Result review,2014 – IT Companies

MindTree 4QFY2014 result review
For 4QFY2014, MindTree’s revenue and PAT came largely inline with the expectations but operating margin stood ahead of expectations. The dollar revenues came in at US$133mn, up 4.4% qoq, led by volume growth of 2.2% on a sequential basis. In INR terms, revenue came in at Rs.824cr, up 4.2% qoq. MindTree’s EBIT margin increased by ~200bp sequentially to 21.5% in 4QFY2014, which came in as a positive surprise. This was led by sequentially lower SG&A spends and inch up in utilization rates. PAT came in at Rs.98cr impacted by forex loss of Rs.43cr as against loss of Rs.27cr in 3QFY2014. MindTree’s management indicated that the deal pipeline of the company remains healthy and it expects to beat Nasscom’s 2014-15 growth forecast of 13-15%, aided by increased client spending and higher contract wins as the macro-economic environment improves in the United States and Europe.
The company has declared third interim dividend of Rs.5 per share, and final & special dividend of Rs.5 per share each for completion of 15 years in business. The company’s board has also recommended a 1:1 bonus share issue for completion of 15 years in business. We continue to remain positive on the stock owing to its diversified revenue portfolio and continued healthy performance.

HCL Technologies 3QFY2014 result review
HCL Technologies 3QFY2014 result review (CMP: Rs.1,409/ TP: Under review/ Recommendation: Under review)


For 3QFY2014, HCL Tech came out with better than expected set of results largely on all fronts, signaling the likelihood of a stronger year ahead. The dollar revenues came in at US$1,361mn, up 3% qoq (estimate – 2.6%), led by strong 5% qoq dollar revenue growth in Infrastructure management services (IMS). Excluding IMS, revenue growth of the company was becoming a concern in the past in this quarter the company shrugged that off by registering 2% qoq USD revenue growth in that. In INR terms, revenues came in at Rs.8,349cr, up 2% sequentially. EBIT margin of HCL Tech grew by ~90bp qoq to 24.6% as against our expectation of ~35bp qoq decline, which came in as a positive surprise. HCL Tech’s EBIT margin has grown by more than 400bp on a yoy basis which is creditable task. Historically, operating margin has been a concern for HCL Tech but the company has shrug off all the concerns by consistently posting increase in operating margins since last seven quarters (excluding 2QFY2014). PAT stood tall at Rs.1,624cr, up 8.5% qoq, assisted by strong operational performance and higher other income.
HCL Tech won 12 transformational deals during the quarter and booked US$1bn+ TCV worth of deals, seventh consecutive quarter of signing ~US$1bn TCV worth of deals. HCL Tech has a strong position in one of the fastest growing service vertical of IMS and on the back of this the company has been growing largely at par with its peers. The concern of weak growth in core software services have been partially shrugged off by the company in the current set of results and management indicated that the deal pipeline in this area of services continues to remains healthy. Overall, the company performed exceptionally well on the margins front and we continue to remain positive on the stock for a longer-term perspective keeping in notice the company’s deal signing trajectory and healthy operating performance since last several quarters. 

TCS 4QFY2014 result review
TCS reported its 4QFY2014 results with revenue a bit lower than expectations while net profit stood marginally higher than higher than estimates on account of healthy forex gains. The dollar revenue grew by 1.9% qoq to US$3,503mn. The company registered volume growth of 2.5%qoq. The company’s performance was impacted due to flat qoq Indian business revenues and decline in MEA business revenue. Europe led growth in major markets, while UK and North America continue to grow in line with the company average. In INR terms, revenue came in at `21,551cr, up 1.2% qoq. EBIT margin of the company declined by 60bp qoq to 29.1% as the company increased its S&M investments. With this level of operating margin, now the margin gap between TCS and Infosys stands more than 450bp. Bottomline of company grew substantially by 2.3% qoq to `5297cr, supported by other income of `699cr as against gain of `539cr in 3QFY2014.
TCS closed 9 large deals during 4QFY2014. Management sounded confident of growing higher than the industry. Management indicated that the company has a robust demand pipeline across markets and the company see a unique opportunity to strategically partner and participate with clients but India business will continue to be soft for next couple of quarters due to impending elections. TCS has given gross hiring target of 55,000 for FY2015 and has announced wage hike of 2-4% for onsite employees and ~10% for employees based in India. We continue to remain positive on TCS remain positive on for a longer-term perspective keeping in notice the company’s consistent performance and industry leading operating margins. 

