Stocks Mostly Rise But Europe Weighed Down By Brexit Discord-The Total Investment & Insurance Solutions

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15 November 2018

financial markets (The Total Investment & Insurance Solutions)

Global stock markets mostly rose Thursday, though European indexes and the pound sagged as discord within the British government threatened a newly agreed Brexit deal.

KEEPING SCORE: German's DAX was flat at 11,417 and France's CAC 40 shed 0.3 percent to 5,054. London's FTSE 100 gained 0.1 percent to 7,038, as a sharp drop in the pound pushed up the share price of multinationals that make most of their money outside the country.

On Wall Street, futures for the Standard & Poor's 500 index and Dow Jones Industrial Average were up 0.3 percent.

ASIA'S DAY: The Shanghai Composite Index rose 1.4 percent to 2,668.17 and Hong Kong's Hang Seng added 1.7 percent to 26,103.34. Tokyo's Nikkei 225 shed 0.2 percent to 21,803.62 and Seoul's Kospi advanced 1 percent to 2,088.06. Sydney's S&P-ASX 200 added 3 points to 5,736.00. India's Sensex rose 0.6 percent to 35,339.44. Bangkok and New Zealand retreated while Taiwan and other Southeast Asian markets rose.

BREXIT: British Prime Minister Theresa May persuaded a majority in her Cabinet to back an agreement to separate from the European Union. The deal would allow Britain to stay in a customs union while a trade treaty is negotiated. It was unclear, however, whether Parliament will approve it and discord soon erupted, with several government officials, including the Brexit minister, resigning. The pound fell 1.4 percent, a wide margin for a developed economy's currency.

ANALYST'S TAKE: "Despite the U.K. Cabinet backing the new Brexit draft plan, the boost for markets had been short-lived with the sea of worries overruling sentiment," said Jingyi Pan of IG in a report.

ENERGY: Benchmark U.S. crude fell 4 cents to $56.21 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 56 cents on Wednesday to close at $56.25. Brent crude, used to price international oils, advanced 44 cents to $66.56 per barrel in London. It gained 65 cents the previous session to $66.12.

CURRENCY: The dollar weakened to 113.44 yen from Wednesday's 113.63 yen. The euro was steady at $1.1311.The Total Investment & Insurance Solutions

Nifty, Sensex Turn Trendless – Wednesday closing report-The Total Investment & Insurance Solutions

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14 November 2018

I had mentioned in Tuesday’s closing report that Nifty, Sensex might log in gains. The major indices of the Indian stock markets were flat after an initial rally. On the NSE, there were 737 advances, 979 declines and 341 unchanged. The trends of the major indices in the course of Wednesday’s trading are given in the table below:

The key equity indices traded flat on Wednesday as higher wholesale inflation and caution during the ongoing assembly polls in five states weighed on the domestic investor sentiments. Although, crude oil prices eased and rupee appreciated during the day but positive sentiments eroded as the day progressed, analysts said. India's annual rate of inflation based on wholesale prices rose to 5.28% in October from 5.13% in September, the Commerce Ministry data said. Selling pressure was witnessed in export-oriented stocks like IT (information technology) and healthcare as the domestic currency appreciated to Rs72.16 to a US dollar from its previous close of 72.67. In addition the benchmark Brent Crude registered a steep decline to $65.42 a barrel. However, the index pivotals -- finance and banking stocks -- traded in the green.

India's annual rate of inflation based on wholesale prices rose to 5.28% in October from 5.13% in September, official data showed here on Wednesday. Even, on a year-on-year (YoY) basis, the Wholesale Price Index (WPI) data furnished by the Ministry of Commerce and Industry was higher than 3.68% reported for the corresponding period of 2017. "The annual rate of inflation, based on monthly WPI, stood at 5.28% (provisional) for the month of October (over October, 2017) as compared to 5.13% (provisional) for the previous month and 3.68% during the corresponding month of the previous year," the data showed. "Build up inflation rate in the financial year so far was 4.64% compared to a build-up rate of 2.12% in the corresponding period of the previous year," the Commerce Ministry official statement said. 

IDBI Bank reported Q2FY19 results with net interest income (NII) at Rs1,300.86 crore (Rs1,657.45 crore), down 21.5% year-on-year. Losses were at Rs3,602.49 crore (Rs197.84 crore). Provisions were at Rs5,481.64 crore (Rs2,842.15 crore). Gross non-performing assets (GNPA) were at 31.78% (24.98%) and net non-performing assets (NNPA) were at 17.30% (16.06%). The bank’s shares closed at Rs60.75, up 1.33% on the NSE.

