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7^Th September 2016

OVERNIGHT MARKETS AND NEWS

Sep E-mini S&Ps (ESU16 -0.10%) are down -0.03% and European stocks are up +0.49% ahead of Thursday's ECB meeting. The odds of a Fed rate hike this year were further reduced after the U.S. Aug ISM non-manufacturing index fell to a 6-1/2 year low on Tuesday. The markets will look ahead to today's Fed Beige book to gauge the health of the U.S. economy. Gains in energy producers and mining stocks are supporting the market with crude oil up +1.23% and copper (HGZ16 +0.65%) up +0.84% at a 2-week high. Gains in European stocks were limited after German Jul industrial production unexpectedly fell by the most in nearly 2 years. Asian stocks settled mixed: Japan -0.41%, Hong Kong -0.19%, Chia +0.04%, Taiwan +0.84%, Australia +0.20%, Singapore -0.10%, South Korea -0.24%, India -0.18%. China's Shanghai Composite posted a 2-week high, although Japan's Nikkei Stock Index fell as exporter stocks weakened after USD/JPY slid to a 1-week low, which undercuts the earnings prospects of exporters.

The dollar index (DXY00 +0.01%) is up +0.02%. EUR/USD (^EURUSD) is down -0.07%. USD/JPY (^USDJPY) is down -0.42% at a 1-week low.

Dec T-note prices (ZNZ16 +0.05%) are up +0.5 of a tick on positive carryover from a rally in German bund prices to a 3-week high.

San Francisco Fed President Williams (non-voter) said if Fed officials wait too long to remove monetary accommodation, they "hazard allowing imbalances to grow, requiring us to play catch-up, and not leaving much room to maneuver."

German Jul industrial production unexpectedly fell -1.5% m/m, weaker than expectations of +0.1% m/m and the largest decline in 23 months. The Total Investment & Insurance Solutions

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous +2.8% with purchase sub-index +1.3% and refi sub-index +3.7%), (2) Kansas City Fed President Esther George (voter) and Richmond Fed President Jeffrey Lacker (non-voter) appear before a House Financial Services sub-committee on “Federal Reserve Districts: Governance, Monetary Policy and Economic Performance,” (3) Jul JOLTS job openings (expected +1,000 to 5.625 million, Jun +110,000 to 5.624 million), and (4) Fed Beige Book.

Russell 1000 companies that report earnings today: HP Enterprise (consensus $0.45), John Wiley (0.60), HD Supply (0.88), Guidewire Software (0.32), Valspar (1.45).

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week include: Citi Global Technology Conference on Tue-Thu, Barclays CEO Energy Power Conference on Tue-Thu, Barclays Global Consumer Staples Conference on Tue-Thu, Barclays Back-to-School Conference on Tue-Thu, Cowen and Company Global Transportation Conference on Wed, Citi Biotech Conference on Wed, Avondale Partners Tech Services Conference on Wed, Goldman Sachs Global Retailing Conference on Wed-Thu, Drexel Hamilton Technology, Media and Telecom Conference on Wed-Thu, Keefe, Bruyette, & Woods Insurance Conference on Wed-Thu, Goldman Sachs Financial Technology Conference on Thu, Evercore ISI Real Estate Conference on Thu, Gabelli & Company Aircraft Supplier & Connectivity Conference on Thu. The Total Investment & Insurance Solutions

OVERNIGHT U.S. STOCK MOVERS

Royal Caribbean Cruises Ltd. (RCL -1.33%) was downgraded to 'Hold' from 'Buy' at Argus

Casey's General Stores (CASY +0.02%) dropped nearly 9% in after-hours trading after it reported Q1 EPS of $1.70, below consensus of $1.81.

Valeant Pharmaceuticals (VRX +2.47%) climbed 2% and Progenics (PGNX +3.36%) jumped nearly 4% in after-hours trading after the companies said the drug Relistor for treatment of opioid-induced constipation is now available for prescribing in the U.S.

Intersil (ISIL -2.23%) was downgraded to 'Hold' from 'Buy' at Stifel with a 12-month price target of $21.

Catalent (CTLT +0.16%) lost over 7% in after-hours trading after it announced a 19-million share secondary offering.

Advanced Micro Devices (AMD -2.26%) dropped 4% in after-hours trading after it filed to sell $600 million in stock and $450 million of convertible notes to repay debt.

Sigma Designs (SIGM +8.07%) gained 3% in after-hours trading after it reported Q2 adjusted EPS of 7 cents, well above consensus of 2 cents.