Infosys 4QFY2014 result review

Infosys’ revenue growth inline with estimates, operating margin and profit better than expectations

Infosys stock up 3% post results

Infosys 4QFY2014 result review (CMP: `3,314/ Target Price: Under Review/ Recommendation: Under Review)

Infosys reported 4QFY2014 results with operating margins and net profit ahead of our expectations and top-line came inline with estimates. Dollar revenues declined by 0.4% qoq (Estimate: -0.3%). Constant currency revenue growth was 1.7% qoq led by merely 0.4% qoq volume growth (largely offshore led). Volume growth was muted because onsite volumes declined by 1.3% qoq mostly due to offshore effort shift. The weakness in the quarter is largely driven by the Retail & CPG industry verticals which saw a 3.5% qoq decline in revenues during the quarter. Revenues from Europe grew by 1% qoq while declined by 0.8% qoq from North America geography. In INR terms, revenues came in at `12,875cr, down 1.2% qoq. Infosys’ EBIT margin grew by ~45bp qoq to 25.5% (better than our expectations), led by operational efficiency with inch up in utilization level to 74.4% (74.1% in 3QFY2014) and sequential decline in employee costs. Net profit came in at `2,992cr, up 4.1% qoq, aided by operating margin gains as well as higher other income of `851cr as against `731cr in 3QFY2014.

The company has given USD revenue growth guidance of 7-9% which is inline with our expectations and we believe that this is a conservative number from the company and we expect the company to post ~10% USD revenue growth in FY2015. The management opined that the global economic environment has improved and looks exciting for IT services industry. The company has still got headroom to increase its utilization level by ~300bp to be comparable with peers and this, in turn, will assist in increasing operating margins further. The company signed 4 large deals during the quarter with TCV worth US$700mn+. We believe that the impact of current high level exits could be felt in the near term. However, a company like Infosys is system driven with a healthy management bandwidth and hence the impact will not be long lasting. With the current set of results as well as guidance given being largely inline with expectations, we maintain Accumulate rating on the stock but don’t foresee a sharp upside potential for the script in the immediate future.

Mr. Naveen Mathur on Nickel commodity

Nickel
Nickel was the top performer of the base metals complex in Mar14 both in the international and domestic markets. Nickel prices on the LME jumped by 8.4 percent in the last month and on the MCX prices gained sharply by more than 4 percent during the same period.
Price rise can be majorly attributed to Indonesia’s Nickel ore ban that has put at risk an estimated 482,000 tonnes, or around 25 percent of global supply. Also, only other viable option for China for its giant nickel pig iron is the Philippines, where the lower quality of that ore will push up the cost of NPI production, effectively pushing the prices higher.
Further, Russia which is the top refined nickel producer after China is involved in a faceoff with the west over annexation of Ukraine. This has resulted into the US and the European Union warning of imposing a round of sanctions on the former.
OAO GMK Norilsk Nickel, Russia’s largest mining company, accounts for nearly 17 percent of world nickel output, and these sanctions have thereby fuelled concerns of supply disruption. Global surplus is now expected to narrow to 68,000 metric tons this year from 207,000 tons in 2013.
China’s trade data for February 2014 shows nickel ore imports from Indonesia were about 3.1 million tonnes, down only 2.5 percent from the same month a year earlier. In the first two months of the year China imported 9.2 million tonnes of nickel ore from Indonesia, a 29.1 percent jump over the same period in 2013. Also, China’s nickel demand is expected to rise 9 percent this year after the nation consumed 897,000 tons in 2013.
The strength in January figures can be explained by Chinese buying ahead of the export ban starting, and the resilience in February is most likely down to cargoes that left Indonesia in early January only being booked as February arrivals due to the Lunar New Year holiday in late January and early February.
On the inventory front, the picture looks mixed as LME inventories jumped by around 5 percent to 283,956 tonnes in March’14 whereas Shanghai inventories fell by 2.3 percent to 193,725 tonnes in the same period.
Overall, the price surge in the metal when all the other metals have seen a slide in prices is mainly as the supply side looks choked up due to Indonesian ban followed by sanctions on Russia, both of which are significant producers.
Any easing of ban on exports by the biggest producer looks unlikely and on the other hand, the war between the Russia and the west continues to heat up, signaling that the situation is not going to improve any time soon. These factors will continue to support the prices and the supply side is only going to get worse as the inventories piled up by China will be used up.
Current News and developments:
Russia to switch nickel sales to China if sanctions imposed

