since it was set up in 2004. That beats the 8.5 per cent earned by the EPFO, which invests mainly in government bonds, but barely beat inflation over the same period.

Private players see an opportunity in the pension savings of the 60 million state employees who contribute $13 billion of the $15 billion in assets overseen by the PFRDA.

The PFRDA plans to invite bids to manage more pension funds in the next two to three months. Awards would be based on the most competitive fees bid by asset managers.

“We are very positive,” said S. Bandyopadhyay, CEO of LIC Pension Fund, which manages $4.4 billion. He forecast that PFRDA-regulated assets could grow by three or four times to $60 billion over the next four years.

Still fund managers say there is long way to go as low awareness of pension products, adverse tax rules and a lack of confidence in the stock market deter many potential investors.

BSE Auto index declined 4.4 per cent to 17,710.18 in the past two months. (Reuters)

Automobile sales in August witnessed mixed trends with car manufacturers registering modest growth of 6.06 per cent, while bike manufacturers posted a decline of 9.6 per cent, according to data from the Society of Indian Automobile Manufacturers released last week.

Medium and heavy commercial vehicles (MHCV) which account for around 40 per cent of the total commercial vehicle sales posted growth of 35 per cent yoy during the period while light commercial performance remain subdued resulting in total commercial vehicle sales growth of 7.6 per cent yoy.

The industry is expecting sales to pick up in near future. Emkay Global Financial Services in a research note said, “August 2015 volume performance was marginally impacted by a slightly delayed festive season this year, which would lead to inventory build-up only beginning September. All segments reported growth in-line with their recent performances. The brokerage house expects around 20 per cent growth in MHCV industry, an 8-10 per cent growth in PV sales and a 3-4 per cent growth in 2-wheeler industry growth (with a downward bias) in 2015-16.”

Two-wheelers sales declined by 3 per cent year-on-year(yoy) in the month of August owing to poor monsoon, delay in festive season and dampened rural sentiment. Amongst the two-wheelers, scooters sales grew by 16 per cent yoy while motorcycle sales declined by close to 10 per cent yoy.

In the past two months, BSE Auto index declined 4.4 per cent to 17,710.18 on September 14. During the period, share price of Hero MotoCorp and Bajaj Auto declined 11 per cent and 7.5 per cent to Rs 2,348.60 and Rs 2,310.50 respectively. Market experts believe two-wheelers and tractors sales are likely to remain under pressure owing to deficient rainfall (monsoon so far has been 16 per cent below normal) and only a moderate rise in minimum support price (MSPs).

According to Angel Broking, “Rural focused segments are likely to remain under pressure on the back of poor rainfall and only a moderate rise in MSPs. The tractor industry is likely to decline marginally while the two-wheeler industry is anticipated to grow only in low single digits in the ongoing financial year 2015-16.”

Share price of Ashok Leyland and Maruti Suzuki jumped 20.90 per cent and 6.7 per cent to Rs 89.55 and Rs 4,320.15, respectively, on September 14 from Rs 74.05 and Rs 4,048.70 on July 14. However, Tata Motors, Eicher Motors and Mahindra & Mahindra declined 10.1 per cent, 9.4 per cent and 7.6 per cent, respectively, during the same period.

Below are a six auto stocks that brokerage houses believe will be a good bet for investors in long-term.

Tata Motors
Recommended By: Sharekhan
Why Buy: The stock price of Tata Motors has witnessed a sharp 40 per cent correction from the peak over the past six months. The fall has been primarily on account of the negative cues coming from China, which is a key market for Tata Motor’s luxury car division, ie Jaguar Land Rover (JLR). China has been the driver of growth for JLR with an impressive 47 per cent volume CAGR over the last five years and 25 per cent volume contribution in 2014-15. According to Sharekhan, the company’s domestic operations have been severely affected over the past couple of years due to a sharp slowdown in the commercial vehicle (CV) industry. The problems have been compounded by the continued poor performance of the passenger vehicle (PV) division (market share has fallen from 14.2 per cent in 2011-12 to mid-single digit in 2014-15). However, the medium and heavy commercial vehicle (MHCV) industry has witnessed a recovery over the past year and the same is expected to continue, while the light commercial vehicle (LCV) segment, wherein Tata Motors is a large player, is also expected to bottom-out over the next six months. Additionally, new launches and brand promotion would drive revival for the PV segment. The brokerage house believes the stock has a potential to generate returns of 45-50 per cent from the current levels over the next 12-18 months. The weakness in the stock is an excellent opportunity for investors to enter in the stock with a long-term perspective.