Ollie's Bargain Outlet Holdings (OLLI -0.98%) fell nearly 3% in after-hours trading after it started a secondary offering of 13.7 million shares.

HealthEquity (HQY +0.92%) rose nearly 3% in after-hours trading after it reported Q2 adjusted EPS of 16 cents, higher than consensus of 13 cents, and then raised its full-year revenue estimate to $174 million-$178 million from a prior view of $173 million-$177 million

Dave & Buster's Entertainment (PLAY -0.71%) slid 7% in after-hours trading after it cut its full-year comparable sales estimate to 2.25%-3.25% from a June 7 estimate of 3.25%-4.25%.

Momenta Pharmaceuticals (MNTA -0.57%) ws downgraded to 'Sell' from 'Hold' at Maxim Group.

Applied Optoelectronics (AAOI -0.57%) surged 23% in after-hours trading after it raised its Q3 revenue forecast to $63 million-$65 million from an Aug 5 estimate of $56 million-$59 million, The Total Investment & Insurance Solutions

MARKET COMMENTS

Sep E-mini S&Ps (ESU16 -0.10%) this morning are down -0.75 of a point (-0.03%). Tuesday's closes: S&P 500 +0.30%, Dow Jones +0.25%, Nasdaq +0.31%. The S&P 500 on Tuesday rallied to a 1-week high and closed higher on increased M&A activity after Danaher bought Cepheid for about $4 billion and Enbridge agreed to buy Spectra Energy for $28 billion in stock. The -4.1 point decline in the Aug ISM non-manufacturing index to a 6-1/2 year low of 51.4 was a negative factor for the economy, although it also produced a delay in expectations for a Fed rate hike.

Dec 10-year T-notes (ZNZ16 +0.05%) this morning are up +0.5 of a tick. Tuesday's closes: TYZ6 +18.50, FVZ6 +11.50. Dec T-notes on Tuesday closed higher on positive carryover from a rally in German bunds to a 3-week high and on the decline in Aug ISM non-manufacturing index to a 6-1/2 years, which may further delay a Fed rate hike.

The dollar index (DXY00 +0.01%) this morning is up +0.020 (+0.02%). EUR/USD (^EURUSD) is down -0.0008 (-0.07%). USD/JPY (^USDJPY) is down-0.43 (-0.42%). Tuesday's closes: Dollar index -1.021 (-1.07%), EUR/USD +0.0108 (+0.97%), USD/JPY -1.41 (-1.36%). The dollar index on Tuesday fell to a 1-week low and closed lower on the weaker-than-expected Aug ISM non-manufacturing index, which bolsters the case for the Fed to delay raising interest rates. There was also strength in the yen against the dollar on speculation the BOJ may delay additional easing measures after an economic advisor to Prime Minister Abe said the BOJ should wait until after the Fed decides on interest rates before the BOJ acts.

Oct crude oil (CLV16 +0.80%) this morning is up +55 cents (+1.23%) and Oct gasoline (RBV16 +1.41%) is up +0.0225 (+1.71%). Tuesday's closes: CLV6 +0.39 (+0.88%), RBV6 +0.0148 (+1.14%). Oct crude oil and gasoline on Tuesday closed higher on the slide in the dollar index to a 1-week low and on comments from Iraqi Prime Minister Al-Abadi who said current oil prices aren't acceptable and he supports an oil-output freeze to increase prices. Oil prices were undercut by a lack of any concrete proposals from Russia or Saudi Arabia to stabilize oil prices after Russian Energy Minister Novak and Saudi Oil Minister Khalid Al-Falih on Monday pledged to cooperate to stabilize oil markets.The Total Investment & Insurance Solutions

Start-up Deadpool: Government says it's only a lean phase -The Total Investment & Insurance Solutions

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6^Th September 2016

Despite reports claiming that a Start-up Deadpool is an Indian reality, with as many as 800 new tech ventures closing shop or on death row in the past 3-4 years, the government contends it is only a lean phase and far from a bust. The Total Investment & Insurance Solutions

"I don't see any bust or any such thing. Start-ups are in various fields, like healthcare, etc. Maybe the dotcom phase is not doing well right now. There is no bust, only a lean phase," Department of Industrial Policy and Promotion Joint Secretary Shailendra Singh told IANS.

Data analytics firm Tracxn Technologies had recently compiled a list of close to 800 technology start-ups founded post-2011 that have failed or are shutting operations.

The list is similar to the one created by a website called F**ked Company after the internet bust of the early 2000s. The site itself was a take-off on a magazine called Fast Company and compiled a list of dotcom failures that came to be known as the Dotcom Deadpool.

