Dear All,
Weak Wednesday at start
Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it - Warren Buffett
The Sage of Omaha celebrates his birthday and it will help to take a lesson or two from his investing style. The large cap pack seems to be sprinting ahead of the mid-cap space with investors reckoning that valuations have turned frothy in many of the mid-sized companies. That explains why the Sensex managed to jump over 1.6pc on Tuesday while the mid-cap segment clocked gains of less than a percent. The new governor of RBI has yet to take charge but Finance Minister has expressed his view point saying that it is 'logical' to hope for a rate cut by the Reserve Bank of India given the good monsoon and falling food prices. He clarified that the actual decision will of course be taken by the central bank. Global cues are subdued after consumer confidence data raised fears of a rate hike again. The jobs data will be closely watched which will provide a clue to what the Fed is likely to do. The listing of RBL Bank is scheduled today. Its IPO was subscribed over 69.6 times.
Express Idea
It's the season to cement gains: Seasonality could lead to further gains in Cement space
Based on seasonality returns for the month of September and advanced technical analysis, we are recommending long trades on Ambuja Cements, JK Lakshmi and ACC. In the month of September, we have seen all the above mentioned counters deliver positive returns on atleast 8 occasions out of 10. Ambuja Cements, JK Lakshmi and ACC for the last 10 years have delivered average monthly returns for September of 5.3%, 8.3% and 7.8% respectively. Focusing on recent chart structure, all the above mentioned stocks are currently going through phase of consolidation. However, they reversed higher after taking support of its 50-day EMA. Considering secular uptrend in all the above mentioned stocks, we see recent consolidation as continuation pattern in the ongoing prevailing uptrend.
Funds Update
Mutual Fund: 15 Trillion Mark conquered, more to come…
Money continued to flow into the mutual fund (MF) industry with total Assets under Management (AUM) of MF industry at Rs 15.18tn as of July, 2016 up 9.9% MoM. The share of equity-oriented schemes was at 31% of the industry AUM in July 2016, down from 31.7% YoY. The proportionate share of income schemes at 44.1% of total AUM in July 2016, increased from 42.2% in July 2015.
On M-o-M basis, the AUM of all categories saw an increase, where the liquid funds category saw the highest rise in AUM, while Gold ETF saw maximum net outflow. AUM of Liquid Funds increased to ~Rs 3.01 tn, principally due to net inflows of ~ Rs 542 bn while AUM of Gold ETF stood at ~ Rs 64.99bn with a net outflow of Rs 1.83 bn.
Technical Track
Nifty registered a strong rally in Tuesday's trade post a gap up opening as momentum picked up on a break above 8680 levels. Market breadth turned positive as all the sectoral indices ended in green. India VIX which is also termed as Fear Index settled near 13 levels (lowest since January 2015). Forming bullish candle Nifty/ Bank Nifty witnessed positive break from its recent consolidation zone, suggesting now 8620-19250 respectively would act as important support levels. Traders are advised to ride the upmove as long as there is no any significant sign of reversal. On higher side Nifty may test 8790/8860 levels.
Derivatives Diary
² Huge breakout after the long consolidation as Nifty surpassed its overhead resistance zone of 8720-8750 zone, Nifty futures closing above 8800 levels.
² On options front, massive put writing seen at 8600/8700 strike adding 14/11.5 lacs shares while calls seen unwinding at 8600/8700.
² FII's futures long/short ratio stood at 8.19x (previous 8.04x) as FII's added another 35k contracts on long side.
² Banking stocks lead the up-move along with auto stocks with fresh life high breakout on likes of Maruti and HDFCBANK.
Fixed Income Synopsis
The 10Y benchmark yield ended ~1 bps lower at 7.11% vs previous close of 7.12%. Gsecs recorded total trading volume of ~Rs. 881 bn. 10Y bond made an intraday high of 7.12% while lowest level for the day was recorded at 7.09%.
The demand at the fixed Repo window was Rs. 107.18 bn, while the supply at the fixed Reverse Repo window was registered at Rs. 41.93 bn. The Call WAR closed lower at 6.39% vs. previous close of 6.40%.