Mahindra & Mahindra reported Q2 FY19 (standalone) results with revenues at Rs12,988.57 crore (Rs12,183.65 crore), up 6.6% year-on-year. Profit after tax was at Rs1,649.46 crore (Rs1,331.57 crore), up 23.90% year-on-year. Earnings per share were Rs13.86 (Rs11.20). Mahindra & Mahindra shares closed at Rs772.15, down 2.27% on the NSE.

Pfizer reported Q2FY19 (standalone) results with revenues at Rs519.74 crore (Rs571.11 crore), down 9% year-on-year.  Net profit was at Rs95.80 crore (Rs111.15 crore), down 13.80% year-on-year. Earnings per share were at Rs20.94 (Rs24.29). The company’s shares closed at Rs2,800.00, down 2.16% on the NSE.

SpiceJet reported Q2FY19 (standalone) results with total income of Rs1,880.80 crore (Rs1,811.40 crore), up 3.80% year-on-year. Losses were at Rs389.30 crore (net profit of Rs105.20 crore). Earnings per share were at Rs minus 6.50 (Rs1.76). The airline’s shares closed at Rs83.70, up 2.83% on the BSE.

Motherson Sumi Systems reported Q2 FY19 (consolidated)results with total revenues at Rs15,104.97 crore (Rs13,420.43 crore), up 12.60% year-on-year. Net profit was at Rs371.07 crore (Rs436.20 crore), down 14.9% year-on-year. Earnings per share were Rs1.18 (Rs1.38). The company’s shares closed at Rs153.60, down 7.58% on the BSE.

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)

Direct tax collections to exceed target this fiscal: CBDT chief Sushil Chandra -The Total Investment & Insurance Solutions

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14 November 2018

 

Tax (The Total Investment & Insurance Solutions)

Direct tax collection has already crossed Rs 5 lakh crore and will exceed the budgeted target of Rs 11.5 crore set for the current fiscal, CBDT Chairman Sushil Chandra said Wednesday. He further said that so far the I-T department has issued refunds to 2.15 crore assessees amounting to Rs 1.15 lakh crore and from now onwards the net collections will increase. "We have already crossed the Rs 5 lakh crore figure that is 44 per cent of the net direct tax collection target. This is despite the fact there is a surge in refund," Chandra said.

Speaking to reporters after inaugurating the pavillion of the Central Board of Direct Taxes (CBDT) at the India International Trade Fair (IITF), Chandra said the number of people voluntarily filing tax returns has gone up substantially, and 6.85 crore income tax returns were filed last year. This year so far 6.02 crore ITRs have been filed with the Income Tax Department. The number of direct taxpayers was 3.8 crore when the Modi-led government took office in May 2014.

The CBDT chief said that so far the net growth rate in direct tax collection is 14.5 per cent, while the gross collection grew 16.5 per cent. "Our asking rate is 14.55 per cent and definitely we will exceed our target Rs 11.5 lakh crore. There is buoyancy. In the second quarter, there has been good profit to India Inc and we saw very good advance tax collection," Chandra said. The Total Investment & Insurance Solutions

RBI to pump liquidity worth Rs12,000 cr on Nov 15Th ,2018-The Total Investment & Insurance Solutions

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14 November 2018

 

RBI (The Total Investment & Insurance Solutions)

The Reserve Bank of India (RBI) would inject Rs12,000 crore into the market by purchasing government securities on November 15, 2018.

The decision comes amid concerns of a liquidity crisis in the economy after the financial services company IL&FS reported defaults in September. 

"Based on an assessment of prevailing liquidity conditions and also of the durable liquidity needs going forward, the Reserve Bank has decided to conduct purchase of... Government securities under Open Market Operations for an aggregate amount of Rs 120 billion on November 15, 2018 through multi-security auction using the multiple price method," the RBI said in a statement on Tuesday.The Total Investment & Insurance Solutions

WPI inflation rises to 4-month high of 5.28% in October-The Total Investment & Insurance Solutions

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14 November 2018

Food Products (The Total Investment & Insurance Solutions)

Inflation based on wholesale prices rose to over 4-month high of 5.28 percent in October on rising prices of crude, natural gas, fuel and power although food prices have softened.

On the basis of Wholesale Price Index (WPI), inflation was 5.13 percent in September and 3.68 percent in October last year.

According to a government data released today, the index for crude petroleum and natural gas group rose by 4.1 percent to 99.8 from 95.9 for the previous month due to higher price of natural gas.

