Sector updates of the Indian Economy for the week ending 22nd Nov'14

1. SECTOR UPDATES
16th November – 22nd November
Finnacle Investments
11/23/2014

2. November 23, 2014
1
Banking and Financial Services Sector Update
(Sector Analysts: Jyoti Gupta, Ankita Kumar, Akshat Kulshrestha)
Market Performance:
 The banking sector performed well last week. All the major private and PSU banks closed on a positive note. Bank Nifty closed at 18056 after increasing 2.33% on Friday.
STOCK
PRICE
% CHANGE Axis Bank 476.95 2.21
Bank of Baroda
1,038.65
1.28 Bank of India 276.20 1.40
Canara Bank
396.15
0.83 SBI 305.50 2.83
HDFC Bank
932.85
1.60 ICICI Bank 1,730.70 2.53
PNB
977.30
2.60
MAJOR NEWS:
Strict RBI norms create tough situations for NBFCs
On Monday, RBI announced new norms regarding the regulatory arbitrage. The advantage that NBFCs had will be over by 2018. Now, NBFCs will have to provision for bad loans in line with what banks were doing. Banks declared an account as non-performing if the party failed to pay the interest or principle for 90 days. Whereas, NBFCs declared such parties as NPA after the payment was due for 6-12 months. Also, RBI has directed NBFCs not to take any public deposit recently.
ING Vysya and Kotak Mahindra merger
Kotak Mahindra is all set to buy ING Vysya bank under an all stock $2,4 billion deal. However, the management of Kotak is facing a challenge in trying to integrate the cultures of the two banks, which are quite different. This step may provide Kotak with an opportunity to lend to small and medium enterprises, but that has some issues as Kotak will now have to deal with less sophisticated clientele, which is quite contrary to what Kotak did till now. Even after all this, Uday Kotak, VC and MD of Kotak Mahindra Bank is confident that the merger will go smooth and without any issues.
Nabard sets aside Rs 2000 crore for UP for the current fiscal
NABARD has committed a sum of Rs 2000 crore for the development of UP. A sum of around 605 crores has been allocated for the irrigation project in Gorakhpur. In addition to this a sum of Rs 260 crores has been allocated for developing cold and dry storage facilities in the state.

3. November 23, 2014
2
CCD owner buys stake in Lakshmi Vilas Bank
The owner of the CCD chain, VG Siddhartha had recently bought 4% stake in Lakshmi Vilas Bank for Rs 65 crores
References:
http://www.business-standard.com/article/opinion/rbi-norms-puts-nbfcs-survival-in-question- 114111200109_1.html
http://www.moneycontrol.com/terminal/?index=23
http://economictimes.indiatimes.com/industry/banking/finance/finance/cafe-coffee-day- owner-vg-siddhartha-buys-4-per-cent-stake-in-lakshmi-vilas-bank-for-rs-65- crore/articleshow/45236507.cms

4. November 23, 2014
3
FMCG Services Sector Update
(Sector Analysts: Amrit Pal Singh and Kirti Chablani)
Weekly Stock price performance of key companies:
STOCK
PRICE(in INR)
CHANGE ITC 376.15 +2.12%
Dabur
230.65
-0.62% Marico 323.05 -1.88%
Colgate
1893.20
-4.75% Nestle 6336.40 +0.06%
 Britannia to e-launch its premium cookie , Good Day Chunkies
Britannia is going to test the e-commerce route for the first time with its exclusive tie up with Amazon for the launch of its super premium Chocolate chip cookie range Good Day Chunkies. Good Day Chunkies, the company's most expensive product at Rs 50 for six cookies, will be sold for the first few weeks (beginning next week) exclusively on Amazon.in. The product won't carry a delivery charge and will be part of Amazon's gourmet & specialty foods store.
 Urban market sees a revival in demand of white goods and FMCG FMCG value consumption in urban markets was up 7 per cent in the July-September 2014 period, against 2 per cent in the corresponding year-ago period, according to IMRB data, although rural demand didn't register any growth. Latest data from the white goods industry tracker GfK reveals that Indian appliances like microwave ovens and refrigerators are logging double digit volume growth this fiscal after flat sales in the past two years. Companies are also optimistic that this sentiment will eventually trickle down to the rural segment as well, which continues to be a lag because of erratic and inadequate monsoon this year.
References http://economictimes.indiatimes.com/articleshow/45227000.cms http://articles.economictimes.indiatimes.com/2014-11-21/news/56340082_1_refrigerators-urban- markets-godrej-appliances

