6th January 2015

Sector Updates 29th December – 4th January

Finnacle Investments

6th January 2015

6th January 2015

IT Sector Update

(Sector Analysis: Bharat Dasaka, Melvin Matthew, Arpita Verma)

Change in stock prices of various IT companies:

Company Stock price on 29thDec

Stock price on 2nd Jan

Change in %

TCS 2505.1 2570.85

2.62

HCL 1567

1605.05

2.43

Infosys 1952.1

2013.45

3.14

Wipro 548

557.25

1.69

Tech Mahindra 2566

2607.05

1.60

IT services firms to remain on strong growth path The improving economic scenario in the US, enhanced IT spending by banks and large deals

are expected to help Indian IT services firms post strong growth, similar to the pace seen last

year, analysts said.On-going trends in technology upgrades for infrastructure (as well as

applications) such as data centre modernisation and virtualisation and emerging areas such

as artificial intelligence, automation, IoT, collaboration and design technology will drive the

market in the future. Also growing demand from emerging markets and an integrated service

delivery models would lead to more alliances, partnerships, JVs and M&A.

Strong dollar to hit HCL Oct-Dec revenue India’s fourth largest software services provider HCL Technologies has said that its Oct-Dec

revenue will take a hit due to the strengthening of the US dollar against global currencies.

Since the revenues of the company are derived from multiple currencies from different parts

of the world, the revenues for the quarter to be reported in dollars would be affected

adversely.

Domestic IT market to grow 12.3% in 2015 The IT sector in the domestic market is expected to grow at 12.3% in the next year and reach

Rs. 1.7 lakh crores. The year-on-year growth in 2014 was 9.8% and that in 2013 was 8.1%.

After a very sluggish growth in 2013, the lowest since 2002, the year 2014 was a year of a

rather slow recovery.

6th January 2015

Telecom Sector Update

(Sector Analysis: Bharat Dasaka, Melvin Matthew, Arpita Verma)

Change in stock prices of various Telecom providers:

Top five telecom trends of 2015

LTE will become mainstream

o Indian players will launch 4G on a more efficient 1800 MHz spectrum

o Mobile data demand demand likely to drive up subscription

Public Wi-Fi to be a bigger phenomenon

o Smart Cities & Digital India and pvt sector initiatives will lead to spurt in Wi-Fi

hotspots

o Retail wired broadband likely to remain work in progress

Demand for wearables and smartphone security apps to increase

Unconventional data monetisation options will appear

o Telecom operators will offer differentiated network experiences

o Reason could be increasing divergence between data revenues and cost

Intense competition due to delayed M&A activities

o With new network launches in 2015, rapidly growing data market to see stiff

competition

o It will be on the lines of price wars witnessed in voice in 2010

Sources:

http://businesstoday.intoday.in/story/hcl-technologies-on-strong-dollar-impact-on-oct-dec-

revenue/1/213816.html

http://economictimes.indiatimes.com/tech/ites/domestic-it-market-to-grow-12-3-in-2015-touch-

rs-1-7-lakh-crore/articleshow/45716851.cms

http://economictimes.indiatimes.com/industry/telecom/top-five-telecom-trends-of-

2015/articleshow/45713887.cms

Company Stock price on 29th Dec

Stock price on 2nd Jan

Change in %

Bharti Airtel 353 364.85 3.356941

Idea Cellular 151.9 159.55 5.036208

Reliance Comm. 81 82.85 2.283951

6th January 2015

Pharma Sector Update

(Sector Analysis: Kanika Singh, Neha Kumar, Ravi Karanam)

Regulatory bodies for drug prices in states The government plans to extend its authoritarian wings to keep prices of drugs under strict check in every part of the country and save customers from paying more. The Centre is trying to set up medicine price monitoring bodies across the country to keep a close watch on real-time price fluctuations, the maximum retail price of drugs and their availability. Even though NPPA is monitoring prices at the moment the absence of sufficient field inspectors and physical proximity the centre finds it difficult to check the markets. So the government wishes to make a start from first tier cities and states where the presence of pharmaceutical companies is more. While states are to provide space for setting up these regulatory agencies, Centre allocates funds for expenditure on infrastructure and personnel. The decision comes in the wake of the government making efforts to enlarge the span of price control by getting more essential drugs under price control. However, strict price regulation has its own fight with many drugs supposedly going off the shelf and new drug launches dropping drastically in recent years. Regulatory bodies claim that companies are also flouting price caps regularly and in the absence of adequate field-force the violations remain unchecked.

