Stocks
Nifty, Sensex still range-bound – Wednesday closing report
We had mentioned in Tuesday’s closing report that Nifty, Sensex were set to move sideways. The major indices of the Indian stock markets were tightly range-bound on Wednesday and closed with small gains over Tuesday’s close. NSE trading volumes were also lower. The trends of the major indices in the course of Wednesday’s trading are given in the table below:
 
 
Initially on Wednesday, the key indices opened on a higher note, following the release of healthy domestic macro-economic data. Major domestic macro-economic data points like the fourth quarter GDP (gross domestic product), fiscal deficit and eight core industries (ECI) were released on Tuesday. The GDP data showed that the Indian economy expanded by 7.6% in 2015-16 to log the fastest growth among larger countries. Besides, India's core industrial output data, ECI edged up by 8.5% in April on the back of higher production of electricity, steel and refinery products.
 
Despite the positive opening, the key indices ceded some of their initial gains on the back of sluggish Asian markets and lower close of the US stocks on Tuesday. The US indices had closed lower on the back of disappointing consumer confidence data which stroked growth concerns in the world's largest economy. The US data also cast a doubt over the US economy's ability to withstand a speculated interest rate hike in June. In addition, lower crude oil prices, a weak rupee and profit booking dented investors' risk taking appetite. However, lower level value buying supported prices. Among the major indices, the Bank Nifty lost 1.12% over Tuesday’s close to close at 17,423.45.
 
Leading SUV car maker Mahindra & Mahindra Ltd (M&M) on Wednesday said it has sold 40,656 units during May, up 11% from 36,706 units sold in the corresponding month last year. In May, sales of passenger vehicles which include SUVs, cars and vans grew 8 per cent at 19,635 as against 18,135 units sold in May 2015. Its domestic sales stood at 36,316 units in the last month, up 10% from 33,369 units sold in the year-ago month. The company sold 501 units of medium and heavy commercial vehicles in the month under review. Exports for May stood at 4,043 units -- a growth of 21%. M & M shares closed at Rs1,334.95, up 0.77% on the BSE.
 
Automobile manufacturer Hyundai Motor India (HMIL) on Wednesday reported a growth of 10.4% in its domestic sales for last month. According to the company, its domestic sales in the month under review rose to 41,351 units from 37,450 units sold during May 2015. The automobile manufacturer credited the sales growth on the healthy off-take of its brands like brands Creta, Elite i20 and Grand i10.  “Hyundai volumes grew by 10.4% with sales of 41,351 units continuing the build-up of positive growth momentum on the strengths of strong performance of the three Indian Car of the Year brands Creta, Elite i20 and Grand i10," Rakesh Srivastava, Senior Vice President, Sales and Marketing, HMIL was quoted as saying in a statement. Srivastava added that the positive growth momentum was supported by heightened expectations of increase in demand on the predictions of good monsoon. S & P BSE Auto index closed at 19,247.16, down 0.60% on the BSE.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 
 
 

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Stock Market fully valued, says Kotak Securities
With the Nifty-50 trading at 18 times of FY2017 estimated earnings per share (EPS) and 15 times of FY2018 estimated EPS, the valuations of the Indian market are full unless earnings surprise positively, says Kotak Institutional Equities Research in a note.
 
"A 15-17 times multiple on FY2018E ‘EPS’ will lead to a Nifty-50 fair value of 8,200-9,300. We find parts of the market (cement, consumer staples, industrials and media) very expensive even on FY2018E EPS. We project FY2017 and FY2018 net profits of the Nifty-50 Index to grow at 16.8% and 20.5%, certainly not conservative or for that matter, certain. We like the top-down story but struggle to find value in several sectors. We remove some of the ‘star’ performers from our Model Portfolio given their strong run in the past few weeks," it said in a research report.
 
 
According to Kotak, domestic certainty and global uncertainty are both unsettling. It says, "On the domestic front, we see consumption-led economic recovery in FY2017 due to likely good monsoons and seventh pay commission-related payouts. However, FY2018’s growth will depend on private investment, which still looks challenged. The government has partly built the basic framework for investment and governance. However, the market’s ‘certainty’ about economic and earnings recovery is a bit worrisome. The Street has not exactly distinguished itself on earnings estimates in the past two years. Also, India’s macroeconomic parameters barring growth are unlikely to improve further." 
 
"On the global front, economic news out of China and the US will shape central banks’ policies, not that there is consensus on how the markets will react to those policies. A US Fed rate increase over the next three months looks likely but should be manageable since it will reflect a stronger US recovery. The unpredictable issue is the extent of China’s economic travails and bad debt challenges," it added.
 
Kotak says there are some risks to its FY2017 estimated earnings despite decent fourth quarter results. "We see moderate downside risks to our current FY2017E net profits of the Nifty-50 Index (+16.8%), with the strong growth reflecting the decimated base of FY2016. We see risks to our estimates of the banking sector (non-performing loan-NPL and loan loss provisions-LLP estimates are still quite fluid) and infrastructure sectors such as cement and industrials. We currently expect FY2018E net profits of the BSE-30 Index and Nifty-50 Index to grow 20.7% and 20.5%," it said.
 
