Nifty, Sensex Uptrend Still on – Weekly closing report-The Total Investment & Insurance Solutions

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22 February 2019

I had mentioned in last week’s closing report that Nifty, Sensex might try to rally. The major indices of the Indian stock markets rallied during the week and closed on Friday with losses over last Friday’s close. 

The trends of the major indices in the course of the week’s trading are given in the table below:

On Monday, The major indices of the Indian stock markets suffered a correction on Monday. On the NSE, there were 575 advances, 1,145 declines and 359 unchanged.  Sensex and Nifty declined after opening on a flat note on Monday led by selling in auto, IT (information technology) and FMCG (fast moving consumer goods) stocks. On Friday, foreign institutional investors (FIIs) sold shares to the tune of Rs966.43 crore, while the domestic institutional investors (DIIs) bought Rs853.25 crore worth of scrips.

In a setback to Vedanta, the Supreme Court refused to order the re-opening of its Sterlite Copper Smelting plant located in Tamil Nadu as it set aside the National Green Tribunal's (NGT) December 15 order on the grounds of jurisdiction. Setting aside the NGT order on maintainability, a bench of Justice Rohinton Fali Nariman and Justice Vineet Saran asked Vedanta to approach the High Court and since the Thoothukudi plant has been locked up for quite some time, they could urge the High Court Chief Justice for an expeditious hearing and interim relief. 

On Tuesday, the major indices of the Indian stock markets were range-bound on Tuesday and closed with losses over Monday’s close. On the NSE, there were 992 advances, 705 declines and 366 unchanged. Sensex advanced a few points, as it opened higher with key banking and finance sectors gaining. All the sectors on the NSE traded in green, as well, except for IT (information technology), Pharma and Media stocks as the Indian rupee slid against the US dollar on Tuesday. On Monday, foreign institutional investors (FIIs) were net sellers and the domestic institutional investors (DIIs) were net buyers. 

The government decided to give a push to its strategic disinvestment plan within the current fiscal year itself by clearing sale of 100% stake in three special steel producing units of Steel Authority of India Ltd. (SAIL), including Salem Steel and Alloy Steel Plant. Massive turbulence continued to hit the Indian airline sector as even the formidable passenger carrier IndiGo now faces headwinds of pilot shortage leading to a truncated flight schedule and consequently a dive in its stock price.

The major indices of the Indian stock markets rallied on Wednesday and closed with gains over Tuesday’s close. On the NSE, there were 1,117 advances, 674 declines and 103 unchanged. A slight ease in crude oil prices along with value buying aided the benchmark Sensex to snap its longest consecutive sessions fall in the last eight years on Wednesday. Accordingly, the benchmark index closed with handsome gains of over 400 points while the Nifty50 jumped past the 10,700 mark after struggling in the past sessions.

The Supreme Court on Wednesday directed Reliance Communications to pay Rs453 crore to Ericsson India within four weeks failing which its chairman will have to undergo a three-month sentence. A bench of Justice Rohinton Fali Nariman and Justice Vineet Saran directed the court's Registry to give Ericsson Rs118 crore that were earlier deposited by RCOM. The court said that the entire amount that RCOM has to pay to Ericsson is Rs550 crore plus the interest that was generated.

The court also imposed a fine of Rs1 crore each on RCOM, Reliance Telecommunication and Reliance Infratel that would be deposited with the Supreme Court Legal Services Committee (SCLSC).

The major indices of the Indian stock markets rallied on Thursday and closed with gains over Wednesday’s close. On the NSE, there were 1,218 advances, 568 declines and 94 unchanged. The Finance Ministry had announced capital infusion of Rs 48,239 crore in the 12 public sector banks on Wednesday, following which PSU Bank Nifty index surged up to 1.6% in today’s trading session. During afternoon, Central Bank of India traded over 7% higher while Union Bank and Punjab National Bank (PNB) surged 4%. Corporation Bank, the biggest recipient of the infusion, gained close to 20%. 

