Sensex, Nifty settle at record closing highs; Nifty Bank ends above 25,000

The markets ended at fresh closing highs on Monday after the country’s biggest lender, State Bank of India, rallied as it introduced a 2-tier savings bank interest rate, while investors awaited a rate cut by the Reserve Bank of India in its two-day policy meeting which begins on Tuesday.The markets ended at fresh closing highs on Monday after the country’s biggest lender, State Bank of India, rallied as it introduced a 2-tier savings bank interest rate, while investors awaited a rate cut by the Reserve Bank of India in its two-day policy meeting which begins on Tuesday.
Economists are divided on what action the RBI will take in its policy review that concludes on Wednesday. Of the 14 economists polled by Business Standard, five said there would be the status quo this time. In most cases where the economists said there would be a cut, they warned it was a close call. CLICK HERE FOR FULL REPORT
Meanwhile, the retail inflation rate is running well below RBI’s target. It had eased to its slowest pace in over five years in June.

Sensex, Nifty settle at record closing highs; Nifty Bank ends above 25,000

From China to liquidity withdrawal, here are key risk factors for the markets

Market valuations have risen considerably over the past few quarters both in the frontline indices like Sensex or Nifty and in the midcap/ smallcap indices. The current equity market valuations are factoring in a robust recovery in earnings growth. Retail investors are worried whether the valuations would sustain at current levels. This depends on how soon and robust the earnings recovery is and how sustainable it will be.

While optically, the markets may seem to be expensive going by historical standards, bulls say that price-to-earnings (P/E) multiples are inversely correlated with the cost of capital.

Further, markets typically top out at times the economy is overheated and there is a general euphoria in the markets. Index composition/changes and index earnings composition (losses by some large companies offset profits by others depressing the index earnings) are other parameters to check whether the markets are really overvalued or not. The truth lies somewhere in between. If the economy is close to a bottom and corporate earnings are slated to recover soon, then the P/E ratios will look reasonable going forward.

 

However, in the case of earnings recovery being delayed, the markets may be expensive and may remain sideways for an extended period, if not fall.

Earnings growth over the last three years has been lacklustre, with flattish Nifty EPS over FY14-17. Earnings growth was constrained by the lack of revival in private investment cycle, two consecutive droughts, asset quality stress at public sector undertaking (PSU) banks and corporate private sector banks, deceleration in credit growth, among other reasons.

Markets also dislike geopolitical risks or conflicts, although the impact of this is large only if the issue is prolonged. Currently, while India could face issues with China and Pakistan based on current skirmishes/posturing, globally also small regional conflicts may become large involving multiple nations. Any such development could lead to paring down of risk on sentiments and withdrawal of funds by foreigners and even locals as they are sitting on wide profits. This could lead to downward volatility in the markets.

A smaller risk at this point is an excessive monsoon resulting in the destruction of crops and other infrastructure. Going by current trends, the India Meteorological Department (IMD) has said that the monsoon has been 5 per cent above normal between 1 June and 26 July. Though breaks are expected in August and September, if it doesn’t happen, excess rainfall could lead to crop shortfall, infrastructure damage, health epidemics, among other problems. This could mean some damage to the prospects of growth and to valuations.

One big risk for the markets is the swift unwinding of the balance sheet by the central banks. If this happens, liquidity which is floating across the world will be withdrawn and come back into the original countries that could create turbulence in the debt and equity markets across the globe.

If global bond yields were to move up from current levels on the back of global economic recovery, this process of rerating would come under threat and reversal.

Liquidity withdrawal and its strong signs by the United States, Japan, the euro zone and lately the United Kingdom could create jitters among equity investors who have entered into an arbitrage trade.

We need to watch as to how serious these central bankers are about ending easy money policies and beginning to shrink balance sheets of the respective countries’ central banks.

From China to liquidity withdrawal, here are key risk factors for the markets

Confirmed: There’s no deal; Snapdeal, Flipkart call off merger talks

After five months, countless man hours of deliberation and numerous board meetings, a proposed merger between e-commerce players Snapdeal and Flipkart – which would have been the biggest consolidation in the Indian e-commerce history has been called off, Snapdeal has confirmed.

