Trendlyne Blog: The Baseline, Latest on stock market and finance in India and the world.

14 Oct 2016

Axis Bank, India Cements and Jamna Auto get upgrades in buildup to Q2 results

Stock	Broker	Prev Reco	Current Reco	Prev Target	Curr Target	LTP	Curr Upside (%)	Change made
Kolte - Patil Developers Lim..	HDFC Securities	Buy	Buy	257.00	171.00	128.00	33.59%	Target
Bharat Petroleum Corporation..	Emkay	Buy	Hold	587.00	616.00	667.10	-7.66%	Reco Target
Alkem Laboratories Limited	Motilal Oswal	Buy	Neut.	1800.00	1800.00	1685.00	6.82%	Reco
Jamna Auto Industries Limited	CD Equisearch	Acc.	Buy	159.00	265.00	218.30	21.39%	Reco Target
Axis Bank Limited	Angel Broking	Acc.	Buy	494.00	630.00	522.00	20.69%	Reco Target
The India Cements Limited	ICICI Securities Limited	Hold	Buy	145.00	190.00	157.50	20.63%	Reco Target

India Cements has seen a reco and target upgrade in the build up to its results. Rising cement prices have buoyed up the cement industry in general, and India Cements is one of the stocks that successfully doubled investor value in the past year. Strong infra growth predictions for the coming six months, and higher rural incomes boosting spending on construction, is likely to keep this stock on the up.
Axis Bank is on a sharp upswing, landing both reco and target upgrades. Axis has been aggressively pursuing new markets, and has been able to outpace industry growth, delivering 19% CAGR so far in its loan book. The bank also tied up in August with Suvidhaa to provide 'nano credit' to the highly underserved rural credit market, and is following ICICI Bank in piloting blockchain transactions.
Jamna Auto's impressive Q1 performance after two uninspired quarters has stoked interest and optimism in the company, and its seen both its recommendation and target upped. The company will benefit from the boost in the auto sector and freight this season - increased agriculture output has boosted truck demand, and the company is the dominant supplier of leaf and parabolic springs for the commercial vehicle market.
Alkem Labs is currently trading above its 150 day SMA, but the company stock was downgraded recently to 'Neutral'. The company ran afoul with the US regulator, the FDA, whose inspection of its Daman plant has found 13 violations. The Daman facility accounts for 30% of the company's FY '16 US revenues (6% of total revenues). Addressing the FDA objections will be key to the company getting an important approval certification in November.
BPCL has seen a recent 'hold' call for its stock. The stock is trading at a year high as well as above its 30 day SMA. BPCL has aggressive refinery expansion plans, including in the northeast to take advantage of Central government tax incentives to invest in the region.

The Baseline

14 Oct 2016

Infosys projects weaker revenue for the year, Amazon Global launches in India

The big news today is Infosys' Q2 results, where the company announced profits QoQ as up 5%, but still cutting its guidance for the revenue it expects for the year, from 10.5-12% to 8-9%. Brokers had predicted a guidance drop, and the stock has taken a beating in early trading today following the results, falling 1.6% and crossing below its 30 day SMA. The drop in guidance reflects management anxiety about longer-term growth, with CEO Vishal Sikka saying that the company needs to move from a "cost-based, people only model" to one "amplified by AI and software". That shift however, is outside the comfort zone of Infosys and an Indian IT industry that has long relied on a low-cost service approach for growth.
India is only the third market outside the US - after Mexico and China - to now have access to Amazon Global, which will make international products available to Indian customers in INR, with delivery in less than two weeks. This would include products sold at deep discounts during Black Friday sales. This move is likely to further ramp up protests by offline retailers against online marketplaces.
2016 has turned out to be the Year of the IPOs, with 21 companies raising almost $3 billion in funds in the first nine months of this year. This has already beaten IPO records since 2007. Of the IPOs, Quess Corp had the most impressive listing gains, scoring 58.6% over its offer price. RBL Bank and Advanced Enzymes both listed with a premium of over 30%.
Photo of the day: First 'knife-edge' stunt by a plane, as it flies between two hot air balloons, in England. Ben Birchell/ Guardian