The Employees' Provident Fund Organisation (EPFO) board recommended an interest rate of 8.65% for 2018-19, 10 basis points higher over the previous fiscal. In the financial year 2017-18, the interest rate was 8.55%. This is the first time since 2015-16 that the interest rate has been raised. The Anil Ambani-led Reliance Group's financial services flagship company Reliance Capital on Thursday said it invited its partner Nippon Life Insurance Company to make an open offer for its 42.88% stake in Reliance Nippon Life Asset Management Ltd (RNAM). It is said Reliance Capital can realise about Rs 7,000 crore out of this deal and it would be used to reduce its debt, industry sources said. 

The major indices of the Indian stock markets opened lower on Friday over Thursday’s close and closed flat. On the NSE, there were 1,168 advances, 559 declines and 337 unchanged. High crude oil prices and fears of a rise in core inflation subdued the key Indian equity indices on Friday. According to market observes crude oil at $67 per barrel and caution over a likely rise in core inflation pointed out in the Reserve Bank of India (RBI)'s latest minutes of the monetary policy committee meet kept investors away. 

Government think tank Niti Aayog Vice Chairman Rajiv Kumar on Friday said banks are in a position to pass on interest rate cut benefits to the consumers and the industry. The Reserve Bank of India (RBI) had on February 7 announced a repo rate cut of 25 basis points, and so far State Bank of India (SBI) is the only bank to have followed it with a small rate cut of 5 basis points. "Credit growth has perked up and will increase further, so banks are in a position to pass on the benefits of a rate cut," Kumar said at an event. He said the government had to struggle through NPAs in the banking sector. 

Ratings agency India Ratings and Research (Ind-Ra) has maintained a stable outlook on the auto sector, anticipating improving sales in the sector during the next fiscal over expectations of better liquidity in non-bank financial companies. The 'stable' outlook comes despite subdued sales numbers in the last couple of months. Society of Indian Automobile Manufacturers (SIAM) data suggested a slowdown in the sales of passenger vehicles in the domestic market which declined by 1.87 per cent on a year-on-year basis in January. The comparable figure for December stood at 0.43 per cent.

The rating firm sees an improvement in the liquidity situation of non-bank financial companies, thus it is likely to reflect in the funding availability. However, the growth rate is likely to be moderate, it added. Apart from improved finance availability, increased construction activities and industrial activities will continue to favour CV demand. The agency further said that credit ratings of most of the large players in its sample are set to be unaffected in 2019-20 despite capital expenditure plans in view of the ongoing regulatory changes, development of an electric vehicle platform and continued new product launches.The Total Investment & Insurance Solutions

Weekly Indices (The Total Investment & Insurance Solutions)

CBDT sets up panel to help bring down tax litigation -The Total Investment & Insurance Solutions

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22 February 2019

 

Tax (The Total Investment & Insurance Solutions)

The government is looking to address taxation-related pain points and cut down the number of tax litigations, while focusing on some of the major issues that may lead to revenue generation, people familiar with the development said. 

The Central Board of Direct Taxes (CBDT) has formed a four-member committee, headed by income tax commissioner Sanjeev Sharma, to look into the matter and submit its final report and recommendations by mid-March. The committee is looking to tackle the issue in a two-prong way — addressing some current pain points and recommending some steps borrowed from international best practices, people in the know said.

 Its recommendations could include applying a filter for tax officer before a notice is issued and setting a time limit for concluding an investigation, they said. The panel has started inviting recommendations for best international practices on litigation management. The tax department is one of the biggest litigators in the country at present, but it ends up on the losing side in majority of the cases, tax experts said. As per government figures, 465,349 cases related to taxation are pending at various forums. Of this, about 1% cases are high value cases and constitute about 90% of the total tax demand.