 
During the fourth quarter, adjusted net profits of the BSE-30 Index and Nifty-50 Index grew 7.5% and 2.3%. Kotak says, "We note that 4QFY15 had set a low base as profits had declined 10.9% and 9.4%. Public sector unit (PSU) banks disappointed the most once again and were joined by pharmaceuticals. The 4QFY16 earnings before interest, taxes, depreciation and amortization (EBITDA) of BSE-30 Index and Nifty-50 Index rose 14.5 % and 13.7% (1.9% and 2.6% ahead of our estimates, a positive sign). FY2016 net profits increased 2% for the BSE-30 Index and were flat for the Nifty-50 Index."
 
The report mentions that banks have put several corporate loan accounts on their internal ‘watch-lists’ and are monitoring the accounts for potential slippages. "Thus," it says, "we are not sure if the NPL issue is firmly behind us. We suspect slippages may remain high for another two quarters, albeit at lower levels compared to second half of FY2016 levels, and banks’ NPLs will peak out by second quarter of FY2017."
 

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India Post to open payments bank with 650 branches
India Post, which already offers limited financial services through its 154,800 post offices, is also becoming a payments bank with 650 dedicated branches involving an investment of Rs 800 crore, officials said on Wednesday.
 
A meeting of the cabinet, presided over by Prime Minister Narendra Modi, gave its approval to the proposal, following an in-principle approval by the Reserve Bank of India earlier.
 
Payments banks offer small savings accounts, as also remittances and mobile and net banking services, notably to migrant labour workforce, low-income households, small businesses and other unorganised sector entities.
 
They can also accept demand deposits up to a maximum of Rs 100,000 per individual customer, issue ATM/debit cards and act as agents for simple financial products like mutual fund units and insurance.
 
"The payments bank will be a game-changer in rural and semi-urban areas. It will help in our larger goal of financial inclusion," Communications Minister Ravi Shankar Prasad said after the cabinet meeting. 
 
"By September 2017, all 650 branches dedicated for postal payments bank will be operational." 
 
"All post offices, including the 1.39 lakh of the rural post offices, will be the access points for India Post Payments Bank. These post offices will be equipped with Micro-ATMs for facilitating both cash and digital transactions," the minister added.
 
More than 50 national and international banks, insurance companies, money transfer organisations are keen to tie-up with India Post Payments Bank, he said.
 
"We will start operations in March 2017 in about 50 districts ad quickly scale up to cover the entire country by the end of financial year 2018-19."
 
Prasad said the India Post Payments Bank will be professionally managed and run by a chief executive, with assistance from the designated of the departments of posts services, expenditure and economic services. 
 
"The payments bank will have 5,000 ATMs," the minister said. As regards the Rs 800 crore investment, half of it will be in the form of equity and the rest as grant, he added.
 
Some limited banking services are not new at post offices, which have been facilitating people to open savings accounts, recurring deposits, time deposit accounts and monthly income schemes and senior citizen savings schemes.
 
In addition, they also facilitate the opening and maintenance of provident fund accounts, and the purchase of National Savings Certificates, Kisan Vikas Patra and Sukanya Samriddhi accounts for the girl child.
 
The payments bank was first proposed by Finance Minister Arun Jaitley in 2014.
 
“After making suitable changes to current framework, a structure will be put in place for continuous authorization of universal banks in the private sector in the current financial year," Jaitley said in his budget speech on July 10, 2014.
 
"Differentiated banks serving niche interests, local area banks, payment banks are contemplated to meet the credit and remittance needs of small businesses, unorganised sector, low income households, farmers and migrant work force.”
 
Highlights of the India Post Payments Bank:
 
* It will offer basic banking, payments of direct benefit transfers, utility bills, collection of taxes and fees, remittances.
 
* It will also provide easy access to loans, collect EMIs, provide insurance (life, health, accident, two-wheeler/auto, crop, etc), pensions, investment opportunities like mutual funds, forex etc. in tie up with third party financial service providers.
 
* It will have a focus on rural, semi-urban, unbanked areas and among the under-banked segments of the society.
 
* India Post Payments Bank will usher in state of the art internet and mobile banking platforms, digital wallets, use emerging technologies such as Unified Payments Interface (UPI), e-KYC and catalyse the shift from a cash dominant to a less cash economy. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Shirish Sadanand Shanbhag

8 months ago

Considering the fact that Post Office offers its Savings bank facility to more than 1.5 lakh branches in India, creation of Payment Bank will popularise Post Office Savings Bank facility in India.
In order to populariser its savings Bank facility, maximum balance be increased to Rs.2.5 lakh in single name and 5 lakh in joint name. It should also provide Savings Bank facility to business houses, and details of cheque be printed in the pass book.
A cheque drawn in the name of Post Office Savings Bank (POSB) A/c holder be encashable in his/her/their POSB.

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