ETMarkets

Beating Volatility

SENSEX GAINS 215 POINTS, Nifty

Market Trends
8201.55

0.91

Sensex

26740.39

0.81

658.08

1.58

MSCI EM

1712.43

1.61

408.88

1.44

6267.44

0.86

MSCI BRIC
MSCI World
SX 40

15974.63

Nikkei

15566.83

1.59

Hang Seng

20436.12

1.31

Strait Times

2792.73

1.31

Values in US $, Gross

OIL ($)
DUBAI CRUDE
45.54

1.27
Absolute Change

BOND
10-YR YIELD
7.45

0.01

Figures in %

Wednesdays Toppers
TOP NIFTY GAINERS

TOP NIFTY MIDCAP GAINERS

Company

Company

Bosch

Prices per Troy Ounce ($)

India

Hero Moto

CMP (`) % Chg

CMP (`) % Chg

22,686.2

5.4

DLF

143.7

7.7

3,156.6

4.5

Bharat Fin

735.6

5.8

84.6

5.8

OPEN

1313.90

1440.69

NTPC

152.1

2.8

JSW Energy

LAST*

1321.10

1439.63

BHEL

122.0

2.5

Concor

1,451.1

5.1

Power Grid

159.3

2.4

Bajaj Finserve 2,298.1

4.6

*At 10.30pm, After adjusting for import duty,

Indian spot gold lower by $ 13.58 to US Comex
gold price on Wednesday. The premium on local
gold is due to tight supply following import curbs.

Compiled by ETIG Database

FOREX RATE (`-$ Exchange Rate)

OPEN

LAST*

67.80

67.68

Market on Twitter@ETMarkets

Sebi Gives
More Time
to FPIs
on P-Note
Expiry

Mumbai:The Securities and

Exchange Board of India (Sebi)
has allowed foreign portfolio investors who had issued participatory notes under the erstwhile
regulations to hold the position
till the date of expiry of such positions or till end of December 2020.
The regulator said in a clarificatory note posted on its website on
grandfathering of participatory
note issuers who didnt meet the
new regulations on foreign portfolio investors specially unregulated funds whose investment manager is well regulated.
However, participatory note subscribers cannot take fresh positions or renew the old positions,
Sebi said.
This clarification is only a consequence of the recent changes on
KYC rules which are applicable to
ODI issuers and ODI holders from
July 1. Earlier, offshore investors
who took exposure to Indian securities under FII Regulations by
subscribing to ODIs were permitted to continue to subscribe ODIs
under the FPI Regulations that
replaced FII Regulations in 2014.
This will not be permissible from
August 1. Also, Dec 31, 2020 is sufficient time for such ODI holders
to decide whether to comply with
new KYC norms or wind up their
positions. said Suneet Barve,
Partner, IC Legal.

We would love to hear from you

on what you think about our
new Markets pages. Share your
feedback on ET Markets at
et.markets@timesgroup.com

Mumbai: State-run banks have outperformed private peers on the

bourses in the past one month, at a
time when global markets have been
rattled by the Brexit vote, clocking
gains of up to 37.44% in one case
while private banks have managed
marginal gains at best.
Analysts said this may have been
triggered by the perception that staterun banks are safer due to government backing, an important factor in
the run-up to and after the voting in
Britain on parting ways with the
European Union, besides signifying
that clean-up of public sector lenders
may be coming to an end.
A group of overseas, domestic
i n s t i t u t i o n a l i nve s t o r s a n d
wealthy individuals, who have
long-term investment horizon are
seen buying state-owned banks
stocks, said Dipen Shah, head of
private client group research at
Kotak Securities. The belief is
that bad loan worries have peaked
out. With economy expected to
pick up, corporate borrowings will

On The Bourses
BANK NAME

Dena Bank
Punjab National Bank
Central Bank of India
Bank of India
Bank of Baroda
State Bank of India
BANKEX
Kotak Mahindra Bank
Axis Bank
HDFC Bank
ICICI Bank

CMP (`)

1 Month
Ago

% Chg

39.8
104.5
107.2
100.1
153.9
217.2
20,235.6
752.3
517.4
1167.84
236.5

29.0
77.2
82.3
86.3
138.4
198.7
19,977.2
743.1
513.3
1180.1
244.7

37.44
35.3
30.27
16.06
11.17
9.34
1.29
1.24
0.79
-1.03
-3.35

also be in an upswing, he said.