According to Bloomberg, Nickel from Russia, the world’s second-largest producer of the refined metal, would be shipped to China in the event of U.S. and European Union trade sanctions. Most of nickel producers, traders and analysts in the Asia-Pacific region said that Russian companies selling to Europe and the U.S. would switch to buyers in China, the largest consumer of nickel. The EU and U.S. have warned of tougher sanctions as Russia took over Ukraine’s Crimea Peninsula last month, sparking the worst tensions since the Cold War.
Outlook
With strong demand side fundamentals for Nickel, prices are likely to trade with a positive bias on account of supply crunch resulting from an exports ban by Indonesia that will hit China, the biggest consumer of the metal. Till the time the concerns of supply disruption from Indonesia remains China will consume the metal stored in their warehouses which in turn will drain the inventories and lift prices. Also, Russia, the second biggest producer of Nickel is confronted with sanctions imposed by the US and the EU over its annexation of Crimea and the escalation of this geo-political tension brightens the prospects of Nickel prices to head higher in the coming months.
In the Indian markets, Rupee movement will provide further direction to prices. For the month of April we recommend,
Buy MCX Nickel April between 1005 – 1015, Stop Loss – 960, Target – 1090 / 1110. (CMP – 1038)

Weekend Highlights – April 11, 2014


GDP Growth Can Reach 6.5% in 2014-15 with Reforms: CII President

India can achieve GDP growth rate of well over 6% provided that systemic reforms are carried out quickly by the new Government, said Ajay S Shriram, the new President of the Confederation of Indian Industry (CII).
Unveiling the CII action theme for the year as Accelerating Growth, Creating Employment, Mr Shriram noted, n++With slowing growth and high inflation adversely impacting employment, CII will urge the next Government to focus on reviving growth and generating new jobs.n++
Mr Shriram added that CII has proposed a strong 100-day action agenda for the new government to boost growth. n++A strong economic revival package and right implementation of policies by a fresh Government can help create as many as 150 million jobs in the next ten years,n++ he stressed. n++Industry is looking for top policy steps such as introduction of GST, easing of interest rates by 100 bps, keeping subsidies at 1.7 per cent of GDP, and restructuring of labour laws to promote mass manufacturing.n++
CII further stated that with continuing robust reforms, GDP growth could be taken back to the 8 per cent level in the next three years. n++A market-friendly environment is required that would proactively promote investments, business and entrepreneurship,n++ said Mr Shriram. Mass manufacturing sectors and labour-intensive services sectors need to be encouraged, he continued.
The J.P.Morgan Global Services Business Activity Index rises to 53.5 in March JPMorgan Global All-Industry Output Index rises to 53.5 in March
The JPMorgan Global All-Industry Output Index rose to 53.5 in March, up from Februarys four-month low of 53.1.
The global economy continued to make steady progress in March, with output rising for the eighteenth successive month. A slight acceleration in the rate of expansion kept the average for the opening quarter as a whole broadly in line with those posted in the latter two quarters of 2013, said the J.P.Morgan Global Manufacturing & Services PMI produced by JPMorgan and Markit in association with ISM and IFPSM.
Output growth rates were similar in the manufacturing and service sectors during March. While this represented a slight acceleration in the rate of expansion for services activity, the pace of increase in manufacturing production was the slowest since last October.
National data pointed to further broad-based expansion of business activity. Rates of output growth in the US and Japan both accelerated slightly after slowing in the previous month. The recovery in the eurozone remained solid, with growth improving in Spain and Ireland, but easing in Germany and Italy. France returned to expansion following contractions in the prior four months.
The upturn in the UK economy remained marked – despite cooling further from last Octobers high – but growth in Brazil remained only moderate. Meanwhile, China, Russia and India all reported lower output.
The rate of expansion in incoming new business eased to a nine-month low in March, raising the possibility of a moderation in output growth at the start of the second quarter. Growth of new orders slowed at both manufacturers and service providers.