On the Tracxn list -- what could be called a Start-up Deadpool -- for example, is online grocery store PepperTap, with $51.2-million funding, which has confirmed it is shutting down core operations, while start-ups like BeStylish, a fashion accessory online store, with $10 million funding, is already down and out. The Total Investment & Insurance Solutions

"To make any detailed statement on the reasons for failure of these start-ups, we need to study the report. We will be talking to Tracxn this month to find out about the basis of the report, the reasons for failure, and analyse," Singh said.

Talking about the likely reason for the failure of these start-ups, he said it could be their inability to scale up during a global slowdown. The Total Investment & Insurance Solutions

"All start-ups need to be scaled up. In the global slowdown -- seeing the grim market situation -- the scaling up is not possible. But it is not a cause of worry as these are cyclical changes. But it (failure of 800 start-ups) is only a small story," he said.

Tracxn, the Bengaluru-based firm, also says that the failure to scale up is one of the likely reasons for the shutdowns, as in the case of e-commerce and food technology start-ups that face a surge in digital marketing expenses due to increased competition.

"But they (the start-ups) failed to scale up due to standardisation or funding issues. Bigger players like Flipkart, PayTM, Snapdeal offer a better variety and price due to their scales and the amount of funding," a Tracxn spokesperson told IANS. The Total Investment & Insurance Solutions

"Replicating the foreign model without indigenisation, focusing on customer acquisition without becoming self-sustainable and 'me-too' syndrome of copying a popular format has led to many failures of startups," says Amit Jindal, Partner, Felix Advisory.

"The Start-up Deadpool though is a reality but not a cause of worry," added Nikhil Donde, Managing Director of consultancy firm Protiviti India.

"Experiementation and innovativeness are the keys to success for any start-up. The start-ups which failed (did so) either due to lack of funding, faulty business model or were mistimed against the market demand," Donde told IANS. The Total Investment & Insurance Solutions

On being asked if funding could be one of the reasons of failure, Industry Ministry's Singh said, "No, funding is not an issue. Funds are constantly coming in through angel funding and venture funding. Government is also making available about Rs 2,500 crore funds every year for start-ups. In fact, it will be difficult for start-ups to absorb all the funds."

According to research firm Preqin, $8.9 billion investments in 2015 were made in India via venture funds. But so far in 2016, only $3.2 billion has been invested in start-ups by venture capitalists.

"The funding surely saw a slight slowdown. For instance, in the first half of 2015 $2.9 billion was invested, while in first half of 2016 only $2.1 billion was invested. But the overall funding scene is not as grave. The early-stage activity has notably increased with many more micro funds and angels stepping up," Tracxn co-founder Neha Singh told IANS. The Total Investment & Insurance Solutions

Overall, it looks healthy for the eco-system because more number of companies are getting launching capital, but with more later-stage investors being cautious, it is forcing companies to rethink about getting their economics right early on in a more sustainable manner, she said.

Confident that the Indian start-ups story is still intact, Singh said: "We are regularly interacting with start-ups. There is a big boost to start-ups. We have to provide the right ecosystem for the start-ups, a common platform and hand-holding." The Total Investment & Insurance Solutions

The silver lining for the failed start-up teams is that corporates are looking at hiring of experienced entrepreneurial teams. The Total Investment & Insurance Solutions

"Most founders of deadpooled companies have people with strong hands-on experience in knowing what works and doesn't in a practice area or market. Failure is no longer a taboo, and the entrepreneurial mindset is highly valued among investors and corporates," Tracxn said.The Total Investment & Insurance Solutions

Reliance Capital raises USD 300 mn via private placement-The Total Investment & Insurance Solutions

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6^Th September 2016

Reliance Capital, a part of the Anil-Ambani-led group, on Tuesday said it has raised USD 300 million through private placement of debentures with a tenure of 5 and 10 years. The Total Investment & Insurance Solutions

"The issue size offered was $ 150 million with an option to retain oversubscription by way of a greenshoe option of up to $150 million). The issue was fully subscribed, including the greenshoe option, and will be listed," the company said in a regulatory filing. The Total Investment & Insurance Solutions

"The funds will be used to refinance existing debt and grow our lending business. Our debt-equity remains at a conservative 1.7 -- among the lowest in the non-banking financial services sector," said Sam Ghosh, Executive Director and Group Chief Executive of Reliance Capital.