While Dena Banks shares surged
37.44% Punjab National Bank gained
35.3% and Central Bank of India
moved up 30.27%.
Analysts said most of the public
sector bank stocks look attractive
with a price-to-book value ratio (a
gauge for valuation) of 1 or less
than that. A month ago these banks
had lost significant market cap
amid bleeding balance sheets, hit

by mounting bad loans.

On June 23, Britain voted to leave
the European Union, sparking volatility across markets.
The underperformance of private
banks may be in part due to higher
ownership by foreign investors, who
are trimming positions.
Some overseas investors are seen
booking profits in retail-focused private banks, which helps them make
good losses in European markets af-

ter market crashes following Brexit,

said Sanjiv Bhasin, executive vice
president-markets and corporate affairs at IIFL. Many public sector
banks, beaten down badly earlier, are
now catching fancy of investors, who
consider it as value buying, he said.
Indias largest private lender ICICI
Banks shares lost 3.35% over the past
month while the second biggest
HDFC Banks shares were down
about 1%.

Valuation Worries Mount for Tata Motors

EDUARDO VIANA, A Revolta

Our Bureau

Our Bureau

BENGALURU, THURSDAY, 30 JUNE

2016

EASING BAD LOAN worries, likely pick up in the economy and corporate borrowings
being seen as positives by investors with long-term investment horizon

Saikat.Das1@timesgroup.com

Global Rally

At 7 pm IST

GOLD RATE
US

Q&A with DCB Banks

Murli Natrajan

PSU
Banks
Outperform
Pvt
Stocks Gain on
Peers
Amid
Brexit
Volatility
Govt Pay Hike,

% CHANGE

Nifty 50

MSCI India

closes above key 8,200 level; IT,

Banks see huge buying interest

We are Focused
on SME & Retail
Banking Now

ANIRBAN BORA

STOCK INDICES

WWW.ETMARKETS.COM

MONEY
MATTERS

Mumbai: The governments

approval of the 7th Pay
Commission recommendations
on salary increase for public
servants cheered D-Street on
Wednesday as investors lapped
up consumer sector stocks on
expectations that the `1-lakh
crore bonanza would bolster demand. The relief rally in global
markets post Brexit also helped
traders mount bullish bets on
stocks, as risk-aversion trade
lost momentum.
The Sensex surged 215 points,
or 81%, to 26,740, and 26 out of
30 stocks in the index ended in
green. The Nifty gained 76
points, or 0.94%, to end at 8,204
its biggest intra-day gain in
more than two weeks. The index closed above the psychological mark of 8,200.
The 7th Pay Commission will
have a snowballing effect on the
economy. Auto, consumer durables and FMCG sectors would
see much higher demand, said
Motilal Oswal, CMD of Motilal
Oswal Financial Services.
However, there remains a
small concern about inflation
moving higher.
Technology and banking
stocks such as Infosys, HDFC,
ICICI Bank and TCS contributed to more than half of
Sensexs gains on Wednesday,
as risk-averse global investors
restored buying into emerging
market stocks, as Brexits grip
on financial markets eased.
Asian and European stocks
rallied up to 2% on Wednesday
on speculations that the UK,
Japan and European Central
Bank may announce additional monetary stimulus to counter any possible slowdown in
global economy arising from
the UKs decision to leave the
European Union.
Analysts expect some volatility due to futures and options
(F&O) expiry on Thursday. If
the Nifty manages to cross 8250,
then the index may rally to
8,300, where it may find some
resistance. Market participants

are also betting on the passage

of the GST Bill in the Monsoon
session of Parliament that
starts on July 18, and if that happens, the Nifty is likely to rally
to 8,600 levels.
We are specifically bullish
on all large-cap stocks because
they are available at their important technical support or
very close to breakout levels,
said Shrikant Chouhan, senior
vice president - technical re-

The stock of Tata Motors may suffer a double

whammy. Last week after Britain chose to exit the European Union, it fell sharply in anticipation of adverse
impact on its UK subsidiary JLR. To add to the woes,
its valuation is looking rich compared to some of its
German peers for the first time in two years.
The company is trading at 50% premium
to German luxury car makers such as
BMW and Daimler (the maker of Mercedes
cars) on the basis of enterprise value (EV)
relative to earnings before interest, tax,
depreciation, and amortisation (EBITDA). Tata Motors
derives nearly 80-85% of its value from Jaguar Land
Rover (JLR), a UK-based luxury car maker.
Tata Motors is trading at three times of EV/EBITDA
as compared with two times for BMW and Daimler,
according to data compiled by Credit Suisse. This
measure is preferred by analysts when a company

Valuation Comparison
of Tata Motors & BMW
Adjusted EV/EBITDA of BMW
Adjusted EV/EBITDA of Tata Motors
5

Apr 13

STREET DEBUT BY FISCAL END

BULLISH CASE

7th Pay Commission

will have a snowballing effect on the
economy. Auto,
consumer durables
and FMCG sector
would see much
higher demand
MOTILAL OSWAL
CMD, Motilal Oswal

search at Kotak Securities.