Southern states high in rural consumer durables consumption: ASSOCHAM study

With increasing purchasing power and aspiration for a better life in the villages, Karnataka, Andhra Pradesh, Kerala, Rajasthan, Tamil Nadu and Gujarat have registered a phenomenal growth in rural consumption of consumer durable goods and surprisingly the overall trend in rural areas during the period of 2007-08 and 2011-12 was higher than the cities, according to the study brought out by ASSOCHAM.
The top five states which registered phenomenal growth rate of durable goods rural consumption expenditure were Karnataka (59.5 %), Andhra Pradesh (44.3%), Rajasthan (40.7%), Kerala (40.4%) and Gujarat (37.0%) during the period.
As per the CSO data, most of the states witnessed a double digit growth in consumer durables goods expenditure and much higher than all India during the 2007-08 to 2011-12.
The other states which have recorded robust growth rate of rural consumption expenditure on consumer durable goods were Tamil Nadu ( 33.3 per cent), Madhya Pradesh (27.2 per cent), Maharashtra (25.2 per cent), Bihar (25.0 per cent), Haryana (23.9 per cent) and Punjab (f 22.7 per cent), reveals the ASSOCHAM paper.
Moodys: ASEAN and India banking systems well positioned to cope with tapering and higher interest rates
Moodys Investors Service said that the banking systems in ASEAN and India are resilient to the financial impacts of the reduction of monetary stimulus by the US Federal Reserve, or the risk of higher interest rates more generally.
The strengths of these banking systems are currently underpinned by their relatively strong capital buffers, modest levels of problem loans, high recurrent profitability and low reliance on foreign funding, said Eugene Tarzimanov, a Moodys Vice President and Senior Credit Officer.
Moreover, the banks will continue to benefit from a supportive economic environment in the region, characterized by growing trade flows between Asia and the recovering economies of the US and Europe, added Tarzimanov.
At the same time, these systems could also face pockets of risk, as tapering lifts their economies out from a long period of low interest rates and speculative capital inflows into a new credit cycle characterized by slower economic and credit growth, and higher cost of funds, said Tarzimanov.
In particular, the key downside risks are a sharp rise in debt-servicing burdens in economies that have seen strong credit growth and are now more leveraged, and adverse asset price adjustments that could affect the banks capitalization position and loan quality, said Tarzimanov. We note, for example, that the ASEAN and India economies have seen pronounced gains in real estate prices in recent years.
The report considers that interest rates will likely rise and capital flows should continue to reverse, as a result of tapering, which was signaled by the US Federal Reserve in May 2013 but effectively started last December.

Book profits in Long Futures and from Long Strangle – Siddarth Bhamre (Head Equity Derivatives & Technicals, Angel Broking)

9th April 2014

Rollovers from March to April series from FII’s segment in index futures were more on the long side and also they continue to their buying spree in cash market segment. However since last trading session of March month their buying activity in index futures has almost vanished and there was a session where we did see some long unwinding in this segment by them. Though this is not a sign of worry, it should not be ignored either.
Technically, If we see weekly chart of Nifty, impulse wave which has started from 1st week of February till date, its first retracement point is around 6570-6580 zone which we believe is strong support for this market. There is decent probability that we may see correction to this support zone. Participants are talking about support around 6640 but we believe it’s not and may be breached. Momentum oscillators too support the view of some correction as both RSI and Stochastic has shown negative cross-over from overbought zone.
Implied volatility for April series has literally crashed and is around 12% indicating that market participants are not expecting much of movement in markets from current levels before election results. However we believe participants may see some surprise move on either side which would spike up the implied volatility.
Taking all of the above in consideration, we suggest some profit booking in this market; however it is important to understand that this profit booking is not a signal of change in trend. Also as IV’s are very low we suggest forming long strangle of 6600 put and 6800 call and hold on to this strategy maximum for one week.
Even if market corrects to the level mentioned above, we are not changing our view that this is bullish current which may continue for quite some time and even if election outcome is not so favourable, after initial dip we may see buying resuming again and we are saying this by looking at nature of buying by FII’s. There is clear change of hands in equity where DII’s are selling and strong hands are buying, this generally happens in initial part of the bull run.
 So from trading perspective option strategy and from medium term perspective this market has still lot of headroom.