“Snapdeal has been exploring strategic options over the past several months. The company has now decided to pursue an independent path and is terminating all strategic discussions as a result. Snapdeal’s vision has always been to create life-changing experiences for millions of buyers and sellers across India,” Snapdeal spokesperson said.

Sources added that Softbank would in all probability invest in Flipkart on its own and not continue its association with Snapdeal. The Snapdeal founders – Kunal Bahl and Rohit Bansal – as well as early-stage investor Nexus Venture Partner and smaller shareholders like PremjiInvest had all along showed their reservations against the deal.

A Softbank spokesperson said: “Supporting entrepreneurs and their vision and aspirations is at the heart of Masayoshi Son’s and SoftBank’s investment philosophy. As such, we respect the decision to pursue an independent strategy. We look forward to the results of the Snapdeal 2.0 strategy, and to remaining invested in the vibrant Indian e-commerce space.”

Snapdeal plans to now go ahead with its ‘Plan B’ and pivot its company into a Taobao kind of an open marketplace set-up. The company just closed a $60-million deal to sell its online wallet Freecharge to Axis Bank. With this money, as well as the cash it has in bank, the company hopes to have a running time of at least four years.

“We have a new and compelling direction – Snapdeal 2.0 – that uniquely furthers this vision, and have made significant progress towards the ability to execute this by achieving a gross profit this month. In addition, with the sale of certain non-core assets, Snapdeal is expected to be financially self-sustainable. We look forward to the support of our community, including employees, sellers, buyers and other stakeholders in helping us create a designed-for-India commerce platform,” the person added.

According to sources there are a host of reasons behind the deal not happening. In his last email to FreeCharge employees as the top boss, Bahl, buoyed by the sale of the mobile wallet to Axis Bank, said the deal provides them the necessary boost in resources to continue the journey towards building an e-commerce platform.

Axis Bank last week announced it had bought the mobile payments wallet provider from Snapdeal for $60 million.

According to sources close to Snapdeal, the co-founders are actively working towards a ‘Plan B’ and have taken into confidence most of their senior management. According to sources, the two have been fighting SoftBank, the biggest investor in the company, ‘tooth and nail’ to prevent the deal from happening.

“They are going to fight the deal till they can. The kind of U-turn SoftBank took last year has left them flabbergasted. First SoftBank asked them to rebrand, spend money on marketing, promising all along that more investments are on way and then they suddenly left them high and dry. While Flipkart went through a series of markdowns, Snapdeal was untouched, but when it came to valuing the company for a merger, its valuation was slashed from $6.5 billion to less than a billion dollars,” said a source who till recently was part of the Snapdeal senior management.

Bahl along with Bansal and Jason Kothari, the current chief executive officer of FreeCharge, have been in talks with several other players in hopes of finding an alternative to Flipkart. Recently, the founders were having informal talks with business-to-business marketplace major Infibeam, though the talks have not moved forward.

If push comes to shove, the co-founders plan to bring down the number of employees from 1,000 to 200, run a lean organisation, and show profits by next year. It plans to go for an initial public offering post that and get an exit.

Valuation woes

Till date, the co-founders as well as Snapdeal’s early-stage investors have been upset with the way SoftBank has marked the valuation to a sixth of what it was last year. Kalaari Capital and Nexus Venture Partners, the two early-stage investors, wanted SoftBank to value not just the e-commerce company, but its two units — Vulcan Express and Unicommerce — with a higher valuation.

Both Kalaari and Nexus had vetoed SoftBank’s proposal in April to value the e-commerce company between $600-800 million. SoftBank has already written off the value of its investments in the company.

In the months that followed, Kalaari’s founder Vani Kola resigned from the Snapdeal board and Nexus gave its assent to the valuation of a billion dollars. Flipkart earlier made an offer of $750 million, then revised it to $900 million. But the co-founders and Nexus played hardball. “The investors believe that Snapdeal is worth more and do not want to be shortchanged. They have to face their shareholders,” said a source close to the Snapdeal board.

Snapdeal’s minority shareholders, in total around 30 including PremjiInvest, have also showed their displeasure about the deal and demanded a better payout.

