Wednesday, May 11, 2016

THE END SESSION ( 11 / 05 )

Key indices slide on concerns about foreign equity flows after amendments to Mauritius tax treaty


Concerns that future equity inflows into India would be hit in the aftermath of amendments to the bilateral India-Mauritius tax treaty weighed on the domestic bourses. The barometer index, the S&P BSE Sensex, shed 175.51 points or 0.68% to settle at 25,597.02. The losses for the Nifty 50 index were lower than the losses for the Sensex in percentage terms. The Nifty declined 38.95 points or 0.49% to settle at 7,848.85. Nonetheless, both these key benchmark indices recovered from an initial steep slide as market took solace in the so-called grandfathering of investments made in India from Mauritius before 1 April 2017 in the amended bilateral India-Mauritius tax treaty. As per the amendments to the bilateral India-Mauritius tax announced by India's finance ministry after trading hours yesterday, 10 May 2016, with effect from 1 April 2017 capital gains tax will be levied on sale of shares in India from a resident of Mauritius.

There will be a benefit of 50% reduction in the capital gains tax rate during the transition period from 1 April 2017 to 31 March 2019 subject to the Limitation of Benefits Article, whereby a resident of Mauritius (including a shell/conduit company) will not be entitled to the benefit of 50% reduction in tax rate if it fails the main purpose test and bonafide business test. A resident is deemed to be a shell/ conduit company, if its total expenditure on operations in Mauritius is less than Rs 27 lakh (Mauritian Rupees 1,500,000) in the immediately preceding 12 months. Taxation in India at full domestic tax rate will take place from financial year 2019-20 onwards. Mauritius is the top source of foreign funds into India.

Following the amendments to the bilateral India-Mauritius tax treaty, India and Singapore will need to renegotiate their own double tax-exemption treaty, as rules say that any changes to the capital gains exemption clause in the treaty with Mauritius would also lead to changes in the agreement with Singapore. Singapore is another major source of foreign funds into India.

Stocks of public sector banks, telecom firms and index heavyweights ITC, HDFC, Infosys and Reliance Industries led losses as the two key benchmark indices snapped a two-day winning streak.

Tata Motors dropped in volatile trade after announcing monthly global sales volume data. Kotak Mahindra Bank rose after the bank announced strong Q4 results. Hindalco Industries rose after its US subsidiary Novelis Inc reported strong Q4 results. Asian Paints rose after announcing good Q4 results. Zee Entertainment Enterprises (Zee) jumped after the company announced good Q4 results.

In overseas stock markets, European shares slipped as some weak earnings pushed the market lower after two previous days of gains. Earlier during the global day, Asian stocks ended on a mixed trend. US stocks registered broad based gains yesterday, 10 May 2016, as oil prices rallied.

The Sensex lost 175.51 points or 0.68% to settle at 25,597.02, its lowest closing level since 6 May 2016. The index lost 363.29 points or 1.4% at the day's low of 25,409.24. The index declined 10.04 points or 0.03% at the day's high of 25,762.49.

The Nifty fell 38.95 points or 0.49% to settle at 7,848.85, its lowest closing level since 6 May 2016. The index lost 106.90 points or 1.35% at the day's low of 7,780.90. The index rose 5.30 points or 0.06% at the day's high of 7,893.10.

The BSE Mid-Cap index up 0.17%, outperforming the Sensex. The BSE Small-Cap index lost 0.03%. The decline in this index was lower than the Sensex's decline in percentage terms.

The market breadth indicating the overall health of the market was negative. On BSE, 1,461 shares fell and 1,097 shares rose. A total of 161 shares were unchanged.

Total turnover on BSE amounted to Rs 2566 crore, higher than turnover of Rs 2349.59 crore registered during the previous trading session.

Among the sectoral indices on BSE, the S&P BSE Telecom index (down 2.34%), the BSE IT index (down 0.72%), the BSE Power index (down 0.75%) and the BSE Realty index (down 0.88%) underperformed the Sensex.The BSE Healthcare index (down 0.6%), the BSE Auto index (down 0.53%) and the BSE Oil & Gas index (down 0.62%) outperformed the Sensex.

Stocks of public sector banks declined. Punjab National Bank (down 3.75%), Canara Bank (down 3.36%), Union Bank of India (down 3.39%), IDBI Bank (down 2.17%), State Bank of India (down 2.3%) and Bank of Baroda (down 0.32%) edged lower.

Indian Bank fell 4% at Rs 90.05 after net profit fell 59.02% to Rs 84.49 crore on 2.34% increase in total income to Rs 4513.60 crore in Q4 March 2016 over Q4 March 2015. The result was announced during trading hours today, 11 May 2016. The bank's gross non-performing assets (NPAs) stood at Rs 8827.04 crore as on 31 March 2016 as against Rs 7071.35 crore as on 31 December 2015 and Rs 5670.44 crore as on 31 March 2015. The ratio of gross NPAs to gross advances stood at 6.66% as on 31 March 2016 as against 5.61% as on 31 December 2015 and 4.40% as on 31 March 2015. The ratio of net NPAs to net advances stood at 4.20% as on 31 March 2016 as against 3.17% as on 31 December 2015 and 2.50% as on 31 March 2015.