5. November 23, 2014
4
Pharma Sector Update
(Sector Analysis: Kanika Singh, Neha Kumar, Ravi Karanam)
New bulk drug policy by government set to stimulate growth in pharma sector Government is all set to bring out a new pharma policy for bulk drugs in 10-15 days that would help the sector grow multiple times over the next 5 years. The new industry friendly bulk drug pharma policy will will have various concessions for all stakeholders of the pharma sector so that it is put on the growth trajectory. Through this policy, the pharmaceutical sector which is Rs 1.8 lakh crore in size currently is likely to grow by 4-5 times in next 5-7 years through phenomenal increase in its domestic production and exports.
Ranbaxy Lab files a suit on US FDA for revoking drug approvals, court turns down its request to block the launch of rival generic drugs Ranbaxy Laboratories Ltd sued US Food and Drug Administration (FDA) for revoking approvals granted to the firm to launch copies of two drugs which include AstraZeneca Plc's heartburn pill Nexium, saying it had overstepped its jurisdiction by doing so. The US court, however turned down Ranbaxy's request to block the launch of generic version of Valcyte by Dr. Reddy's Laboratories and Endo International, who were given the right to exclusively sell the generic versions for the first six- months after revoking the rights from Ranbaxy.
Global expenditure on medicines to touch $1.3 trillion by 2018 IMS Institute for Healthcare Information (Mumbai) has estimated that international spending on drugs is likely to touch US$ 1.3 trillion by 2018 with a growth of 30 per cent over the 2013 level owing to introduction of novel specialty medicines and improved accessibility for patients with minor impacts from patent expiries in developed markets. The growth will be driven by rising population, an aging population and improved access in pharma emerging markets. Sun Pharma recalls bottles of anti-depressant drug in US on account of failure to meet the dissolution specification Sun Pharma initiated a recall of 68194 bottles of its Venlafaxine Hydrochloride Extended-Release 37.5 mg tablets manufactured at its Halol plant for failing to meet dissolution specification. The drug is used to treat major depressive disorder and has been recalled. The recall has been classified as a Class- II recall defined by the FDA as a situation in which use of or exposure to a violative product may cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequence is remote. Pfizer signs a $850 million cancer drug deal with Germany's Merck KGaA In a major cancer drug deal, Merck will get an upfront payment of $850 million from the US drugmaker for sharing rights to develop its experimental immunotherapy drug with the Pfizer. In addition, the company is also eligible for up to $2 billion in payments based on the medicine's future success. Merck's immunotherapy drug is a part of class of drugs known as anti-PD-L1 therapies which work by

6. November 23, 2014
5
blocking a tumor's ability to evade the immune system's defences. Such immune-boosting medicines are the hottest area of cancer research. Rise in chronic illness offers huge growth opportunities for pharma market The Indian pharma industry has witnessed the highest volume growth in anti-diabetic medicines in the last five-years followed by medicines for treating semi-chronic ailments in urology and dermatology. According to AIOCD (All India Organization of Chemists and Druggists), the Indian pharma market grew at a CAGR of 3.3% in terms of volume in the past five-years while the medicines for combating diabetes, urology and dermatology ailments grew at double the industry growth rate. The trend is expected to sustain, owing to the increased chronic lifestyle disorders.
Stock Recommendations
The below stock recommendations are based on the comparison of the Bloomberg estimated Median Target Price and current price of the stocks. Stock Target Price(INR) - 12 month period Current Price(INR) Recommendation
SUN PHARMACEUTICAL INDUS
980
841
BUY
DR. REDDY'S LABORATORIES
3453
3530
SELL/HOLD
RANBAXY LABORATORIES LTD
698
617
BUY
CIPLA LTD
631
627
BUY
LUPIN LTD
1526
1463
BUY
GLENMARK PHARMACEUTICALS LTD
790
819
SELL/HOLD
CADILA HEALTHCARE LTD
1519
1563
SELL/HOLD
BIOCON LTD
512
457
BUY
TORRENT PHARMACEUTICALS LTD
1023.5
1004
BUY
References
 http://www.pharmabiz.com/NewsDetails.aspx?aid=85235&sid=2
 http://www.ft.com/intl/cms/s/0/b126fbfa-6fc2-11e4-a0c4-00144feabdc0.html#axzz3JnGKZe5O
 http://profit.ndtv.com/news/industries/article-government-to-rollout-bulk-drug-pharma-policy- within-15-days-700580
 http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/sun-pharma- recalls-68194-bottles-of-anti-depression-drug-in-us/articleshow/45177996.cms