Ketan Dalal, managing partner at structuring and advisory firm Katalyst Advisors, said the committee should focus on preventing, or at least mitigating, litigations such as pre-assessment filters. “Additionally, on the basis that ‘justice delayed is justice denied’, an ecosystem for meaningful and contemporary time limits should be prescribed for completion of litigation,” he said. The committee may also look to address some immediate taxation-related pain points, including aggressive stance of tax offices that have shot off prosecution notices to many individuals and companies, people in the know said. “There could be three areas which could be looked at,” said Sudhir Kapadia, national tax leader, EY India. “The first is the whole business of issuing prosecution notices, and if the taxpayer has paid the tax along with interest then these shouldn't be pursued.”

 Prosecution notices make such cases equivalent to criminal offences and give income tax officers additional powers akin to those of the police, experts said. Taxpayers can only seek relief from a magistrate’s court in such instances. Kapadia also wants the committee to consider “setting up a mechanism where private rulings are offered to taxpayers where disputes could be altogether avoided.” “Also, in cases where the tax department gets an adverse ruling at tribunal level, it should only appeal in certain cases and focus on quality as that would lead to higher probability of winning,” he said. Experts also said the tax department should focus on large issues rather than going after the small fish. In some cases, prosecution notices are issued when a taxpayer has not paid or delayed paying as little as ?1,000, they said. Experts called for an alternative dispute resolution mechanism that could lead to fast resolution of disputes. “Where litigation does emerge, the focus should be on quick resolution,” Dalal said.

 “Since the conventional litigation trail takes far too long. Alternative dispute resolution mechanisms such as mediation and private rulings should be considered.” The government could take a relook at streamlining some of the quasi-judicial forums and set up a separate redressal mechanism that acts as preventing litigation, people in the know said. While Authority of Advance Ruling was introduced for the same purpose, many complain that several recent AAR rulings have led to litigation. Insiders said the government is also concerned about how it should tackle taxing digital companies. It has already introduced equalisation levy and is set to introduce rules around significant economic presence to tax digital companies. The government could also look to introduce peer review for tax officers, people in the know said. The Total Investment & Insurance Solutions

Banks raise margin protection, headroom issues on RBI's rate cut transmission call-The Total Investment & Insurance Solutions

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22 February 2019

 

RBI (The Total Investment & Insurance Solutions)

Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday met PSU and private sector banks CEOs and MDs to discuss rate transmission and persuade them to pass on the advantages after taking note of the non-passing of the benefits of lower interest rates to the consumers following a key policy rate cut by it recently while the banks are said to have raised their concern on protecting their margins to provide for the NPAs and banking operations which may be hit if they start passing on the full rate cut to the consumers.

Earlier this month, the RBI cut the benchmark interest rate by 0.25 per cent to 6.25 per cent. But banks have so far cut only 5 basis points after the rate cut. According to a banking chief present at the meeting held in Mumbai, after the April MPC meeting of the RBI, if there is a rate cut further by the central bank, then banks would feel comfortable to pass on full benefits. SBI has cut the interest rate by just 0.05 per cent.

As a policy step, RBI has the power to issue instructions to the banks to pass on the benefits but in today's meeting the discussion was on listening to the bankers' side also and the Das listened to them as well on their limitations, said a source. Banks lend on the basis of MCLR, PLR and base rates. 

Concerns over a full pass-through of lower interest rates to the economy emerged after lenders lowered lending rates by only 5 basis points after a 25 basis point rate cut by the RBI in early February, raising questions on the efficiency of monetary policy transmission.

A former bank chief said the rate cut by RBI to translate directly into loan rate cut is not that easy. Banks have to reduce deposit rates for reducing MCLR rates who also have the challenge to raise the deposit growth and lower deposit rates don't attract savings. And here the situation is not very bright as credit growth has been 9.3 per cent versus 6.1 per cent deposit growth of the banks. 

Banks also have to protect their margins to provide for the NPAs and meet other banking expenses, so if they go on passing the full rate cut, they would have a weak financial base again eroding their margins.

This has been expressed by the SBI chairman recently as Rajnish Kumar said that the bank currently does not have any headroom to cut interest rates. Many other banks aslo expressed similar views in the meeting.