Flipkart’s demands

From indemnity to a non-compete clause, Flipkart had put forth a set of demands in front of the Snapdeal board that is making them as well as the shareholders of the Gurugram-based online marketplace ‘uncomfortable’, and leading to further delay.

“There are a lot of non-standard clauses that Flipkart wants the Snapdeal board to agree on. For example, the marketplace major wants indemnity for at least two years for any financial losses or other troubles that might happen after merger,” sources close to the Snapdeal board said.

It means Flipkart wants protection from all the decisions taken by the Snapdeal board that might have an effect on the company after merger for a period of two years. Snapdeal investors looking for an exit, such as Nexus and Kalaari, would remain tied up for a considerable amount of time.

Confirmed: There’s no deal; Snapdeal, Flipkart call off merger talks

Govt in talks to revise policy on petroleum industrial regions

With some of the petrochemical industrial regions such as Paradip and Tamil Nadu not generating expected results unlike Dahej in Gujarat, the Government of India is in discussions of revising the Petroleum, Chemicals and Petrochemicals Industrial Region (PCPIR) policy.

Speaking at the sixth Petrochemicals Conclave at Gandhinagar, Rajeev Kapoor, secretary, department of chemicals and petrochemicals, Government of India said, “There is expected to be a shortage of petrochemical intermediates by 20 million tonnes by 2025. There is also lack of R&D and innovation in the sector. Except for Dahej, nothing much has happened in Paradip and Tamil Nadu PCPIRs. Hence, there is a need to relook at the policy for revision and the government is in discussions for the same.”

Minister of State for Chemicals and Fertilizers, Mansukh Mandaviya said that the petrochemical complexes need strengthening in order to boost country’s exports. “Chemical and petrochemical imports today stand at 10 million metric tonnes which is set to grow to 46 million metric tonnes by 2030. Import substitution of certain petrochemicals is the key requirement for sustainable development of the industry in the next 5-10 years. We have to look at ways to reverse the trend for India to become a net exporter of the same,” said Mandaviya.

 

Mandaviya urged the petrochemicals industry to focus on effective recycling and management of plastic waste for building a positive perception on the use of plastics.

Union minister for petroleum and natural gas, Dharmendra Pradhan said that setting up of petrochemical clusters could help boost both consumption and marketing of end products. “Currently, the petrochemicals value chain is spread across various regions which could be brought together into clusters to boost consumption and marketing. Already, with increase in the per capita income and discretionary spending, there has been a steady change in spending patterns, from products made of metals to those made of fibres and plastics, which are both economical and long-lasting,” Pradhan added.

While India’s per capita consumption of plastics at 10 kg per person is lower than the global average of 32 kg, the country’s aggregated demand for petrochemicals stands at 38 million metric tonnes per annum (mmtpa), Pradhan. Between 2000 and 2016, India grew at nearly 14 per cent in polymers to stand at a 10 mmtpa.

The current petrochemicals market in India is estimated to be about 30 mmtpa while the average domestic per capita consumption of petrochemicals is about 22 kg per person. The total petrochemicals market in India is currently valued at approximately $ 50 billion. Driven by the rise in polymer demand, it is expected to grow at the rate of nine per cent annually to reach 40 mmtpa in consumption and $65-70 billion in revenues by FY 2019-20.

Out of India’s petrochemicals demand of 30 mmtpa, the demand for polyolefins, used in industrial packaging and household plastic products, is estimated to be around 10 mmt. Expected to grow at a CAGR of almost 8-9 per cent, polyolefin demand in India is expected to reach 22 mmt by 2026. Overall, the petrochemicals market in India is expected to grow at a CAGR of 1.5 times that of GDP in the next 10 years.

Meanwhile, speaking at the conclave, Nitin Patel, deputy chief minister of Gujarat said that petrochemicals had a big share in making Gujarat a model state with a high growth rate. “The annual turnover of the petrochemicals industry in Gujarat is Rs 5 lakh crore, supporting about 500 big industries, 1,600 medium and many small industries,” Patel added.

Govt in talks to revise policy on petroleum industrial regions

Focus on Tier-II towns, Scoot to fly to SE Asia

Singapore Airlines’ low-cost subsidiary Scoot says it is focusing on Tier-II cities such as Amritsar, Jaipur and Lucknow as it is unable to expand its operations and meet demand from large metros due to lack of slots.