7. November 23, 2014
6
Power Sector Update
(Sector Analysis: Anshu Mishra and Ankit Bacchuka)
Major News:
India Plans solar army, to train 50000 people – They will be trained in areas related to solar power by organizations like industrial training institutes (ITIs). The solar army will help the government to achieve the revised target of 100000 MW from 20000 MW by 2022. For this estimated investment is of around Rs.6.5 trillion over five years.
Private producers are seeking 10 per cent additional debt exposure by banks to the power sector to fund projects stranded by lack of fuel. The Association of power producers suggested if a project was stranded because of fuel, banks be allowed to classify these assets as standard, defer interest and capitalize these, reduce the interest rate to the State Bank of India’s base rate till the plants were operational and extend the loan tenure suitably.
Sesa Sterlite (2400 MW) and GMR Kamalanga (3*350 MW) has commissioned their power projects in Odhisa, other Independent power producers like Jindal India Thermal Power Ltd (JITPL), Ind-Barath Energy Utkal Ltd and Monnet Power have also made substantial investments and are in advanced stage of commissioning their projects.
Bharat Heavy Electricals Ltd has commissioned the second module of ONGC gas- based power plant in Tripura. The plant has 2 modules of 363.3 mw each. Across the country, it has build 9 modules steam power turbine to produce electricity in combined cycle mode.
The sixth 660 Mw unit of Sasan ultra mega power project with total capacity of 3,960 Mw will be fully operational before January 2015. For now 3300 MW capacity of the project is operational
NTPC has decided to invest in solar energy power projects in Odhisa, it has signed an MoUs with the Andhra Pradesh government for generation of 1,000 Mw solar energy and with the Madhya Pradesh government for another 750 Mw. Nationwide, NTPC has been mandated to generate 3,000 Mw solar power.
The Union Cabinet today gave its approval for signing of "SAARC Framework Agreement for Energy Cooperation (Electricity)" among the SAARC Member States during the forthcoming 18th SAARC Summit scheduled to be held at Kathmandu, Nepal on 26-27 November, 2014. The Agreement is expected to improve the power availability in the entire SAARC region.
The prices in spot market continue to decline to as low as Rs. 2.17 per unit but still big cities are facing power shortage issues in the range of 3,000 Mw to 4,500 Mw. The cost of power is usually in the range of Rs 3.8-5 per unit. The difference is demand and supply is caused because of lack of proper transmission system and planning of power purchase.

8. November 23, 2014
7
References-
http://www.kseboa.org/news/india-plans-solar-army-to-train-50000-people-19113531.html
http://www.business-standard.com/article/companies/private-power-producers-ask-rbi-for-bailout- 114112100888_1.html
http://www.business-standard.com/article/companies/ipps-invest-rs-33-000-cr-on-their-projects-in-odisha- 114112200531_1.html

9. November 23, 2014
8
Oil and Gas Sector Update
(Sector Analysis: Ashwin Jain, Mili Handa and Piyush Sethi)
Major News: DBTL compliance in Gujarat: IOC has set a target of 90% cash transfer compliance among its consumers by mid- January 2015. This modified Direct Benefit Transfer (DBTL) scheme is set to launch on 1st January, 2015. Last time this scheme was launched in 2013 but at that it mandatorily required consumers to have Aadhar card for availing LPG subsidy. Later it was modified under which consumers can receive cash directly into their bank account without producing Aadhar card. Around 6.5 million LPG domestic consumers are there in Gujarat between three PSUs – IOC, HPCL and BPCL. Brent crude oil fell beyond 78$ a barrel: This dip has been because of weak economic data of China and Europe and US crude inventories high, resulting in more supply but not much demand. Gas supply from Turkmenistan: As part of TAPI gasline project, a 1800 km pipeline is being set up which will be exporting 33 million bcm of natural gas from Turkmenistan via Pakistan and Afghanistan to India for over 30 years. They are in a plan of expanding their activities in upstream and downstream facilities as well. Recently India has set up a company jointly with Turkmenistan, Afghanistan and Pakistan which will commission the TAPI project. Reduction in Import Bill by Rs 10000 Cr: Government is in a plan to import fuel from middle-east countries at better rates which will further lead to reduction in import bill by at least Rs 10000 Cr. At this moment OPEC is battling up for market share and is competing with the new energy suppliers. As per oil industry officials country will save Rs 9000 Cr a year for every 1$ reduction in price.
References-
http://www.business-standard.com/article/companies/ioc-aims-at-90-dbtl-compliance-in-gujarat- by-mid-jan-114112100859_1.html
http://www.business-standard.com/article/markets/crude-oil-slips-below-78-a-barrel- 114112001432_1.html
http://www.business-standard.com/article/economy-policy/oil-ministry-seeks-gas-assurance-from- turkmenistan-114111900773_1.html