Maruti Suzuki
Recommended By: LKP Securities
Why Buy: On a year-to-date basis, the share price of the company jumped 29 per cent to Rs 4320 on September 14. According to LKP Securities, the company has maintained their promise of launching at least one model every year. After the Celerio launch last year, the company launched Ciaz and has now launched the SUV S-Cross which is getting a good response with strong order book. Going forward, the company is coming with an LCV and a hatchback in the ensuing quarters/year. The brokerage house is expecting strong festive season on the back of improving demand for cars and the low base in line with the spreading out of festive season this year. With improving macros such as reducing fuel costs, expectations of a rate cut in the upcoming RBI policy meet, wide product portfolio, attractive pricing, a made for India psyche associated with the company and a deeply entrenched distribution network, Maruti Suzuki is better placed than its peers although they come out with new launches. Lower discounting, better product mix and currency benefits will continue to assist margin improvement. Furthermore, recent news that Gujarat plant commissioning will lead to increased production of high margin products such as Swift and Dzire will be leading to further scope for healthy earnings growth. After the current fall in the stock, Maruti shares look attractively priced as far as valuations are concerned. LKP has ‘BUY’ rating on the stock with a target price of Rs 4,891.

Bajaj Auto
Recommended By: Finquest Securities
Why Buy: The recent rupee depreciation against the dollar should benefit Bajaj Auto in a big way as 47 per cent of sales come from exports. The company has a slew of launches lined up in the next six months and most of these products are in segments (cruisers and sports category) which are less affected by sluggish rural markets. The recent hit from Bajaj Auto, the RS200 could provide a decent upside to the bottomline once the capacity constraints in the Chakan plant ease. Finquest believes the recovery of the motorcycle market is still sometime away and now its more of a play of market share gains that Bajaj Auto has to look for, and looking at the product pipeline the brokerage house expects it to outperform its peers. Earnings are expected to grow at a CAGR of 22 per cent in the next 2 years while currently it trading at 15x FY17E earnings. The company could easily trade at 18x FY17E EPS and factoring in the investment in KTM. The share price of the company can touch Rs 2,717. On September 14, the scrip was at Rs 2,310.

Mahindra & Mahindra
Recommended By: Sharekhan
Why Buy: The deficient monsoon rainfall has cast a shadow on the recovery in tractor demand for 2015-16 (FY2016) as sentiment is expected to remain subdued. Mahindra & Mahindra (M&M), the market leader in the tractor segment is bound to bear the brunt of the same. The lack of products in the popular compact utility vehicle (UV) segment has been a gap in M&M’s UV portfolio. The launch of TUV3OO is the company’s much awaited entry into the compact UV space. The vehicle is priced competitively as compared with competition and two jump seats at the back give the vehicle a flexibility of seating seven passengers. M&M will be launching another vehicle in the segment (code name S101) which will have monocoque chassis and will have a more urban styling. The launches are expected to revive M&M’s flagging market share in the UV space. Considering the below-par monsoon for a second year in a row, Sharekhan believes the weakness in the tractor segment to persist in FY2016. Although a sharp decline in October-March period is not expected given the low base of last year, a meaningful recovery in the segment would be delayed to FY2016. Hence, the brokerage house has cut its tractor segment growth estimates for FY2016. Consequently, earnings estimates for FY2016 and FY2017 have been lowered by 6 per cent and 3 per cent, respectively. However, given the expectation of a pick-up in the UV volumes (on the back of new launches) and a recovery in the tractor industry in FY2017, Sharekhan has maintained ‘Buy’ recommendation on the stock with a revised price target price of Rs 1,450 (vs Rs1,550 earlier). On September 15, the share price of Mahindra & Mahindra was at Rs 1,151.55.

Eicher Motors
Recommended By: Religare Securities
Why Buy: The company’s 2W segment (Royal Enfield) maintained strong growth momentum reporting sales of 42,360 units in August (59 per cent yoy growth), driven by production ramp up at the new Chennai plant. Royal Enfield continues to witness strong demand traction with the current waiting period at 4-6 months despite steep increase in production. Eicher Motors’ CV sales grew in healthy double digits (20% yoy) to 3,711 units mainly due to low base of the corresponding previous year period. On a year-to-date basis, the share price of Eicher Motors gained 23.45 per cent to Rs 18,813.10 on September 14. According to Religare Securities, Eicher Motors can touch Rs 22,500 in the next 12 months. The company continues to dominate the premium motorcycle market with its iconic Royal Enfield brand. CV volumes too are expected to post a healthy 19 per cent CAGR as benefits from a cyclical demand recovery and premium launches kick in. Valuations are appealing and the recent correction offers a good entry point for investors.

Atul Auto
Recommended By: IndiaNivesh Securities
Why Buy: Atul Auto is the only pure play 3‐W manufacturer in India. With around 17.9 per cent share in the goods carrier segment and 5 per cent share in the passenger carrier segment, the key brands of the company are Shakti, Smart, Gem and Gemini. Despite challenging macro environment the company has performed well in last couple of years (25 per cent CAGR growth in revenue and 21 per cent CAGR growth in volume from 2010-11 to 2014-15). Volume have been improving on the back of added dealerships and increasing geographic presence (especially in semi rural and rural area) along with market share gains in existing markets. IndiaNivesh believes with further capacity addition and new petrol product launch, Atul can efficiently tap export markets along with urban markets in India and, thereby, continue the strong growth momentum. The entry into petrol segment, increasing capacity and overseas footprint could lead to faster growth in market share in the coming years. The brokerage house expects the share price of the company can touch Rs 471 in coming months.

On September 14, it was at Rs 417.30.

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