The Baseline

13 Oct 2016

Profits burn down for Samsung India, ICICI Bank pilots blockchain

Profits burn down for Samsung India this quarter: The decision by Samsung to withdraw the fire-prone Note 7 from all markets is likely to result in a Rs. 420 crore hit for the company in India this quarter, and pave the way for Google and Apple to grab market share at the top end. Samsung had discontinued the Note 5 model to introduce Note 7, but may now re-introduce the older model to recoup whatever losses that are possible.
ICICI Bank and Dubai's Emirates Bank are joining hands to use blockchain technology, in a first for both geos. The blockchain effort is likely to cut transaction costs and make international transactions near-real time. Savings for both banks is likely to be significant if the pilot is successful. Remittances from the Middle East to India are a big part of international transactions, and UAE, where Emirates Bank is based, is the highest contributor of remittances to India.
Even as Toyota and Suzuki have announced a new partnership to expand market share in India, Renault India is set to recall its top selling entry-level Kwid model, with 50,000 cars sold between October and May potentially seeing problems with a faulty fuel system.
A meeting of rivals?: In a vindictive move, after India compelled other SAARC members to pull out of a summit in Pakistan, Pakistan may be discussing a SAARC-like group in Asia that excludes India, according to a Pakistani newspaper. The report comes just as Dhaka prepares to host Chinese President Xi Jinping with the hopes of getting investments from China. India had earlier foiled an effort by Pakistan to get China added to SAARC.
Photo of the Day: Dussehra celebrations this year in some cases acknowledged India-Pak tensions, with effigies of Nawaz Sharif and Pakistan symbols burnt as demons. NYT/Getty

The Baseline

12 Oct 2016

Toyota and Suzuki may form a partnership to expand car market share

Toyota and Suzuki are exploring a possible business partnership, one that will give Toyota much greater access to growing car markets like India. Suzuki is currently India's leading car manufacturer through Maruti Suzuki. A partnership with Toyota would benefit Suzuki as well, which has long focused on small cars but would now have access to Toyota's technology, including self-driving cars and electric motors.

Toyota has long seen emerging markets like India a difficult nut to crack. A partnership would also help both the companies address a global car market that is rapidly changing with new battery-powered technologies, as well as self-driving solutions where tech companies like Google are leading over traditional car companies.

The Baseline

12 Oct 2016

SBI set for weak Q2 results, Uber launching bus and van hailing services

State Bank of India is currently trading above its 200 day SMA, but the bank stock is likely to fall again on dismal Q2 results. Kotak has projected a 40% fall in net profit for SBI YoY due to provisions against bad loans, hopefully buffetted by higher loan recoveries. The news comes just as Vinod Rai, who is helping oversee turnaround in the sector, said that two large PSU banks may merge after addressing their bad assets.
Uber is now preparing to provide bus and van services in India, in an expansion the company calls 'Uber Everything'. The idea is to offer every option available for a passenger to go from point A to point B. The pilot in India will be managed from Bangalore's technical center. Uber had previously offered UberMoto, the two wheeler service, but had to retire it after regulatory pushback, and the insistence from the Karnataka government that the service was illegal.
What is the world's best-performing IPO? That would be Luen Wong Group Holdings Ltd, which jumped 1,438% on the first trading day after its April IPO and is now 6,715% above its offer price. This is an outcome less because of company performance and more due to the nature of Hong Kong's stock market, where over 50 companies had their market value jump over 1000% in a six month period.
GST reform is likely to push India past 8% GDP growth, says an S&P report. The estimate for India has gone up even as China struggles to maintain its growth footing and is now averaging around 6.1%.
Photo of the day: A man dressed as Spiderman cleaned windows at a children's hospital in Brazil and joked with the patients during the country's Children's Day. Reuters