"We will continue to maintain a healthy asset liability mix, and provide optimally priced funds for our high growth lending businesses." The Total Investment & Insurance Solutions

The secured redeemable non-convertible debentures have an annual coupon rate of 8.9 per cent for 5 years, and 9 per cent for 10 years.The Total Investment & Insurance Solutions

Patel's 'handover' at RBI is low key, unlike other governors -The Total Investment & Insurance Solutions

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6^Th September 2016

In keeping with the low-key style he is known for, Reserve Bank of India's new Governor Urjit Patel began his first working day on Tuesday away from media spotlights, unlike the practice followed by RBI governors in the past. There were no milling photographers at the "handover".

Patel had officially assumed charge on Sunday when the term of his predecessor Raghuram Rajan expired. Monday was a holiday here on account of the Ganesh Chaturthi, which kicked off the 10-day Ganesh festival. The Total Investment & Insurance Solutions

An RBI spokesperson said photographs of the official ceremony of Patel assuming office would be released later on Tuesday. The Total Investment & Insurance Solutions

Patel has taken over the bank's charge from Rajan after serving as RBI Deputy Governor since January 2013.

He has also worked at the International Monetary Fund (IMF), and was a consultant to the Union Finance Ministry from 1998 to 2001.

The RBI said Patel has a Ph.D. in Economics from Yale University, an M.Phil. from the University of Oxford and a B.Sc. from the University of London.

Following his departure from the RBI, Rajan on Monday cautioned governments and central bankers across the world against relying too much on low interest rates to propel growth or use it as a substitute for undertaking key structural reforms in the economy.

He told the New York Times in an interview that lower policy rates are often an easy solution. However, these can trap economies in a fear of psychosis that when they normalise the rates eventually could hurt growth and distort markets, thereby making a low interest rate policy difficult to abandon. The Total Investment & Insurance Solutions

When Rajan took charge at the RBI in 2013, at a time the US Federal Reserve had declared its intent to wind down its stimulus programme, the rupee plunged in value in respect of the US dollar on fears about a spiralling current account deficit.

In a series of measures, Rajan managed to stabilise the currency that also brought back investors to the country. The Total Investment & Insurance Solutions

"Rajan's disciplined and focussed approach in leading the Reserve Bank during his first year as governor was remarkably impressive," British magazine Central Banking said while awarding Rajan its 'Central Banker of the Year' award for 2015.

Predicting the 2008 financial meltdown that is still affecting global economy, Rajan in 2005 argued that increasingly complex markets with myriad instruments of credit and mortgage-backed securities in ever greater quantities made the global financial system a risky place.

Almost a decade down the line, Rajan is stronger in his belief that global markets now are at the risk of a crash due to the competitive loose monetary policies being adopted by developed economies. The Total Investment & Insurance Solutions

Pointing to the very low interest rate policies of the US Federal Reserve, the Bank of Japan and the Bank of England in a bid to stimulate their economies, Rajan has been warning that emerging markets are especially vulnerable to big shifts in capital flows triggered by the unprecedented monetary accommodation in rich countries. The Total Investment & Insurance Solutions

The elevation of Urjit Patel as Governor has naturally raised expectation among those who were critical of Rajan for not easing enough the monetary policy by cutting rates.

When talking about the challenges for Patel as the Governor, it should also be kept in mind that his moorings are as monetarist as his predecessor Rajan's were, and he is considered to attach the same importance to inflation control as did Rajan. The Total Investment & Insurance Solutions

His views on monetary policy were expressed at the time Rajan held rates in the February 2015 review after making an unexpected rate cut a month edarlier -- the first in nearly two years.

Patel at the time elaborated on the "important backdrop" to Rajan's move to hold rates.

"We are in the midst of the age of competitive depreciation and of a beggar-my-neighbour philosophy. It brings to mind an old African saying that when elephants fight, the grass suffers," Patel said at a press conference to announce the policy review, on the trend of accommodative monetary policies being adopted by developed economies. The Total Investment & Insurance Solutions

"While the ECB (European Central Bank) and the Bank of Japan are printing money and devaluing their currencies on one hand, the US economy is reviving on the other. Anyone in the middle is getting crushed," he pointed out.The Total Investment & Insurance Solutions

Samsung Australia recalls over 50,000 Galaxy Note 7 -The Total Investment & Insurance Solutions

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6^Th September 2016

As part of its global recall of Galaxy Note 7 after reports of battery explosion surfaced, Samsung Australia has formally recalled 51,060 such devices.