Government to prioritize drugs, states to revive Jan Aushadhi Pharmacies To bring a fresh charter of life into the struggling Jan Aushadhi chain of pharmacy outlets which were set up to make affordable generic drugs available to people, the government plans to center on select medicines and states to improve the supply chain and support doctors to use generic names of medicines. The government is considering to dapper the list of drugs in fast-moving high consumption drugs where the price difference between branded generic version and the unbranded generic product is significantly high distributed through Jan Aushadhi outlets that constitute 40-50 mass consumption drugs from a huge list of 320 medicines which are part of the stock at present.

Lupin gets USFDA nod for HIV drug Drug firm Lupin has recently received hesitant nod from the US health supervisor to market a generic version of Prezista tablets which are used in treating HIV infection. The company now plans to market its Darunavir Ethanolate tablets in multiple strengths in the American market.

Darunavir tablets are prescribed for the treatment of HIV-1 infections which have annual US sales of USD 1.2 billion.

Many pharmaceutical companies faced USFDA wrath over data integrity issues Several data integrity issues which covered improper manufacturing practices and overlooking results while testing drugs have taken centre stage this year, with many domestic pharma firms being towed up by the US Food and Drug Administration (USFDA) over the issues.

6th January 2015 Actions against firms such as Sun Pharma, Wockhardt, Cadila Pharma, Orchid Pharma and IPCA Labs this year has been on these issues which were reflected in the admonition letters by the US regulatory supervisor.

In few cases, where the matter was not resolved by the firm satisfactorily, it resulted in a ban

on the drugs exported to US from large firms especially Sun Pharma and Wockhardt, leading

to loss of face as well as considerable revenues. With US being the largest market for

domestic generic companies which contribute 25-55% of revenues and with Indian supplies

being around 40% of medicines (in volume terms) to that market we can’t afford for more of

these issues and our regulations should be adopted in a such a way that we meet the

standards of FDA to avoid the embarrassment in the future.

Sources:

http://economictimes.indiatimes.com/articleshow/45748425.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

http://economictimes.indiatimes.com/articleshow/45722591.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

http://economictimes.indiatimes.com/articleshow/45690418.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

http://economictimes.indiatimes.com/articleshow/45674905.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

6th January 2015

Power Sector Update

(Sector Analysis: Anshu Mishra and Ankit Bacchuka)

Company Price Chg (%) EPS(Rs) P/E(x)

NTPC 144 (-0.35) 12.91 11.15

Power Grid Corpn 139.1 -0.29 8.71 15.97

NHPC Ltd 18.9 (-0.79) 0.77 24.55

Reliance Power 63.35 -0.24 3.7 17.12

JSW Energy 102.25 -0.44 6.67 15.33

Adani Power 45.1 -0.11 3.51 12.85

SJVN 25.35 -1.4 3.81 6.65

Major News:

Suzlon Energy Ltd’s Senvion unit has won four wind-turbine orders of 63,5 MW capacity in the UK which includes 14 Senvion MM82 machines of 28.7 megawatts at the Penmanshiel wind farm. The project is due for completion in fall 2016, and the deal includes a 20-year service contract.

Various solar and wind energy projects have suffered a “setback” due to shortage of funds. The parliamentary panel’s report found that the new and renewable energy ministry had demanded Rs40,000 crore, but was allocated only Rs19,113 crore.

The government has proposed imposing up to Rs.1 crore fine on entities violating norms under the Electricity Act, 2003. The proposed penalty limit would be a steep jump as it is just Rs.1 lakh under the existing provision.