Market may move towards support zone of 6570-6580 – Siddarth Bhamre (Head – Equity Derivatives and Technicals, Angel Broking)

5th April 2014
Fortnight back we were mentioning about this market is consolidating around 6500 and its not correction and one should hold on to long positions. Last week again markets have been taking resistance around levels of 6750, however this time we may see some dips in market. Though we are not anticipating any change of trend as of now but there may be some dip.
All 5 days of last week market opened slight gap-up then corrected and bounced back. In Friday’s session however market made open high, corrected and when most of the participants were thinking that it may again show bounce like last 4 days, it closed almost at the low of the day.
If we see weekly chart of Nifty, impulse wave which has started from 1st week of February till date, its first retracement point is around 6570-6580 zone which we believe is strong support for this market. There is decent probability that we may see correction to this support zone. Participants are talking about support around 6640 but we believe it’s not and may be breached. Momentum oscillators too support the view of some correction as both RSI and Stochastic has shown negative cross-over from overbought zone.
Some of the heavy weights which may drag this market to those strong supports level are HDFCBANK, BHARTIARTL and TCS. All three counters on momentum oscillators have been showing downward biased. Though CNX Midcap index on weekly chart is showing no signs of weakness, if markets correct to reach support zone, we may witness significant correction in midcaps, so avoid midcaps as of now.
Though we are expecting some dip taking place in market, we are still not changing over view from bullish to bearish. Square-off some longs and buy near support zone again is the view.

Range bound activity may continue

4th April 2014
Sensex (22360) / Nifty (6694)

We observed a tug-of-war between the bulls and the bears throughout the week and in the process, the Nifty closed on a muted note. As mentioned in our previous report, the Nifty remained range bound after reaching our target of 6750; stock specific action was seen throughout the week. In each of the sessions until Thursday, we observed that the Nifty managed to recover from the day’s lows and maintained its positive bias. Also, the Nifty never sneaked below the previous day’s low on any of these occasions. But during these sessions, the skeptical bulls were overshadowed by the bears as the Nifty could not defend its respective previous day’s lows. In fact, on Friday, we witnessed a closing below Thursday’s low of 6696. This clearly indicates that the bulls are losing their strength, at least from a trading perspective. The negative placement of the daily momentum oscillators does not bode well for the bulls. Generally, after witnessing a vertical rally of nearly 15%, market participants tend to expect a healthy correction. But, looking at the monthly breakout from the ‘Ascending Triangle’ pattern, we are of the opinion that this time we may not see a meaningful price correction. Instead, we are expecting a ‘Time-Wise Correction’. The index may remain within 6800 – 6574 trading range over the next few trading sessions before starting a new leg of the rally on the upside. The coming week may trade slightly with a negative bias and hence, traders are advised to trade with strict stop losses and if possible, should not trade aggressively in this corrective phase. The immediate support levels for the coming week are seen at 6640 – 6574.