The index for fuel and power group rose by 3.6 percent to 111.1 from 107.2 for the previous month.  The index for coal group rose by 0.2 percent due to higher price of coking coal.

The index for Manufacture of Food Products group rose by 0.1 percent to 129.5  from 129.4 for the previous month.

The index for Food Articles group rose by 0.9 percent to 145.8 from 144.5 for the previous month. The index for ‘Non-Food Articles’ group, however, declined by 1.1 percent to 123.4 from 124.8 for the previous month.

Meanwhile, data on retail inflation showed that it fell to a one-year low of 3.31 percent in October on the back of cheaper kitchen staples, fruits and protein-rich items.

The inflation based on the Consumer Price Index (CPI) was 3.7 percent in September 2018 and 3.58 percent in October 2017. The retail inflation number is the lowest since September 2017 when it touched 3.28 percent.The Total Investment & Insurance Solutions

Global Shares Dip After Wall Street Falls Over Oil Concerns-The Total Investment & Insurance Solutions

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14 November 2018

Japan financial markets (The Total Investment & Insurance Solutions)

Concerns about political developments in Britain and Italy kept a lid on global stock markets on Wednesday. Meanwhile oil prices recouped some lost ground.

KEEPING SCORE: In Europe, France's CAC slipped 0.4 percent to 5,082 while Germany's DAX fell .3 percent to 11,441. The FTSE 100 index of leading British shares was steady at 7.055. U.S. stocks were set for a flat opening with Dow futures and the broader S&P 500 futures unchanged.

BREXIT UNEASE: In Europe, traders were unsure as to whether British Prime Minister Theresa May would be able to get the Brexit deal she has agreed with the European Union through her Cabinet and then through Parliament. May is presenting the deal to colleagues later. Investors are wondering whether any ministers will quit in protest as they try to assess the probability of May being able to push through her deal.

ANALYST TAKE: "If May was to somehow fall at the first hurdle, it would be a humiliation of epic proportions which she may struggle to come back from," said Craig Erlam, senior market analyst at OANDA. "I imagine therefore that there is little chance of this happening, putting the focus on the parliamentary vote in the weeks ahead."

ITALIAN BUDGET: Meanwhile in Italy, the country's populist government maintained its controversial plan to raise its budget deficit to 2.4 percent of annual GDP as it responded to EU demands for changes. However, it made tweaks during a late-night Cabinet meeting Tuesday, including adding plans to sell off some government real estate. "It's not just the U.K. that Brussels needs to worry about," said Erlam.

TRADE WORRIES: Fears about global growth continue amid trade tensions between the U.S. and China. Traders drew encouragement from a report out of China saying that country's top economic adviser might visit Washington ahead of a planned meeting between Chinese President Xi Jinping and U.S. President Donald Trump at this month's Group of 20 gathering in Argentina. The U.S. and China have raised tariffs on billions of dollars of each other's goods.

ASIA'S DAY: Japan's benchmark Nikkei 225 inched up 0.2 percent to finish at 21,846.48, while Australia's S&P/ASX 200 lost 1.7 percent to 5,732.80. South Korea's Kospi edged down 0.2 percent at 2,068.05. Hong Kong's Hang Seng fell 0.5 percent to 25,654.43, while the Shanghai Composite was down nearly 0.9 percent at 2,632.24.

ENERGY: Oil prices recovered some recent losses with benchmark U.S. crude oil was up 46 cents at $56.15 a barrel while Brent crude, used to price international oils, rose 79 cents to $66.26 a barrel.

CURRENCIES: The euro was steady at $1.1283 while the dollar rose 0.1 percent to 113.88 yen.The Total Investment & Insurance Solutions

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

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13 November 2018

I had mentioned in Monday’s closing report that Nifty, Sensex were under pressure. The major indices of the Indian stock markets rallied on Tuesday and closed with gains over Monday’s close. On the NSE, there were 875 advances, 848 declines and 339 unchanged. The trends of the major indices in the course of Tuesday’s trading are given in the table below:

Positive global cues along with an ease in global crude oil prices pushed the key equity indices in the green on Tuesday. The benchmark Brent Crude eased to $69.38 a barrel after it surpassed the $71 mark on Monday. As a result, S&P BSE Oil and gas index gained 1.43, most among all the 19 sectors on BSE. However, the index pivotals - finance and banking stocks - traded in red. Oil prices fell by more than 1% on Tuesday, with Brent crude sliding below $70 a barrel and WTI below $60 per barrel, after US President Donald Trump put pressure on OPEC not to cut supply to prop up the market, said market analysts. US West Texas Intermediate (WTI) crude oil futures were at $59.06 per barrel at 0115 GMT, down 87 cents, or 1.5% from their last settlement. We are expecting a correction again in crude oil towards $58 to $55 in WTI Crude oil, analysts added.