The Mahan coal block in Madhya Pradesh has been earmarked for the power sector under the government’s upcoming auctions, which means the Aditya Birla Group won’t be able to bid for the block that it owned jointly with Essar Power Ltd.

Government will decide whether to accept the sole bid of NTPC for proposed ultra mega power projects (UMPPs) in Odisha and Tamil Nadu with proposed cost of 25,000 crore as it has become sole bidder after withdrawl of private players from bidding process citing difficulties in securing finances.

Source:

http://www.livemint.com/Industry/bCjWAHwvhDDUjZQbVXJldI/Suzlon-Energys-Senvion-

unit-wins-4-UK-windpower-orders.html?utm_source=copy

http://www.livemint.com/Industry/v6Ga9slCAnoOuA6Krrm38L/Government-to-decide-

fate-of-Odisha-Tamil-Nadu-UMPPs-on-Mon.html?utm_source=copy

http://www.livemint.com/Companies/xH4Y7DvOUsRlNaxtsC76dI/Hindalcos-erstwhile-

coal-block-Mahan-earmarked-for-power-se.html?utm_source=copy

6th January 2015

Oil and Gas Sector Updates

(Sector Analysts: Ashwin Jain, Mili, Piyush Sethi)

Weekly stock price performance:

Stock Stock Price (in INR) As on 5th Jan

% Gain/Loss

Oil Drilling and Exploration ONGC 353.15 +1.80 GAIL 446.00 +0.92

CAIRN India 243.95 +1.99 Oil India 563.85 -0.59 Petronet LNG 212.00 +1.97

Refineries

RIL 875.85 -2.36 IOC 338.20 +1.88

BPCL 645.65 -0.22 HPCL 561.70 +3.22

LPG cylinder subsidy registration in Odisha

LPG registration for availing cash subsidy on purchasing cooking gas has increased to 39%

(as of date) of the consumer base from 12% (three weeks ago). As per the new scheme, even

without possessing an Aadhaar card the person can receive the cash subsidy through online

payment by linking the LPG cylinder consumer number with their bank accounts. There will be

a further grace period after March 2015 till June 2015 as per the new scheme. After July 2015

there will be no subsidy on LPG cylinders across the country.

Fall in the Brent crude to $56 a barrel Brent crude has reached a five and half year low. There has been

an oversupply in the oil markets due to the increasing output of

light oil from US shale and due to lower consumption. Some of

the oil ports have been closed due to the clashes in Libya, as a

result exports got reduced from the OPEC producer. Also

Benzene, phenol, acetone prices were affected.

Unified Gas allocation policy As per the new policy the proposed priority list is - CNG and LPG, strategic sectors,

petrochemical and LPG plants, urea and power plants. This policy will eliminate multiple

anomalies and will correct many imperfections which are present in the current policy

allocation. Under this, natural gas pricing guidelines changed from $4.2 per unit to $5.6 per

unit for all categories, allocation of APM gas to strategically important plants. In the current

6th January 2015

policy there is an ambiguity regarding extraction of higher fractions. Replacement of liquid

fuels by CNG and PNG (clean fuels) will help in saving the foreign exchange.

Non-subsidized cooking gas or LPG prices have been cut down by Rs. 43.50 a 14.2kg

cylinder and jet fuel prices have been cut by 12.5%. The companies are in a plan to use the

benefit due to the dip in the oil prices to offset the inventory losses of around Rs 14,000 cr.

Sources:

http://www.business-standard.com/article/current-affairs/registration-for-lpg-cylinder-subsidy-on-track-in-odisha-114122901221_1.html

http://www.business-standard.com/article/reuters/oil-hits-5-1-2-year-low-below-57-on-supply-glut-114123000992_1.html

http://www.business-standard.com/article/economy-policy/why-govt-wants-a-unified-gas-allocation-policy-114123101107_1.html

http://www.business-standard.com/article/economy-policy/non-subsidised-lpg-price-cut-by-rs-43-5-a-cylinder-atf-becomes-12-5-cheaper-115010100285_1.html

http://www.livemint.com/Money/TQqTJa36fTnE1f8LB6jXlI/2015-outlook-for-oil-and-gas-sector.html