The benchmark five-year OIS and one-year OIS closed lower, with the 5-Y OIS closing at 6.49% vs. previous day's close of 6.50%, while the 1-Y OIS closed at 6.57% vs. previous day's close of 6.57%.
The Reserve Bank of India's Reference Rate for the US Dollar is Rs 67.09 on August 30, 2016, while the corresponding rate for the previous day (August 29, 2016) was Rs. 67.18.
Commodity & Currency Cues
Precious pack remained under pressure, influenced by strengthening US dollar. Market focus is accentuated on the flow of positive macroeconomic indicators. In the latest, US Conference Board reported that its consumer confidence index for August rose to 101, an eleven month high. Moreover, Case-Shiller composite home price index of 20 US cities rose 5.1% in June, after increasing 5.3% in May. Investors are now keeping an eye on US nonfarm payroll numbers for August, where projections state that the economy probably added just 180,000 jobs, when compared with 255,000 jobs during last month.
LME base metals pack witnessed a quiet session, however, Copper prices particularly seems to be under pressure, weighed by hefty rise in LME warehouse stocks and rising mine output.
Crude oil futures lost ground despite reports of oil and gas operators in the Gulf of Mexico shutting production equivalent to 170,000bpd of oil and 190mcbf of gas production in light of approaching tropical storm. Prices were more receptive to the build-up in US crude oil inventories.
Indian rupee is on a firm footing, underpinned by surging foreign capital inflows and buoyancy in equity markets. Moreover, there is a growing conviction that RBI will smoothly manage the forthcoming FCNR redemptions worth US$20bn.
Corporate Snippets
² DLF has shortlisted bidders for stake sale in its rental arm and has allowed access to virtual data room and vendor diligence reports. (BL)
² Prime Focus Technologies (PFT), subsidiary of Prime Focus, has secured close to USD20mn in first round of funding from Ambit Pragma. (ET)
² Reliance Communications is planning to offer voice calling over LTE (VoLTE) by the end of the year, giving users another option to make voice calls, and is holding talks with major network providers to finalise a player within a fortnight. (ET)
² A government-appointed panel examining a dispute over migration of gas from Oil & Natural Gas Corporation (ONGC)-held blocks in the Bay of Bengal to adjacent fields of Reliance Industries (RIL) will submit its report to the Ministry of Petroleum by August 31. (ET)
² The pensioners of Britannia Industries Ltd and the biscuit-making major have agreed to settle a decade-long dispute to pay pensions due to employees who retired after March 2003. (BS)
² Cipla said its US arm InvaGen Pharmaceuticals Inc has received final approval from the American health regulator to market generic Bupropion Hydrochloride extended release tablets used for treatment of major depressive disorder. (BL)
² A central green panel has given environment clearance to Steel Authority of India Ltd's (SAIL) Rs54.19bn expansion and modernisation project for its Rourkela plant in Odisha. (BS)
² Reliance Communications is evaluating its options regarding spectrum in 700MHz band, which will be auctioned for the first time in India. (BS)
² IDBI Bank Limited has raised capital of Rs15bn through Basel III compliant Additional Tier-1 (AT1) bonds to enhance capital adequacy. (BS)
² Canada Pension Plan Investment Board (CPPIB) that manages pension fund assets has received RBI approval to increase stake beyond 5% to 10% in Kotak Mahindra Bank. (BS)
Economy Updates
² The mines ministry has allotted 30 mineral blocks for exploration to Mineral Exploration Corporation Ltd (MECL) to enhance confidence among private exploration agencies. (ET)
² India's biggest telecom spectrum auction will now start from October 1 instead of September 29, as the operators have suggested that there should be a gap of three working days between the mock auction and the actual start of sale of airwaves. (BS)
² The auto industry suffered a loss of Rs40bn in 8 months following the ban on sale of diesel vehicles in engine capacity of 2,000cc and above in Delhi/NCR. (ET)
Results Table
| Rs m | Revenue | YoY % | PAT | YoY % |
| Cox & Kings | 21,511 | 4 | 1,081 | (24) |
| Crompton Greaves | 10,700 | (26) | (95) | NM |
Happy Investing!
Amar Ambani
Head of Research
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