The bank's provisions and contingencies (excluding tax provisions) rose 44.62% to Rs 813.58 crore in Q4 March 2016 over Q4 March 2015. Provision coverage ratio was at 53.37% as on 31 March 2016.

Oriental Bank of Commerce (OBC) declined as sticky loans surged in Q4 March 2016. The stock fell 2.75% to Rs 84.95. The bank's gross non-performing assets (NPAs) stood at Rs 14701.78 crore as on 31 March 2016 as against Rs 11824.90 crore as on 31 December 2015 and Rs 7666.22 crore as on 31 March 2015. The ratio of gross NPAs to gross advances stood at 9.57% as on 31 March 2016 as against 7.75% as on 31 December 2015 and 5.18% as on 31 March 2015. The ratio of net NPAs to net advances stood at 6.7% as on 31 March 2016 as against 4.99% as on 31 December 2015 and 3.34% as on 31 March 2015.

OBC reported a net profit of Rs 21.62 crore in Q4 March 2016 compared with the net loss of Rs 178.44 crore in Q4 March 2015. Total income fell 4.68% to Rs 5451.60 crore in Q4 March 2016 over Q4 March 2015. The result was announced during trading hours today, 11 May 2016.

OBC reported net profit in Q4 March 2016 on the back of tax reversal. The bank reported pre-tax loss of Rs 147.38 crore in Q4 March 2016. There was a tax reversal of Rs 169 crore in Q4 March 2016.

The bank's provisions and contingencies (excluding tax provisions) fell 7.27% to Rs 1026.11 crore in Q4 March 2016 over Q4 March 2015. Provision coverage ratio was at 51.16% as on 31 March 2016.

Stocks of private sector banks were mixed. ICICI Bank (down 0.62%), HDFC Bank (down 0.5%) and IndusInd Bank (down 0.32%) declined. Axis Bank (up 2.16%) edged higher.

Yes Bank rose 0.68% at Rs 956.25. The stock hit high of Rs 962 in intraday trade, which is also a record high for the stock. The stock hit low of Rs 931.50 in intraday trade. Yes Bank is seeking shareholders' nod for raising up to $1 billion from issue of equity shares and other financial instruments or securities convertible into equity shares. The issue will be consummated in one or more tranches as the company's board of directors may in its absolute discretion decide, according to a notice issued to the shareholders of the bank pertaining to the company's annual general meeting to be held on 7 June 2016. The aggregate amount to be raised from the equity issue will be restricted to 15% equity dilution, the bank said in the notice. Yes Bank is also seeking shareholders' nod for an enabling resolution to raise up to Rs 10000 crore from issue of debt securities.

Kotak Mahindra Bank rose after the bank announced strong Q4 results. The stock rose 1.34% at Rs 731.15. The bank's net profit rose 31.99% to Rs 695.78 crore on 52.26% rise in total income to Rs 4947.32 crore in Q4 March 2016 over Q4 March 2015. The results are not comparable due to merger of ING Vysya Bank with Kotak Mahindra Bank, which took effect from 1 April 2015.

The bank's gross non-performing assets (NPAs) stood at Rs 2838.11 crore as on 31 March 2016 as against Rs 2690.34 crore as on 31 December 2015 and Rs 1237.23 crore as on 31 March 2015. The ratio of gross NPA to gross advances stood at 2.36% as on 31 March 2016 as against 2.3% as on 31 December 2015 and 1.85% as on 31 March 2015. The ratio of net NPA to net advances stood at 1.06% as on 31 March 2016 as against 0.96% as on 31 December 2015 and 0.92% as on 31 March 2015.

The bank's provisions and contingencies spurted 199.38% to Rs 200.41 crore in Q4 March 2016 over Q4 March 2015.

On a consolidated basis, Kotak Mahindra Bank's net profit rose 15.63% to Rs 1055.23 crore on 28.16% increase in total income to Rs 7910.41 crore in Q4 March 2016 over Q4 March 2015.

Telecom stocks edged lower in choppy trade. Bharti Airtel (down 2.55%), Idea Cellualar (down 1.46%) and Reliance Communications (down 2.16%) declined. The Supreme Court today, 11 May 2016, struck down the telecom regulator's directive imposing penalty for call drops on telecom operators. The Apex court called the directive unconstitutional and arbitrary. The Supreme Court ruled that the Parliament can make and enact a call drop compensation rule, adding that the authority of the Telecom Regulatory Authority of India (TRAI) remains intact. It, however, questioned the regulator's process of arriving at the call drop decision, report added.

TRAI last October had imposed a penalty of Rs 1 per call dropped with a maximum penalty of Rs 3 per day on telecom operators for each call dropped on account of an error on the part of the telecom operator.

Shares of Bharti Infratel declined 2.28% at Rs 370.45. Bharti Infratel is a telecom tower arm of Bharti Airtel.