6th January 2015

FMCG Sector Update

(Sector Analysts: Amrit Pal Singh)

Current market price of key companies

STOCK CMP(in INR)

ITC 369.75

Dabur 231.45

Marico 324.95

Colgate 1833.60

Nestle 6334.90

Future outlook on FMCG

The FMCG sector was an underperformer in the year 2014. The under-performance is not

only a result of the market’s shift towards cyclical industries, which have regained favour, but

also a result of slower sales growth for consumer companies. In the first half of 2014, sales

growth was a mere 7% compared with 13% a year ago, according to market researcher

Nielsen Co. The second half is expected to be slightly better. At the start of 2015, the outlook

looks brighter, with predictions of an improvement in sales growth while soft trends in raw

material costs augur well for margins as well.

Niche FMCG brands go web first to test the market

FMCG companies are planning to pre launch their niche and premium products on e-

commerce platforms before launching it in the market. This will help them test acceptability of

their products in the marketplace. With the help of e-commerce companies are being able to

reach as far flung areas as Andaman & Nicobar to North Eastern states. Such sites are

serving as new distribution channel for the companies. Getting right audience is also easy for

the companies through theses websites.

ITC: Easing regulatory overhang, valuations key positives

ITC has shown a dull performance on the stock markets this year. With a return of 14% ITC

has underperformed its peers as well as the index. Falling cigarette volumes in the wake of an

intensifying tax structure both at the Centre and state levels weighed heavily on the stock.

For 2015 though, the trend is likely to reverse, believe analysts. The government’s recent

decision to put on hold anti-cigarette proposals such as a ban on sale of loose cigarettes and

raising the age limit for smoking from 18 to 25 years is one reason for their optimism.

Attractive valuation is another.

Sources:

http://www.livemint.com/Money/X8Lfe9CnrS5IlfQrOPgjJM/FMCG-begins-2015-on-a-brighter-

note.html

http://www.business-standard.com/article/companies/itc-easing-regulatory-overhang-valuations-

key-positives-114122900307_1.html

http://www.thehindubusinessline.com/companies/now-niche-fmcg-brands-go-web-first-to-test-

the-market/article6749257.ece

6th January 2015

Banking and Financial Services Sector Update

(Sector Analysts: Jyoti Gupta, Ankita Kumar, Akshat Kulshrestha)

Week performance of banking stocks

STOCK PRICE % CHANGE

ICICI Bank 363.05 0.21 HDFC Bank 957.15 -0.84 Axis Bank 517.55 0.63 Bank of Baroda 1095.95 -0.03 SBI Bank 312.75 -0.79

Axis Bank Ltd. climbed 0.6 percent even as the 12-member S&P BSE Bankex dropped 0.3 percent.

HDFC stock fell 0.84 percent this week, Bank of baroda fell by 0.03 percent and State bank of India

fell by 0.79 percent. ICICI bank grew by almost 0.21 percent and closed at 363.05.

Major News

ING Vysya employees will strike work seeking protection on January 7, 2014 Staff attached with trade union of ING Vyasa Bank declared that they will start their work seeking protection from January 7. Shareholders will assemble and approve the merger of bank with Kotak Mahindra Bank. They declared that they are demanding that all the employees of ING Vyasya should be taken over by Kotak. On the whole, they demand high job security.

CBI sub-inspector, bank executive held for taking bribe CBI arrested sub-inspector, SK Jha and chief minister of Syndicate Bank, Sambi Reddy both working in Banking Securities and Fraud Cell. The accused were allegedly demanding a bribe of Rs 25 lakh from a person, who was being investigated in a bank fraud case, to dilute investigations against him.

Morgan Stanley raises target price of Axis, Yes Bank, HDFC, HDFC Bank, LIC

HF Strong balance sheets should help private lenders assets grow and EPS surge by >20% for

next 2-3 years, says Morgan Stanley report. Bank Nifty will surge by 25% in 2015 despite

weak performance of public sector banks. Brokerage expects bulk of state owned banks to

become even more constrained by lack of capital. This will help government to raise capital

form markets.