10. November 23, 2014
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http://articles.economictimes.indiatimes.com/2014-11-18/news/56221832_1_oil-minister- dharmendra-pradhan-tapi-pipeline-project-india-and-pakistan
http://www.etintelligence.com/etig_root/sections/Sectors/OilGas/news/2014/NOV/SEc-Oil-Gas- 181114.pdf

11. November 23, 2014
10
Telecom and IT Sector Update
(Sector Analysis: Bharat Dasaka, Melvin Matthew, Arpita Verma)
Major News:
Acquisitions
Tech Mahindra in plans to buy Light Bridge Communications
Tech Mahindra, Part of Mahindra Group Conglomerate, Is planning to buy US based Light Bridge Communications. Light Bridge Communications is a network services operator which will be adding around 30 clients to the Tech Mahindra’s clientele. 45 % of Tech Mahindra’s revenue comes from telecommunication business accounts. Acquiring Light Bridge communications would set the total Tech Mahindra’s employee count to over 1,00,000. The Deal is estimated at $240 Million Dollars. Tech Mahindra has been aggressively acquiring companies in the past as well with acquisitions such as Hutchison Global Services, vCustomer BPO, Type Approval Lab. Tech Mahindra is trying to establish firm ground and global foot print in telecommunication business.
Partnership
Infosys enters into partnership with Dream Works
Infosys has entered into an engineering pact with dream works to help DreamWorks develop its technologies. Dream Works is an American film production company which is into films, animation and video games. Infosys is set to funnel its talent pool across various technologies such as Cloud, big data and java. These will in turn provide technological solutions to DreamWorks. The financial details of this partnership is yet to be disclosed.
TCS faces setback in its new software system for emigration
Tata consultancy services has faced a setback when the recruitment agents asked MOAI(Ministry of Overseas Indian Affairs) to roll back the new emigration software system developed by TCS to the old system . Apparently, the new system was delaying the emigration clearance system leading to huge blockage of applications. To quote an example, More than one lakh job seekers to the Gulf are stranded in Mumbai and different parts of the country due to the implementation of the TCS eMigrate system.

12. November 23, 2014
11
What’s Trending in IT?  A new software has been developed by scientists which can analyse the life cycle, carbon footprint and water foot print for grape, wine and sugar beet production
 A Computer model is in place which shows how CO2 traverses across the globe. The model helps identify the concentration of CO2 with respect to growth cycle of plants and trees and climatic changes
References-
http://businesstoday.intoday.in/story/infosys-dreamworks-animation-sign-engineering- pact/1/212072.html
http://www.thehindubusinessline.com/features/smartbuy/recruitment-agents-want-tcs- emigration-software-withdrawn/article6618733.ece
http://www.sciencedaily.com/releases/2014/11/141118072648.htm
http://www.sciencedaily.com/releases/2014/11/141117174526.htm

13. November 23, 2014
12
Metals & Mining and Real Estate Sector Update
(Sector Analysis: Arihanth Jain, Manish Rathore and Priyanka Mohanty)
Metals and Mining:
Stock price performance of key companies
Name
Change %
Related news Tata steel -2.9% TATA steel receives $750m in commitments in an aim to borrow $5.6 billion.
Sesa Sterlite
-0.39% Sesa Sterlite is going to take up Rs 2,500 cr TN facility expansion Coal India limited -2.47% S Bhattacharya set to take on as CMD of CIL.
NMDC
-5.5% NMDC and Odisha mining steel plant in keonjhar.
New legal/regulatory environment
Inter ministerial meet :An inter-ministerial meet is scheduled for next week to discuss the issues related to linkages of coal sector to other sectors such as power.The power ministry also sought suggestions from various ministeries.
Coal and CBM environment: Indian government is ready to align coal mining and gas exploration legislation to facilitate the exploration of coal and coal bed methane(CBD) by both domestic and foreign investors.
Estimates for the sector Mining index: The index of mineral production of mining and quarrying sector for September grew 0.7 per cent while the total value of the mineral output was estimated at Rs 17,221 crore.
Other news Global steel price: Coupled with increased exports from China led to CIS export prices witnessing a bigger fall compared to domestic prices.It will also likely make Indian prices to follow the same route.
Foreign firms to mine: India will likely allow locally registered foreign firms to mine and sell coal.This will end the chronic shortage that cripples power plants.