Pharma stocks declined. Dr Reddy's Laboratories (down 2.02%), Alkem Laboratories (down 1.51%), Wockhardt (down 1.4%), Lupin (down 1.33%), Ipca Laboratories (down 0.66%), Sun Pharmaceutical Industries (down 0.79%), Cipla (down 0.2%), Cadila Healthcare (down 0.14%), Divi's Laboratories (down 0.4%) and GlaxoSmithkline Pharmaceuticals (down 0.69%) edged lower. Strides Shasun (up 1.29%), Glenmark Pharmaceuticals (up 0.26%) and Aurobindo Pharma (up 0.25%) edged higher.

Index heavyweight and software major Infosys fell 0.95% at Rs 1,201.05. The stock hit a high of Rs 1,214.95 and a low of Rs 1,193 in intraday trade.

Hindalco Industries rose after its US subsidiary Novelis Inc reported strong Q4 results. The stock rose 1.95% at Rs 91.60. Novelis' net profit excluding tax-effected special items rose 35% to $50 million on 14% fall in revenue to $2.4 billion in Q4 March 2016 over Q4 March 2015. The result was announced after trading hours in India yesterday, 10 May 2016. Excluding the impact of metal price lag, adjusted earnings before interest, taxation, depreciation and amortization (EBITDA) rose 29% to $277 million in Q4 March 2016 over Q4 March 2015. The increase in EBITDA was a result of record global shipments in a seasonally strong quarter, as well as positive product mix primarily driven by a 23% increase in automotive shipments. The strong growth in EBITDA was additionally driven by excellent operational performance and favorable currency effect. Novelis attributed the decline in revenue to lower average aluminum prices and local market premium.

Asian Paints rose after announcing good Q4 results. The stock rose 0.97% at Rs 907.40. The company's consolidated net profit rose 19.9% to Rs 408.80 crore on 12.3% rise in income from operations to Rs 3971.30 crore in Q4 March 2016 over Q4 March 2015. The result was announced at the fag end of the session today, 11 May 2016.

On standalone basis, Asian Paints' net profit rose 13.86% to Rs 386.95 crore on 11.11% growth in total income to Rs 3262.67 crore in Q4 March 2016 over Q4 March 2015.

Index heavyweight and cigarette maker ITC declined 1.64% to Rs 318. The stock hit high of Rs 322.80 and low of Rs 316.10 in intraday trade.

Index heavyweight and housing major HDFC lost 1.22% to Rs 1,203.65. The stock hit high of Rs 1,220.55 and low of Rs 1,200.05 in intraday trade.

Zee Entertainment Enterprises (Zee) jumped after the company announced good Q4 results. The stock surged 7.13% at Rs 447.50. The company's consolidated net profit rose 12.93% to Rs 260.61 crore on 12.39% growth in total income to Rs 1577.37 crore in Q4 March 2016 over Q4 March 2015. Advertising revenue rose 29.1% to Rs 864.50 crore in Q4 March 2016 over Q4 March 2015. Subscription revenue rose 16.4% to Rs 594.40 crore in Q4 March 2016 over Q4 March 2015. Earnings before interest, taxation, depreciation and amortization (EBITDA) rose 52.8% to Rs 413.60 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 10 May 2016.

Zee's board of directors at its meeting held yesterday, 10 May 2016, took on record the conclusion of acquisition of 49% equity stake in Fly By Wire International (FBW). It may be recalled that Zee had in March this year announced a proposal to acquire 100% equity stake in FBW which is engaged in aircraft charter services under a NSOP license from Director General of Civil Aviation (DGCA). At that time, Zee said that it initially proposes to acquire 49% equity stake in FBW and the balance 51% equity stake will be acquired within 5 days of receipt of approval from Ministry of Civil Aviation. The process is expected to be completed by mid-July 2016, Zee said at that time.

Tata Motors dropped in volatile trade after announcing monthly global sales volume data. The stock fell 2.26% at Rs 380.10. The stock hit a high of Rs 391.90 and a low of Rs 376.05 in intraday trade. The company after market hours yesterday, 10 May 2016, announced that its global wholesales including Jaguar Land Rover rose 5% to 81,333 units in April 2016 over April 2015. Global wholesales of all Tata Motors' commercial vehicles and Tata Daewoo range rose 11% to 29,584 units in April 2016 over April 2015. Global wholesales of all passenger vehicles rose 1% to 51,749 units in April 2016 over April 2015.

Key indices snapped two-day winning streak. The Sensex had risen 544.03 points or 2.15% in the preceding two trading sessions to settle at 25,772.53 yesterday, 10 May 2016, from its close of 25,228.50 on 6 May 2016. The Sensex has fallen 9.60 points or 0.03% in this month so far (till 11 May 2016). The Sensex has fallen 520.52 points or 2% in calendar year 2016 so far (till 11 May 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 3,102.41 points or 13.79%. The Sensex is off 2,981.31 points or 10.43% from a 52-week high of 28,578.33 hit on 23 July 2015. The Sensex is off 4,427.72 points or 14.74% from a record high of 30,024.74 hit on 4 March 2015.

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