With Indian carriers utilising just 20 per cent of the slots allocated to them to fly to Singapore, the chances of India and Singapore going for bilateral talks to expand capacity will remain a pipe dream. “Given the constraints, we are looking at expanding in Tier-II cities. Last year, we started operating from Amritsar and Jaipur, and about a year and a half ago we started at Lucknow. So, our focus will be in Tier-II cities and if the metro cities open up we will definitely come in,” said Bharath Mahadevan, country head for Scoot.

Scoot expects its operations in India to grow by just 5-7 per cent in the next few years, despite the domestic market for international travel to South East Asia and Australia expected to explode. To indirectly meet some of this demand, the company is looking at aggressively entering new cities such as Bhubaneswar and Guwahati, which fall under the government of India’s open skies policy. Mahadevan says Scoot will also look at cities such as Pune, Chandigarh and Madurai as and when they open up. With around 80 per cent of its capacity being utilised the year round, India is Scoot’s largest International market after China. Given the restrictions in place, the company will begin looking at alternative for growth, just as it did by aggressively entering Tier-II markets over the past one and a half year.

 

“We have our partner Vistara (a Singapore Airlines and Tata venture), which is operating in the Indian market. We are looking at synergies with Vistara, where it feeds us from the Tier-II cities into Bangalore or Chennai and we carry them (the passengers) to Singapore. But it (Vistara) has to expand its network first before that happens,” added Mahadevan.

Scoot on Tuesday announced its merger with Tigerair, another wholly owned subsidiary of Singapore Airlines. The merger would give the company access to all the routes Tigerair operated in India, including Bengaluru from where it will operate a daily flight to Singapore.

Focus on Tier-II towns, Scoot to fly to SE Asia

A rare phenomenon caused Gujarat floods

With just two days to go before the month ends, Ahmedabad may break a 112 years old record of highest rainfall in July it had set in 1905. Gujarat, especially in the northern and western parts, received good rainfall this year. Ahmedabad has already received 828.2 mm rains, as against a normal level of
291.1 mm.

At a time when nine districts of Assam saw 60,000 people being affected by floods, questions arose over Prime Minister Narendra Modi’s aerial review of the flood situation in Gujarat, especially in Banaskantha which faced maximum fury of rains this year. However according to experts, unlike eastern states which face such situations almost in every monsoon due to proximity to Bay of Bengal, floods in Gujarat were unprecedented.

Unlike historically when onset of monsoon caused either an active system emerging from Arabian Sea or Bay of Bengal lashing heavy rains, this year both the systems have been active and caused simultaneous low pressure over Gujarat. What further aggravated the scenario is the merger of these two active systems lasted for more days than usually seen in other cases of flooding such as in Assam this year or last year in Chennai.

 

“This is definitely one of the heaviest rainfall. Usually Gujarat gets rainfall either from Bay of Bengal or Arabian Sea. This year, both the systems are active simultaneously. In a typical normal monsoon, however, the system comes from Bay of Bengal,” Jayant Sarkar, director of the Indian Meteorological Department (IMD), Ahmedabad, told Business Standard. Mahesh Palawat, vice- president, meteorology and climate change, Skymet Weather Services.

“Normally, Gujarat does not receive such torrential rains. It was way back in 1905 that Ahmedabad had received record highest rainfall of 952.5 mm in July. Since then, we haven’t seen such a downpour in July. This is due to low-pressure areas being developed over the system emerging from Bay of Bengal, which travelled across central India to reach Gujarat,” Palawat said.

graph

“The other reason is this (rain) lasted for a longer duration and poured over several parts of the state unlike last year in Chennai where it was concentrated only on northern coastal areas of Tamil Nadu. Compared to Chennai last year and Assam this year, the rainfall has been heavy, prolonged and widespread across the state,” Palawat added.

The state has already seen over 55,000 being rescued, even as rain-related deaths were reported at over 110 so far across Gujarat. According to Nitin Patel, deputy chief minister at the Gujarat government, eight more teams of National Disaster Response Force (NDRF) are expected to join the rescue work apart from 10 existing teams, six Army columns and 11 State Disaster Response Force teams, among other agencies.