"Samsung Electronics Australia advises all customers who use a Galaxy Note7 smartphone to power off their device, return it to its place of purchase and use an alternative device until a remedy can be provided," the company said in a statement. The Total Investment & Insurance Solutions

According to theaustralian.com.au, while no battery incidents was reported in Australia, Samsung said it was taking "the proactive and voluntary step" of recalling the 51,060 Galaxy Note7 smartphones in response to global concerns. The Total Investment & Insurance Solutions

The Rs 59,990 flagship device went on sale in 10 countries.

Samsung is recalling and replacing up to 2.5 million Note 7 devices, with nearly $1 billion dollar cost to the company. The Total Investment & Insurance Solutions

"Customers who have purchased a Galaxy Note7 from Samsung are entitled to a new Galaxy Note7 and a courtesy device until replacement Galaxy Note7 stock arrives or a full refund," Samsung Electronics Australia said.

The delivery of a replacement Galaxy Note 7 to customers is expected within three to four weeks.The Total Investment & Insurance Solutions

Nifty, Sensex in a strong momentum – Tuesday closing report-The Total Investment & Insurance Solutions

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6^Th September 2016

I had mentioned in Friday’s closing report that Nifty, Sensex have bucked the weakness, and have headed higher. The major indices of the Indian stock markets rallied strongly on Tuesday after the long week-end to close with gains of around 1.50% over Friday’s close. The trends of the indices in the course of Tuesday’s trading are given in the table below: The Total Investment & Insurance Solutions

 

Major Indices (The Total Investment & Insurance Solutions)

Positive global cues and healthy inflow of foreign funds pushed the Indian equity markets to a striking distance of all-time highs by the end of the session on Tuesday as healthy buying was witnessed in all the 19 sub-indices of the BSE, led by stocks of banking, automobile and consumer durables. The BSE market breadth was tilted in favour of the bulls -- with 1,624 advances and 1,126 declines. On the NSE, on Tuesday, there were 938 advances, 524 declines and 60 unchanged. The Indian stock markets were closed on Monday on account of Ganesh Chaturthi. The Total Investment & Insurance Solutions

Reliance Capital, a part of the Anil-Ambani-led group, on Tuesday said it has raised $300 million through private placement of debentures with tenures of 5 and 10 years. "The issue size offered was $ 150 million with an option to retain oversubscription by way of a greenshoe option of up to $150 million). The issue was fully subscribed, including the greenshoe option, and will be listed," the company said in a regulatory filing. The company’s shares closed at Rs558.00, up 2.46% on the BSE. The Total Investment & Insurance Solutions

Indian drug major Sun Pharmaceutical Industries Ltd on Tuesday said it has signed a strategic distribution agreement with Mitsubishi Tanabe Pharma Corporation. In a statement, Sun Pharma said Japanese company Mitsubishi Tanabe will distribute the 14 prescription brands acquired from Novartis Pharma earlier this year. Mitsubishi Tanabe will also provide information on their proper use to healthcare professionals. "Through this alliance we have the opportunity to leverage Mitsubishi Tanabe Pharma Corporation's specialized expertise to create a strong business foundation for us in Japan," Isao Muramatsu, President & Representative Director, Sun Pharma Japan Ltd, was quoted as saying in the statement. "Sun Pharma will focus on expanding its sales channels in Japan's pharmaceutical market while continuing to ensure a stable supply of medicines and healthcare information," Muramatsu said. The company’s shares closed at Rs782.10, with no change from the previous close, on the BSE.

Urjit Patel has taken charge as Governor of the Reserve Bank of India (RBI), an official statement said here on Monday. "Urjit R. Patel assumed charge as the twenty-fourth Governor of the Reserve Bank of India, effective September 4, 2016 after serving as Deputy Governor since January 2013," the RBI statement said. Patel, who has been given a three-year term, succeeds Raghuram Rajan, whose three-year term ended on Sunday. The elevation of Urjit Patel as governor has raised expectation among those who were critical of Rajan for not easing enough the monetary policy by cutting interest rates. "We are in the midst of the age of competitive depreciation and of a beggar-my-neighbour philosophy. It brings to mind an old African saying that when elephants fight, the grass suffers," Patel said at the press conference to announce the policy review, on the trend of accommodative monetary policies being adopted by developed economies. "While the ECB (European Central Bank) and the Bank of Japan are printing money and devaluing their currencies on one hand, the US economy is reviving on the other. Anyone in the middle is getting crushed," he added. The Total Investment & Insurance Solutions

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

Top Gainer (The Total Investment & Insurance Solutions)

The closing values of the major Asian indices are given in the table below:The Total Investment & Insurance Solutions

Asian Indices (The Total Investment & Insurance Solutions)