Sameet Chavan
Technical Analyst

Sun Pharmaceuticals & Ranbaxy announce merger – Angel Broking

Sun Pharmaceuticals & Ranbaxy announce merger: Sun Pharmaceutical Industries (Sun Pharma) and Ranbaxy Laboratories Ltd (Ranbaxy) announced that they have entered into definitive agreements pursuant to which Sun Pharmaceuticals will acquire 100% of Ranbaxy in an all-stock transaction. The deal value for the transaction at ~ US $4bn., puts the valuations at 1.6xFY2015E EV/sales, which is at discount to its peers, which trade at 2.0-2.5x. Thus, every shareholders of the Ranbaxy would get 0.8 shares of Sun Pharmaceuticals. The combined entity’s revenues are estimated at US $4.2bn(Pro Forma CY2013 sales).Ranbaxy has a significant presence in the Indian pharmaceutical market (21% of Ranbaxy’s sales) and in the US(29% of Ranbaxy’s sales) where it offers a broad portfolio of ANDAs and first-to-file opportunities. In high-growth emerging markets (50% of Ranbaxy’s sales), it provides a strong platform which is highly complementary to Sun Pharmaceutical strengths. Sun pharmaceutical on other hand has a strong presence in the US(60% of sales), India (23% of its sales), while the ROW( contributed 17% of sales). Thus, the combined entity would be more diversified with US, ROW and India, contributing 47%, 31% and 22% of sales respectively. In terms, of market share, the combination of Sun Pharmaceuticals and Ranbaxy creates the fifth-largest specialty generics company in the world (just behind the Teva, Sandoz, Activas and Mylan) the largest pharmaceutical company in India, with a market share of 9.2% with a sales of US $1.1bn, behind Abbott which is has a market share of 6.5%, which is huge gap in the Indian markets, which is highly fragmented. In terms of asset base, the combined entity will have operations in 65 countries, 47 manufacturing facilities across 5 continents, and a significant platform of specialty and generic products marketed globally, including 629 abbreviated new drug applications (ANDAs). On the profitability front, the company is estimated to have a combined pro forma EBDITA of US $1.2bn, thus a OPM’s of 28.6%, which is still very healthy, given that the Ranbaxy labs is currently operating at low OPM’s in its history. The company is confident of turning around the same, given its history of turning around its acquisitions in the past of the likes of the Caraco, Taro, DUSA and URL. Thus Sun Pharma is confident of turning around the acquisitions. The company expects the synergies worth US $250mn by the third year of acquisition (i.e. mostly by FY2019). Also, in connection with the transaction, Daiichi Sankyo has agreed to indemnify Sun Pharmaceuticals and Ranbaxy for, among other things, certain costs and expenses that may arise from the recent subpoena which Ranbaxy has received from the United States Attorney for the Toansa facility. Thus there could be some expenses, if any to be borne by the Sun pharma, which should not be a problem, given the strong cash on the books of the combined entity (estimated to be around Rs. 20,000cr in FY2016). The acquisition is likely to get completed by end of 2014 and thus will fully reflect in FY2016 financials. Thus, in FY2016, the Ranbaxy labs, will contribute around 37% of the combined sales (estimated to be around of Rs. 31,223cr) of the company, with Sun pharma contributing the rest. On the, operating front, the company is likely to have an OPM’s of 29.0%, with a combined net profit of Rs. 6640cr. The combined EPS of the entity would now stand at Rs. 27.5, lower form Rs. 28.8 earlier. While in near term the acquisition will dilute the reported ROE’s from 25.4% to 20.7% in FY2016, which is still healthy, given the low profitability of the acquired company and is line with most of the peers which have an ROE’s of 17-25%. However, the operating ROE,
which excludes the cash component, will still be higher at around 40%. Thus, we don’t see any significant de-rating in the stock and hence believe that given the growth opportunities and its market share, we believe that the company will continue to trade at premium to sector valuations. Thus we maintain our buy with a price target of Rs. 660. And as regards, the Ranbaxy labs shareholders, we believe that they should hold on to their investments, given the synergies and the positives emanating from the deal.
Sarabjit Kour Nangra VP Research – Pharma, Angel Broking

Weekend Highlights – April 5, 2014

Indian consumer confidence shifts into higher gear in 2014-ZyFin Research
ZyFin Research announced the Consumer Outlook Index (COI) for March 2014. The index, which is a barometer of consumer confidence, reflects current and future spending plans, employment and inflation outlook of urban Indian consumers. It has registered a score of 42.2 for March 2014; the COI has been consistently higher in 2014 than in any month of the previous year. A score above 50 reflects optimism while below 50 is an indication of pessimism. The cities of Mangalore, Bengaluru, Mumbai and Hyderabad registered the best overall scores for the month.
The index is based on a monthly survey of 4,000 consumers across 18 cities categorized into metros, Tier I and Tier II. With private spending accounting for over 55% of Indias real GDP, consumer outlook plays an important role in identifying turning points ahead of time.
Key Highlights of the ZyFin Consumer Outlook Index for March 2014:
The ZyFin Consumer Outlook Index of India (COI) witnessed a mild decline of 0.4 points in March 2014 over the last month. This has been primarily due to a slight decrease in willingness to spend among Indian consumers. However, their broader economic outlook is gradually improving. The current score of 42.2 is also higher than the average for 2013 (40.6).