Mahindra & Mahindra looks
good on the charts because the
stock is very close to its twoyearly consolidation breakout
formation. State Bank of India
is trading and sustaining well
above 200-day simple moving
average.
Foreign institutional investors (FIIs) were net buyers of
Indian stocks worth about `102
crore on Wednesday. Domestic
institutional investors, however, sold shares worth `20 crore,
according to provisional exchange data.

GIC Re Moves A
Step Closer to IPO
Shilpy.Sinha@timesgroup.com

Mumbai: State-run national re-insurer GIC Re is likely to list on the

stock exchanges by the end of the fiscal year. The board has today approved listing of shares and we have
sent the proposal on the same to the
government, said Alice Vaidyan,
chairman of GIC Re. This is good
for the company as it will improve
transparency and corporate governance. Vaidyan, however, did not divulge any details on the quantum of
the stake sale.
GIC Re is expected to divest 10%
initially and subsequently raise
this to 25% in three years as that is
the requirement under the listing
norms. The General Insurance
Corporation had a networth of
`38,281 crore and total assets of
`80,000 crore at the end of March
31, 2016. The company had earning
per share of `6.62 and book value
per share of `34.49 as on March 31,
2016. There is no indication of how
much will be its valuation at the
time of listing.
The Insurance Amendment Act allowed government to reduce stake to
51% in state-owned general insurance companies.

Earlier this year the government

had approved reducing face value of
each GIC Re share to `1 from `1,000.
GIC Re, incorporated under the
Companies Act, 1956, as a private
company has strong financials. It
has a combined ratio of 96%.
Combined ratio is sum of incurred
losses and expenses to earned premium. GIC Re reported profit of
`2,848 crore in 2015-16. It has reported 21.41% growth in premium income to `18,436 crore during the last
financial year,
when the industry
GIC Re is
grew by 13%.
expected to
The company has
divest 10%
share capital of Rs
initially and
subsequently 430 crore. It has reserves and surplus
raise it to
of `15,402 crore.
25% in
GIC Res solvency
three years
ratio, which is like
capital adequacy of banks, was at
348% against the regulatory requirement of 150%. The company expects
15-20% growth for the current financial year. It is planning to expand to
new geographies including USA and
China. It plans to open operations in
next 2-3 years in these markets. It
plans to enter new lines of risks including cyber, protection and individual terrorism.

Mar 16
Source: CS

has sizable debt. Historically, German peers have

traded at par with their Indian counterparts.
While analysts reckon that Tata Motors may
trade at a premium to German luxury makers,
owing to superior earnings growth and projected
volume growth in the next two years, the current
50% premium seems to be high. Also, the company
may face slowing sales volume growth in its key
markets such as Europe and the US, which account
for nearly 60% of total JLR market.
JLRs volume growth is expected to grow by
15% and 14% in FY17 and FY18, respectively, on
account of incremental volume from new models
such as Jaguar XE, F-Pace and Discovery Sport.
Credit Suisse has downgraded Tata Motors stock
to neutral from outperform and reduced target
price to `430 from `530 earlier due to high valuation premium to its German peers.

CO TO RAISE ABOUT `1,250 CRORE

L&T Info IPO to Open

on July 11 with Price
Band at `705-710
Big Issues
`1000-CRORE PLUS IPOs SINCE 2011
Company

Issue Size
(` Crore)

Offer
Price (`)

Listed
Price (`)

CMP (`)

L&T Finance

1,245

52.0

51.0

77.4

Bharti Infratel

4,156

220.0

200.0

344.4
234.9

Inox Wind

1,021

325.0

400.0

Coffee Day

1,150

328.0

313.0

252.1

InterGlobe Aviation

3,009

765.0

856.0

1,017.7

Alkem Labs

1,348

1,050.0

1,380.0

1,375.3

Equitas Holding

2,177

110.0

144.0

176.8

Mahanagar Gas

1,039

421.0

Our Bureau

Mumbai: L&T Infotech, the IT

services arm of Larsen & Toubro,
will hit the capital market on July
11 to raise about `1,250 crore. The
company has fixed a price band of
`705-710 per share for its proposed
IPO with `10 discount to individual retail investors. Promoter L&T,
that holds 94.96% stake in the
company, would sell 10.85%
through the offer for sale route
which will close on July 13.
Shares of Larsen & Toubro gained