The Baseline

11 Oct 2016

Mountain of bad loans block road to growth, Facebook launches Workplace

Bad loans in banks - the biggest choke to investment and credit growth in India - have grown 15% in the six months from December to June, to $138 billion, says Reuters. Weak credit and investment is already weighing down industrial production numbers, which contracted by 0.7% in August. The RTI request filed by Reuters resulted in the release of these numbers, just as the government has been weighing options to clean up these bad assets. The options include setting up a 'bad bank' that buys up these assets, a bank by bank cleanup, or asset swaps. Former RBI governor had opposed the bad bank option, but it remains on the table. Any entity set up would have to address this problem with government funds, meaning that one way or another, the taxpayer will be on the hook for this debt.
While bank NPAs remain a growth overhang, the government is working with McKinsey to address other issues of regulation, to unshackle businesses and make it easy to grow in India. An early focus has been on eliminating the paperwork required by businesses, and digitizing many requirements including labour certifications.
Facebook has launched Workplace, a company communication tool which puts the company in direct competition with businesses like Slack and Skype. Workplace does not connect to FB personal accounts, and while it has a news feed, the feed would be limited to company announcements and memos. The tool also allows voice and video calls.
Photo of the Day: militants have taken refuge in a government entrepreneurship development institute and are clashing with police in Pampore, Kashmir. The militants apparently crossed over via the Jhelum river. AP/Firstpost

The Baseline

10 Oct 2016

An unhappy Dussehra for Indian IT, new Pharma IPO upcoming

A big bang Pharma IPO: What is set to be the pharma industry's biggest IPO in a decade is coming up in early 2017, with Eris LifeSciences' Rs. 2000 crore IPO. The company, which figures in the top six in India for treating diabetes and high blood pressure, is seeking a Rs. 10,000 crore valuation. Eris currently clocks revenues of Rs. 800 crore and profits of Rs. 200 crore.
Not a happy Dussehra: there are some dismal second-quarter results are coming up for India's IT services companies, as everyone from TCS, Infosys and the smaller players are hit by weak spending, pricing pressures and automated offerings that are taking a big bite out of the IT services pie. The second-quarter is usually the better-performing quarter of the financial year, and this therefore does not bode well for yearly results. Infosys, which has already lowered its guidance once, is expected to do so again. Infosys has seen 5 price downgrades from brokerages in recent months, and TCS has seen three downgrades in the last month alone.
Repco Home Finance is the latest company to come under scrutiny by the CBI, with the agency searching company and home premises of directors after allegations of favoritism to some customers. The company insists that regulations were followed: the allegations are apparently regarding a Rs. 6 crore loan taken by a Coimbatore-based firm.
Amid recriminations, anger from telecom rivals, Reliance Jio has claimed a 'world record' in crossing 16 million subscribers in its first month. However, it remains to be seen if these subscribers stay on after the free data services expire in three months.
Photo of the day: India's indigenous fighter jet Tejas steals the show on Air Force Day. The maneuvers included the aircraft standing vertical in the air, loops and low-speed turns. Firstpost/Naresh Sharma

The Baseline

07 Oct 2016, 02:48PM

Vodafone leads in spectrum auction, Tata losing Rs 2 crore a day in legal battle with Docomo

The spectrum auction ended with Vodafone putting down the most amount of money, purchasing over Rs. 20,000 crore of spectrum. Airtel came in second, followed by Jio and Idea. Tata Teleservices faced strong bidding competition from Idea in renewing its Mumbai airwaves and ended up spending over Rs. 4,000 crore to retain its spectrum. Telcos however, could not bid on the highly efficient 700 MHz spectrum due to the steep pricing for the band.
After ICICI Prudential, another insurance company is preparing to list. SBI is now in talks with private equity investors to sell 5% of SBI Life, in discussions which will help set the price of the eventual IPO issue. SBI owns 74% in the life insurer. SBI is seeking a valuation of at least three times SBI Life's FY 16 value of Rs13,000 crore. ICICI Prudential Life listed at a multiple of over three times its FY16 value.
The Tata group is being sued by Docomo for damages and breach of contract,in a suit worth over $1.17 billion. The case has been filed in an American court, over Tata's refusal to pay the exit price for a buyout, which was agreed upon when Docomo invested in Tata Teleservices in 2009. The Tata group is currently losing Rs. 2 crore a day in court fees and costs.
GoAir is challenging the use of 'Go' in IndiGo's name and website. Google has also been named as a defendent in the suit, for reasons as yet unclear. The court justice remarked that its good that GoAir is not demanding that Google also drop the 'Go' and change the company name to 'Ogle'.