“Normally, states like Assam and Meghalaya receive good rains but their topography is such that the rainwater gradually flows down and waterlogging is, therefore, uncommon. Compared to these northeastern states, the rainfall so far in Gujarat has been much heavier. What worsened the situation is that the excess rainfall in southern Rajasthan, which was more than 700 mm for two consecutive days, flowed back to Gujarat,” Palawat stated.

As of July 26, around 38 dams and reservoirs of the total 203 were over 90 per cent full and carried a high alert, followed by 19 dams and reservoirs with warning being 80-90 per cent full and another 15 being 70-80 per cent full.

According to the IMD data, between July 1 and 28, Gujarat has seen an excess 65 per cent rainfall at 559.4 mm, as against the normal of 339.6 mm for the said period. Area-wise, the highest rainfall has been witnessed by Banaskantha, Patan, Gandhinagar, Morbi, Surendranagar, Mehsana and Sabarkantha at 267 per cent, 208 per cent, 189 per cent, 174 per cent, 172 per cent, 130 per cent and 115 per cent, respectively.

Meanwhile, both state and central government teams are set to begin assessment of loss to the state including crop loss once the downpour slows down and waters recede.

A rare phenomenon caused Gujarat floods

Your beauty parlour could be giving you Hepatitis, even HIV!

Recently, American singer Paula Abdul suffered a painful thumb infection, which she picked up from a Los Angeles nail salon. This led legislators in the US raising voice in support of a Bill to increase nail salon health standards. The truth is situation in our country is not any merrier.

Each time you opt for a manicure or pedicure, you experience a little bleed. You will dab it with a little antiseptic solution, believing that it’s a minor injury that’ll heal as long as you don’t wear tight shoes. In reality, this could lead you contracting hepatitis B virus, hepatitis C virus and HIV, because the parlour may not always use sterilised scissors.

A recent study claims that a simple fish pedicure could spread deadly infections and diseases in a never-seen-before manner. So, if you are getting great discount at a salon or parlour, re-think again and make sure that you are safe.

 

Among those living with HB or HC, it is recommended by doctors that personal care items, such as nail files, clippers, and tweezers should not be shared. Small salons and beauty centres do not always adhere to standard precautions, and the tools in many places are not of single-use or adequately disinfected. If a person has a weak immune system or pre-existing conditions like diabetes and psoriasis, it is advisable to stay away from local beauty parlours. Even droplets of blood could readily transmit the infectious diseases. All of these viruses are transmitted through the blood; HB is said to be 50-100 times more likely to be transmitted than HIV, while HC is 10 times more likely. These are asymptomatic diseases — once they enter the blood stream they do not show any symptoms, but may stay in the body for up to 25 years and then cause serious liver problems, even resulting in cirrhosis and cancer. According to a study conducted at 250 parlours in Pakistan in 2011, it was noted that one out of 10 women were infected with HB or HC at beauty parlours.

HC, in particular, has emerged as a major health threat in India. Lack of awareness can have long-term implications. In most infected areas in the country, it is primarily caused by unsafe injections, blood transfusions with unscreened blood, surgical procedures that follow unsafe practices, and use of unsterile needles by intravenous drug users. Unsafe sex can also transmit the virus in rare cases. Body piercing, body art, and tattooing are other causes of the rapid spread of the virus across the country, which are again on the rise amongst the youngsters of our country presently, and culminating in numerous infections of viral Hepatitis, which manifest its chronic symptoms after decades.

Ground level awareness must focus on stepping up on the modes of transmission. You must keep a close watch on how the nail and hair parlours you visit are using clean tools or wearing gloves while performing procedures such as waxing. If hygiene and use of non-disposable items does not seem to be a priority, it is a wise decision to wash your hands off from that particular parlour.

Here are a few precautions you must take: Don’t let a beautician use a previously used towel. Make sure needles are brand new. Insist that personal care items are disinfected. Make sure the salon has ventilation and cleanliness, and that the employees of are vaccinated against HB.

Your beauty parlour could be giving you Hepatitis, even HIV!