Oil markets are entering a period of renewed uncertainty and volatility, including a possible supply gap in the early 2020s, the International Energy Agency (IEA) said on Tuesday.

Jet Airways reported a net loss of Rs1,297.46 crore for the second quarter ended September, against a net profit of Rs49.63 crore a year ago. On a consolidated basis, the airline's net loss stood at Rs1,261 crore for the second quarter of the current fiscal year ending March, against a net profit of Rs71 crore in the year-ago quarter. The private carrier said that it faced a tough industry environment in the backdrop of a sharp rise in Brent fuel price by more than 50% during the quarter, a depreciating rupee and a challenging pricing situation in an over-capacitated domestic market. "At the strategic level, the company remains committed and is on track to realise most of the outcomes that were outlined as part of its turnaround strategy last quarter...," the company said in a statement. The company’s shares closed at Rs254.65, up 5.21% on the BSE.

Wall Street closed with heavy losses on Monday, the Dow Jones Industrial Average falling 2.32% on a day marked by concerns about a deceleration in world economic growth and plunges in tech giants such as Apple, which fell more than 5%. At the close of regular trading, the DJIA - the main indicator for US stocks - had lost 602.12 points, coming to rest at 25,387.18, while the S&P500 index fell 1.97% to 2,726.22 and the NASDAQ index - which includes the important tech companies - dropped 2.78% to 7,200.87, Efe reported. Almost all market sectors ended the day in negative territory with tech stocks falling 5.54%, discretionary consumer goods by 2.31%, energy 2.14% and both finance and industrials by 1.99%. Only the real estate sector was in the green on Monday, with a slight rise of 0.20%. Wall Street analysts blamed investor pessimism as the backdrop for concerns about economic growth that they fear may have reached its peak. Also, investors were said to be fearful of new tariffs resulting from trade tensions and the Federal Reserve's potential interest rate hike next month.

India's industrial output growth slipped to 4.5% in September from a rise of 4.66% in August, official data showed on Monday. However, the data released by the Ministry of Statistics and Programme Implementation showed that the Index of Industrial Production (IIP) in September 2017 had grown at a slower rate of 4.1%. "The cumulative growth for the period April-September 2018 over the corresponding period of the previous year stands at 5.1%," the 'Quick Estimates' of IIP released by the ministry said. On the YoY (year-on-year) basis, the output of manufacturing sector expanded by 4.6%, while mining production inched-up by 0.2% and the sub-index of electricity generation increased by 8.2%. Among the six use-based classification groups, the output of primary goods which has the highest weightage of 34.04 grew by 2.6%. Intermediate goods output (which has the second highest weightage) inched up by 1.4%. Similarly, consumer non-durables output rose during the month by 6.1% and that of consumer durables by 5.2%. In addition, infrastructure or construction goods output increased by 9.5% and capital goods by 5.8%.

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:

financial markets (The Total Investment & Insurance Solutions)

RBI needs to align capital adequacy norms with Basel III norms -The Total Investment & Insurance Solutions

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13 November 2018

 

RBI (The Total Investment & Insurance Solutions)

The government is of the view that the Reserve Bank should resort to Basel III normsfor capital adequacy in banks rather than the present stricter guidelines which restrict the lending capacity of lenders, sources said. Currently, the RBI applies stricter norms and not those specified under Basel III for capital adequacy, leading banks to set aside higher capital for loans. The government has been in favour of alignment of the capital adequacy norms with Basel III norms, sources said, adding this issue may come up for discussion in the upcoming board meeting on November 19.

This assumes significance amidst growing tensions between the RBI and the government, with the Finance Ministry initiating discussion under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor. RBI Deputy Governor Viral Acharya had in a speech last month talked about the independence of the central bank, arguing that any compromise could be "potentially catastrophic" for the economy. According to the Basel Committee on Banking Supervision (BCBS) report, core capital requirement for banks as prescribed by the RBI is 1 per cent higher than what Basel III norms recommend. I

Indian banks as per RBI direction are required to maintain 5.5 per cent Common Equity Tier 1 (CET 1) as against 4.5 per cent required under the Basel III framework. This higher capital norms translate into additional capital requirement, restricting lending potential and income generation, the BCBS report released in 2015 said. "Several aspects of the Indian framework are more conservative than the Basel framework. This includes higher minimum capital requirements and risk weightings for certain types of exposures as well as higher minimum capital ratios. The RBI also applies certain restrictions to banking activities through its prudential framework," it said.