Photo of the day: Children fleeing ISIS-controlled areas in Syria ride in a pickup truck. Reuters

The Baseline

06 Oct 2016

Adani Transmission spends Rs. 2000 cr on Reliance Infra transmission assets, Thane police raid call centres

Adani Transmission has purchased the transmission assets of the Anil Ambani promoted Reliance Infra, consolidating its presence in the space and becoming the largest private operator of power transmission networks in India. The deal closed at an estimated Rs. 2,000 crore, and follows close on the heels of Adani's acquisition of GMR Energy's power transmission projects and of the Aravali Transmission Company.
Thane Crime officials have raided seven call centres and arrested 70 employees for threatening US citizens and extorting them of money. The employees, trained to speak in an American accent, would contact US citizens posing as Internal Revenue Service tax officials, threatening them with jail terms and fines for irregular tax filings. They would then demand bank account details, and siphoned money from their accounts. The daily turnover of these call centres was to the tune of Rs 1.5 crore, with an annual collection of over Rs 400 crore.
Should you buy stocks during cross-border unrest? The BSE index fell by 1.6% on 29 September, the day the surgical strikes against Pakistan were reported. Markets rose significantly as the 1999 Kargil conflict was ongoing. However the Kargil war was a short-term conflict, and there is historical evidence that long-term tensions impact the economy and stock markets significantly, reducing trade and bringing down industrial production and consumer optimism.
Amazon has seen a big bump in its India sales this season, with sales growing 3X compared to last year. 70% of new customers came from Tier 2 and Tier 3 towns, suggesting that customer optimism and spending is widespread, aided by a better-than-average monsoon. The biggest selling item has been interestingly, the Amazon Prime membership in a country where analysts often claim that customers do not buy subscriptions or pay premiums for faster delivery/service.
Photo of the day: A treehouse Army lookout on the Line of Control. Firstpost

The Baseline

05 Oct 2016

Google puts India in focus, Aditya Birla group plans sell-off of key businesses

Automation is threatening close to 70% of jobs in India, and 77% of jobs in China, says the World Bank. Automation of many industrial and service jobs, the bread and butter of growth in these countries, could mean large scale unemployment at a time India badly needs strong job growth for the many millions of young workers coming of age. India is among the youngest countries in the world, and the government will have to figure out new ways to address this challenge. Some solutions that are already being proposed in other countries include a universal basic income for all adults.
Google puts India in focus, making it among the first six markets it will launch the Pixel smartphone at a price of Rs 57k. The phone comes with virtual reality enabler Daydream, Google Assistant built-in, and unlimited cloud storage. The fancy features and the phone's appearance puts it in direct competition with top end phones including the Samsung Galaxy series and Apple iPhones. This is a big jump that Google is taking into the hardware space, with its additional announcement of Google Home.
The new RBI Governor Urjit Patel marked a definitive end to the Rajan era, with a cut to the repo rate - the borrowing rate for banks - from 6.5% to 6.25%. The RBI said all six members of the new Monetary Committee voted in favour of the rate cut, and cited falling inflation as the reason for the move. In the future the number of favorable votes in favor or against rate cuts are likely going to be an additional indicator to markets how optimistic the RBI is about inflation and growth.
In light of the upcoming Adiya Nuovo merger with Grasim, the Aditya Birla group may be looking to sell its minority stakes in the telecom tower and financial services businesses, while Grasim fully exits from its fertilizer and insulator companies. The telecom tower business is a subsidiary of Idea Cellular.
Photo of the day: Brian Rakowski, Google VP of products, talks about the Pixel phone at the launch event. AP Photo/Eric Risberg