The RBI is mandated to see whether banks are cutting lending rates in line with repo rates.

The home loan borrowers have often complained about the opacity of the interest rate fixing mechanism which allows banks not to pass rate cut benefits in lowering home and auto loan rates.

"Transmission of rates is very important especially after the central bank announces a rate cut," Das had said after its board meeting in the capital.The Total Investment & Insurance Solutions

Higher state spending helps German economy avoid recession in fourth quarter-The Total Investment & Insurance Solutions

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22 February 2019

 

German Economy(The Total Investment & Insurance Solutions)

Higher state spending helped Germany avoid a recession in the fourth quarter, data showed on Friday, as exports failed to provide impetus for a slowing economy.

Detailed data released by the Federal Statistics Office confirmed the economy stagnated in the fourth quarter after a contraction in the previous month.

A breakdown of the data showed that state spending had risen by 1.6 percent, contributing 0.3 percentage points to economic growth.

Exports and imports rose by 0.7 percent each on the quarter, resulting in net trade making no contribution.

Private consumption, which has been supporting the economy as exports weaken on trade frictions and bottlenecks in new car registrations, grew by a disappointing 0.2 percent and its contribution to growth was as little as 0.1 percentage points.

VP Bank chief economist Thomas Gitzel said stricter emissions rules that have hindered sales in the automotive sector had weighed on both exports and private consumption.

“We expect a catch-up effect in the current quarter,” he wrote in a note.

Germany’s dependence on exports for growth makes it particularly vulnerable to the trade disputes between the United States and both China and the European Union.

“Where do we go from here? What happens in the international arena will decide the prosperity and adversity of the German economy,” Gitzel said. “A resolution to the trade conflict will certainly leave a positive mark.”The Total Investment & Insurance Solutions

Global Shares Mixed As Investors Watch Trade Talks-The Total Investment & Insurance Solutions

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22 February 2019

Financial Markets (The Total Investment & Insurance Solutions)

Global shares were mixed Friday as nervous investors await developments in the U.S.-China trade talks in Washington.

European shares rose, with France's CAC 40 gaining 0.3 percent in midday trading to 5,212. Germany's DAX was up 0.6 percent at 11,487 and Britain's FTSE 100 rose 0.5 percent to 7,204.

U.S. shares were set to open higher as Dow futures rose 0.5 percent to 25,970. S&P 500 futures also rose close to 0.5 percent, to 2,786.

A hodge-podge of recent economic data is fueling concerns over risks to global growth and the world's two biggest economies are locked in a trade war spurred by U.S. contentions that China uses predatory tactics in a quest to overtake U.S. technological dominance, including pressuring American companies to hand over trade secrets and in some cases stealing them outright.

The Trump administration has warned it will increase its import taxes on $200 billion in Chinese goods from 10 percent to 25 percent if the two sides haven't reached a resolution by March 2. But Trump in recent days has signaled a willingness to extend the deadline if negotiators are making progress.

"The trade talks do appear to have made some progress. However, a run of weak data from Japan, Europe and the U.S. yesterday took the wind out of the equity market sails," said Jeffrey Halley, senior market analyst at OANDA.

KRAFT HEINZ TROUBLE: Shares in Kraft Heinz plunged 20 percent before the opening bell Friday. The company disclosed an investigation by federal regulators and said it will slash the value of its Oscar Mayer brands by $15.4 billion, leading to a $12.6 billion loss for the fourth quarter.

THE DAY IN ASIA: Japan's benchmark Nikkei 225 inched down 0.2 percent to finish at 21,425.51. Australia's S&P/ASX 200 gained 0.5 percent to 6,167.30. South Korea's Kospi was unchanged at 2,230.50, while Hong Kong's Hang Seng rose 0.5 percent to 28,762.75. The Shanghai Composite gained 1.9 percent to 2,804.23.

ENERGY: Benchmark U.S. crude rose 50 cents to $57.47 a barrel in electronic trading on the New York Mercantile Exchange. It slid 0.3 percent to settle at $56.96 a barrel in New York. Brent crude, used to price international oils, gained 40 cents to $67.47.