The RBI has fixed March 2019 as the deadline to meet capital requirements under the Basel III norms for banks. As per the report, while the Basel framework requires the application of capital standards to all internationally active banks, these have been made applicable in India to all scheduled commercial banks, including banks which are not internationally active. India has only four intThe Total Investment & Insurance Solutions

Reliance Infrastructure bags Rs 16.14 crore arbitration award against NHAI -The Total Investment & Insurance Solutions

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13 November 2018

 

Job (The Total Investment & Insurance Solutions)

Reliance Infrastructure NSE 2.06 % has bagged a Rs 16.14 crore arbitrationaward against National Highway Authority of India, a small win for the company which has Rs 8,000 crore of claims with different government agencies. With this win, Reliance Infrastructure has won a total of six arbitration awards amounting to around Rs 6,300 crore in cases of Delhi Metro Rail Corporation (DMRC), Goa Power Plant and NHAI Roads. The company now has over Rs 8,000 crore of claims under advanced stages of arbitration for engineering, procurement and construction (EPC) projects, Mumbai Metro and road jobs, a company statement said.

Reliance Infrastructure said Tuesday that a three-member arbitration tribunal ordered NHAI to pay Rs 16.14 crore by February 10, 2019 to the company. NHAI will have to pay interest of 12% per annum on the amount if it does not pay by the deadline. This order is in addition to a Rs 200 crore arbitration award the company bagged earlier in August for the same NHAI project for cost over-run and loss of revenue. 

“The need for current arbitration arose due to cost over-run in consultant fees during construction, delayed payment of grant and additional expenses due to change in law on TD Toll Road Private, a wholly owned subsidiary of Reliance Infrastructure, which NHAI did not reimburse as per the terms of the concession agreement,” the company said in the statement. TD Toll Road has designed, built and is operating an 87-km-long 4-lane national highway, NH45, connecting Trichy and Dindigul in Tamil Nadu. The project construction work was completed and commercial operation started in January 2012.

Many construction firms have funded large cost and time overruns on their own balance sheets in the absence of timely compensation from client. With a multi-year dispute resolution process, these companies are dependent on relief from the courts after PSUs and other government authorities challenge binding arbitration awards all the way to the Supreme Court. Industry says that these clients mechanically appeal all the way up to the apex court, thereby making a mockery of the dispute resolution process. The Total Investment & Insurance Solutions

SEBI asks credit rating agencies to provide liquidity status, historical average transition of companies being rated-The Total Investment & Insurance Solutions

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13 November 2018

 

credit ratings (The Total Investment & Insurance Solutions)

Market regulator Securities and Exchange Board of India (SEBI) has asked credit ratings agencies (CRAs) to include a specific section on liquidity in their reports to highlight the company financials. 

In its guidelines, SEBI said, "The press release shall include a specific section on 'liquidity', which shall highlight parameters like liquid investments or cash balances, access to unutilised credit lines, liquidity coverage ratio, and adequacy of cash flows for servicing maturing debt obligation. CRAs shall also disclose any linkage to external support for meeting near term maturing obligations."

To help investors understand underlying rating drivers better and make more informed investment decisions, CRAs are asked to make specific disclosures in the section on analytical approach. This includes, infusion of fund from parent group or government for servicing debt and providing rationale in case subsidiaries or group companies are consolidated for rating action.

For reviewing rating criteria, SEBI has asked ratings agencies, to assess inter-linkages of holding company and subsidiaries, holding company’s liquidity, financial flexibility and support to the subsidiaries.

"While carrying out 'monitoring of repayment schedules', CRAs shall analyse the deterioration in the liquidity conditions of the issuer and also take into account any asset-liability mismatch. While reviewing 'material events', CRAs may treat sharp deviations in bond spreads of debt instruments vis-à-vis relevant benchmark yield as a material event," SEBI said.

The market regulator has also asked credit rating agencies to publish information about historical average rating transition rates across various rating categories, so that investors can understand the historical performance of the ratings assigned by the CRAs. 

"Accordingly," SEBI said, "CRAs shall publish their average one-year rating transition rate over a five-year period, on their respective websites, which shall be calculated as the weighted average of transitions for each rating category, across all static pools in the five-year period." 

CRAs are also required to furnish data on sharp rating actions in investment grade rating category to stock exchanges and depositories on half-yearly basis, within 15 days from the end of half year on 31st March and 30th September.The Total Investment & Insurance Solutions