almost a percent to close at `1481.8

on Wednesday.
The Mumbai-based IT services and
solutions company had reported a
consolidated revenue of `6,143.02
crore for the financial year ended
March 31, 2016, as against `5,069.54
crore for the previous financial year,
registering an increase of 21%. The
companys net profit rose 24% to
`1,147.27 crore for the same period.
Earnings per share from operations stood at `56.13 in FY16 as
against `45.10 in FY 2015.
11
Cheapest IT Stocks XX
9

REBOUND IN DOLLAR and government bonds, volatility in stock market derail efforts to normalise policy Derivative markets see rate cut more likely than hike in 2016

Forget December. Forget Next Year. Fed Done Hiking Until 2018
Bloomberg

New York: Circle January 31, 2018,

on the calendar. Thats the soonest
the Federal Reserve hikes next.
At least if money market derivatives are to be believed. Traders,
who have consistently been better at
projecting the path of interest rates
than the Fed itself, are now pricing
in a greater probability that policy
makers will cut rates in upcoming
meetings than raise them. They
dont assign more than a 50%
chance of an increase until the beginning of 2018, and dont price in a
full rate hike until the final quarter
of the year.
The sea change in outlook for central bank policy comes after global
equities and commodities plunged
while government bonds and the
dollar surged following Britains

vote to quit the European Union.

Thats tightened financial conditions in the worlds largest economy,
driven down inflation expectations
and dimmed the outlook for global
growth.
The market is pricing in a nontrivial probability of a Fed rate cut
over the next couple of months,
said Aaron Kohli, a fixed-income
strategist in New York at BMO
Capital Markets, one of 23 primary
dealers that trade with the central
bank. The Fed is really boxed in
now, so the market doesnt even begin to price in any real chance of
hikes until mid-2017.
The markets view on the path of
Fed policy is hardly set in stone.
Rate hike expectations were upended in August and February amid
similar bouts of market volatility.
Yet implied yields on federal funds
futures, which settle upon expira-

tion at the average effective fedfunds rate during the contract

month, are now pricing in a real
possibility of a rate cut by year end.
The effective rate was 0.41%
Tuesday, and is foreseen by traders
averaging 0.37% in December.
Fed Governor
Jerome Powell
Fed Governor
said Tuesday that
Jerome Powell global risks have
said Tuesday
shifted further to
global risks
the downside after
have shifted
Britains vote to
further to the
exit the EU, introdownside
ducing new uncerafter Britains
tainties that may
vote to exit EU merit reassessing
policy.
Monetary policy will need to remain supportive of growth, as we
work through the challenging global environment, Powell said in remarks prepared for delivery to the

Chicago Council on Global Affairs.

Options on eurodollar futures, the
worlds most actively traded moneymarket derivative, imply a 25%
chance of a rate cut by September.

Thats a reversal from just two

months ago, when prices signaled
that a rate increase by year end was
a virtual certainty.
If the markets dour outlook were

to pan out, it would be reminiscent

of 1998, when an Alan Greenspanled Fed began cutting rates in
September in response to market
turmoil, before resuming hikes in
June.
The idea that they are more likely
to cut than tighten in the next
month or two I think makes sense
given the backdrop, but I think as
you go out, it starts shifting back the
other way, said Jim OSullivan, the
Valhalla, New York-based chief U.S.
economist at High Frequency
Economics Ltd. Obviously there is
uncertainty about how much fallout there is from Brexit are we
out of the woods on that yet, or do
the markets continue to tumble?
Fed Chair Janet Yellen canceled
plans to attend the European
Central Banks forum on central
banking in Sintra, Portugal, this
week to return to Washington, a

sign US policy makers are on high

alert amid financial market turmoil following the UKs decision to
leave the EU. The Fed said June 24
that it was prepared to provide dollar liquidity through its existing
swap lines with central banks to
avert undue stress on global funding markets.
Treasury yields have fallen in part
due to safe-haven demand for US assets. Benchmark 10-year Treasuries
pay just 1.46%, near the all-time low
of 1.379% reached in July 2012.
You are not going to get any activity out of the Fed right now, said
James Camp, director of fixed-income at Eagle Asset Management,
with about $30 billion in St.
Petersburg, Florida. They do not
want financial conditions to tighten any further and they certainly
dont want to continue this dollar
stampede.