CURRENCIES: The dollar rose to 110.86 yen from 110.70 yen on Thursday. The euro made a modest gain to $1.1343 from $1.1338.The Total Investment & Insurance Solutions

Nifty, Sensex May Log in More Gains- – Thursday closing report -The Total Investment & Insurance Solutions

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21 February 2019

I had mentioned in Wednesday’s closing report that Nifty, Sensex would head higher. The major indices of the Indian stock markets rallied on Thursday and closed with gains over Wednesday’s close. On the NSE, there were 1,218 advances, 568 declines and 94 unchanged. The trends of the major indices in the course of Thursday’s trading are given in the table below:

The Finance Ministry had announced capital infusion of Rs 48,239 crore in the 12 public sector banks on Wednesday, following which PSU Bank Nifty index surged up to 1.6% in today’s trading session. During afternoon, Central Bank of India traded over 7% higher while Union Bank and Punjab National Bank (PNB) surged 4%. Corporation Bank, the biggest recipient of the infusion, gained close to 20 per cent. 

Tata Motors led the gains in the Sensex pack and was followed by Vedanta, Tata Motors(DVR), ONGC and Bajaj Finance, while Yes Bank, Infosys, Maruti Suzuki, Coal India and IndusInd Bank settled lower, slipping up to 1.50%. However, the export-oriented IT stock closed lower both on BSE and NSE. The BSE Sensex closed 142.09 points or 0.40% higher at 35,898.35, while the Nifty gained 54.40 points or 0.51% at 10,789.85.

The Employees' Provident Fund Organisation (EPFO) board has recommended an interest rate of 8.65% for 2018-19, 10 basis points higher over the previous fiscal. In the financial year 2017-18, the interest rate was 8.55%. This is the first time since 2015-16 that the interest rate has been raised.

The Anil Ambani-led Reliance Group's financial services flagship company Reliance Capital on Thursday said it has invited its partner Nippon Life Insurance Company to make an open offer for its 42.88% stake in Reliance Nippon Life Asset Management Ltd (RNAM). It is said Reliance Capital can realise about Rs 7,000 crore out of this deal and it would be used to reduce its debt, industry sources said. 

Nippon Life Insurance Co Ltd already holds 42.88% stake in RNAM. An open offer by Nippon Life Insurance will be triggered if the above transaction goes through. While the RNAM scrip was locked in the upper circuit at about Rs 187 per share, Reliance Group will be expecting a sizeable "control premium" for its stakes. The RNAM came out with an IPO at a price of about Rs 252 and the sale price now was expected to be more than that as it would include the "control premium".

The top gainers and top losers of the major indices are given in the table below:

The closing values of the major Asian indices are given in the table below:

Major Indices (The Total Investment & Insurance Solutions)

Finance ministry expects NPA recovery of Rs 1.80 lakh crore in FY19 -The Total Investment & Insurance Solutions

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21 February 2019

 

NPA (The Total Investment & Insurance Solutions)

With two major cases at the final stage of resolution, the Finance Ministry expects bad loan recoveries to touch Rs 1.80 lakh crore during the current fiscal. 

So far, banks have recovered Rs 1 lakh crore under the Insolvency and Bankruptcy Code (IBC). The recovery is expected to touch Rs 1.80 lakh crore by March 2019 with some of the resolutions at the final stage, Financial Services Secretary Rajiv Kumar said. 

Lenders are expecting to recover almost Rs 52,000 crore loan in case of Essar Steel while Rs 18,000 crore from Bhushan Power & Steel Ltd. 

Besides, the NCLT is expected to finalise corporate insolvency resolution process of several stressed assets including VideoconNSE 4.35 % Group, Monnet Ispat, Amtek Auto and Ruchi Soya. 