India’s GDP growth to accelerate to 5.5% in the fiscal year to end March 2015-Asian Development Bank
The recent deceleration of economic growth in India appears to have bottomed out, but the economy will not reach its potential until remaining structural bottlenecks are overcome, says a new Asian Development Bank (ADB) report.
n++Indias capacity for more rapid growth over the long term is high, with a promising outlook for labor, worker skills, capital, infrastructure, and productivity,n++ said ADB Deputy Chief Economist Juzhong Zhuang. n++But a serious effort on reforms is needed if the economy is to achieve and sustain higher rates of growth going forward.n++
ADB projects Indias GDP growth to accelerate to 5.5% in the fiscal year to end March 2015 (FY 2014) on improved performance in industry and services. Growth is seen rising further to 6.0% in FY2015, as a recovery in advanced economies bolsters external demand and government action opens some structural bottlenecks that have impeded industry and investment.
The governments initial estimates peg FY2013 GDP growth at 4.9%. The economy remained constrained by slow industrial growth, contracting manufacturing output, weak investment, and a reduction in private consumption. The current account deficit is estimated to have narrowed sharply to 2.2% of GDP in FY2013, from 4.7% a year earlier, as the weakened currency improved competitiveness, export demand picked up, and restrictions were introduced on some import items.

Election Commission allows RBI to issue licences for setting up new banks
The Election Commission on 01 April allowed the Reserve Bank to issue licences for setting up new banks.
n++The Commission is of the view that the Reserve Bank of India (RBI) may take necessary action (for grant of in-principle approval for banking licences) as deemed appropriate,n++ the lection commission wrote to RBI Governor Raghuram Rajan.
The RBI on March 12 approached the Election Commission (EC) seeking its approval for granting bank lincences as the model code of conduct had come in place after the general elections announcement on March 5.
The RBI Governor while unveiling bi-monthly monetary policy said that after consulting the Election Commission, the RBI will announce in-principle approval for new bank licenses.

Temporary suspension of issuing Certificate of Registration (COR) for conducting business of NBFI-RBI

Several important developments have taken place in the financial sector warranting a major shift in the regulatory paradigm for the NBFC sector.
The Committee on Comprehensive Financial Services for Small Businesses and Low Income Households,(Nachiket More Committee) which submitted its report to the Bank on December 31, 2013, has made several recommendations pertaining to NBFCs. These recommendations are being examined by the Bank. Several changes to the regulatory and supervisory framework for NBFCs may be called for. Putting in place the required mechanisms is likely to take some time.
In view of the above, there is a felt need to review the regulatory framework and streamline the sector, before taking a view on allowing more entities, into the sector. The Reserve Bank of India has, therefore, in public interest, announced in its Monetary Policy Statement on April 1, 2014, that it has been decided to keep in abeyance, for a period of one year, the issue of Certificate of Registration (COR) to the companies proposing to conduct business of NBFI in terms of Section 45IA of the RBI Act, 1934. However, COR applications already received by the Bank on or before March 31, 2014, will be disposed of in the normal course.
The temporary suspension, will also not be applicable to COR applications that may be submitted by prospective systemically important Core Investment Companies (CIC-NDSIs), Infrastructure Finance Companies (IFCs), Infrastructure Debt Fund companies (IDF-NBFCs) and NBFCs proposing to conduct Micro-finance business (NBFC-MFIs). Such applications may be considered in public interest.

Appreciation in the Indian Rupee to continue till election results out

Views of Mr. Naveen Mathur (Associate Director – Commodity & Currencies, Angel Broking) on Indian Rupee.

“The Indian Rupee has appreciated strongly in the last few trading sessions, largely due to strong inflow of foreign funds in to Indian equities on back of positive sentiments both on economic front and anticipated political scenario. Foreign inflows pumped in the Indian equities is around $3296.80 million for the month of March 14 till date. Positive data on Current Account Deficit along with fiscal deficit is one of the major factors boosting prospects for the Indian Rupee. Selling of dollars by exporters and custodian banks is also acting as a positive factor for the domestic currency.

For the short term ( one month or so), we expect Indian Rupee to trade with a major support at Rs. 59.0/58.0 and resistance seen at Rs. 61.0/62.0 against the US Dollar.”

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