According to estimates, the IBC has helped address stressed assets worth approximately Rs 3 lakh crore -- directly or indirectly -- since the new law came into force in December 2016. 

n 2018, insolvency proceedings against some companies including Bhushan SteelNSE -1.12 %, ElectroSteel Steel, Binani Cement were almost completed and the new management from their successful bidders -- Tata Steel, Vedanta group and Adity Birla-led UltraTech, respectively -- have taken over the management control of the stressed assets. 

When asked about his outlook for public sector banks in the current January-March quarter, Kumar said it is very positive. 

Banks have posted a combined profit in the last quarter, he said, adding, provisioning by and large is over and resolution in the current quarter would add recoveries. 

In June 2017, RBI's internal advisory committee (IAC) identified 12 accounts, each having more than Rs 5,000 crore of outstanding loans and accounting for 25 per cent of total non-performing assets (NPAs) of banks. 

Following the RBI's advisory, banks referred Bhushan Steel Ltd, Bhushan Power & Steel Ltd, Essar Steel Ltd, Jaypee Infratech Ltd, Lanco Infratech Ltd, Monnet Ispat & Energy Ltd, Jyoti Structures Ltd, Electrosteel Steels Ltd, Amtek Auto Ltd, Era Infra Engineering Ltd, Alok Industries Ltd. The Total Investment & Insurance Solutions

Global Stocks Mixed Ahead Of US-China Tariff War Talks-The Total Investment & Insurance Solutions

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21 February 2019

RBI (The Total Investment & Insurance Solutions)

Most global stock markets rose Thursday following a listless day on Wall Street ahead of U.S.-Chinese negotiations aimed at ending a tariff battle.

In early trading, Germany's DAX index advanced 0.4 percent to 11,445.77 while London's FTSE 100 was off 0.2 percent at 7,210.51. France's CAC 40 added 0.4 percent to 5,203.12. All three indexes gained on Wednesday.

On Wall Street, the future for the Standard & Poor's 500 index was up 0.1 percent. That for the Dow Jones Industrial Average was up 0.2 percent.

Investors were looking ahead to talks in Washington on a fight over Beijing's technology ambitions ahead of a March 2 deadline for a possible U.S. tariff hike. Neither government has released details but companies saw the decision to hold more talks as a sign of progress.

President Donald Trump told reporters Tuesday the talks were "going very well." Trump has suggested he might postpone the tariff hike on $200 billion of goods but made no firm commitment.

The U.S. Federal Reserve reassured investors by releasing minutes of its latest meeting saying, as expected, it will be patient with interest rate hikes amid economic uncertainty.

A lack of details in the Fed's report "leaves the region to await further US-China developments," Jingyi Pan of IG said in a report. After markets rose on Trump's positive comments, she said, "one should not be surprised" to see more gains.

In Asia, Tokyo's Nikkei 225 gained 0.1 percent to 21,464.23 while the Shanghai Composite Index lost 0.3 percent to 2,751.80. Hong Kong's Hang Seng was 0.3 percent higher at 28,600.54 and Seoul's Kospi was off 1 point at 2,228.66. Sydney's S&P-ASX 200 rose 0.7 percent to 6,139.20 and India's Sensex added 0.4 percent to 35,912.25. Benchmarks in New Zealand, Taiwan and Southeast Asia also advanced. India's Sensex shed 0.1 percent to 35,721.75.

JAPANESE MANUFACTURING: The preliminary reading on a monthly purchasing managers' index fell to 48.5 on a 100-point scale from January's 50.3. It was the second unusually large monthly decline and the PMI's lowest level since October 2016. "Such large falls are rare and suggest that the economy is losing momentum rapidly," said Marcel Thieliant of Capital Economics in a report.

ENERGY: Benchmark U.S. crude gained 10 cents to $57.26 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained 71 cents on Wednesday to $57.16. Brent crude, used to price international oils, added 1 cent to $67.09 per barrel in London. It gained 63 cents the previous session to $67.08.

CURRENCIES: The dollar edged down to 110.82 yen from Wednesday's 110.85 yen. The euro gained to $1.1341 from $1.1336.The Total Investment & Insurance Solutions