Trump shadow on stocks offers easy Infosys entry

With Republican candidate Donald Trump narrowing the gap with Democratic counterpart Hillary Clinton in the run-up to the US presidential elections, the stocks of domestic information technology (IT) firms plunged on Thursday.

Stocks of Infosys, Wipro touched 52-week lows, even as HCL Technology and Tech Mahindra fell on Thursday. Tata Consultancy Services (TCS) was the only IT biggie to give positive returns. This was because it has a more diversified revenue model than its peers.

However, most analysts believe recent fall offers an attractive entry point in Infosys.

Trump is known to be in favour of protectionist measures, such as stricter visa norms to curtail jobs for Indian and other non-US employees. Though it remains to be seen how much of this election rhetoric actually translates into action, the US elections will continue to weigh on IT stocks nonetheless, believe analysts.

Trump shadow on stocks offers easy Infosys entry Ashish Chopra, technology analyst at Motilal Oswal Securites, said, “I think Trump’s stance against Indian IT is very clear. The first question is whether he gets elected and second is, if he takes over in January, whether it will culminate into yet another hostile Bill in the US Congress. Those issues are keeping investors away from the sector and this pressure is likely to continue.”

One, at current levels the scrip is trading at 15 times FY17 estimated earnings which is undemanding and seems to capture most of the concerns. Second, even at it’s toned down revenue growth guidance of eight to nine per cent for this financial year, Infosys is likely to post industry leading growth.

“We like Infosys because we remain convinced that Vishal Sikka (CEO) will turn around the business as almost all operating metrics show improvement and current valuations too are attractive,” said Sagar Rastogi, technology analyst at Ambit Capital. Notably, Infosys has been witnessing improving Donald Trump momentum in both new deal wins as well as deal sizes in recent times.

On the other hand, investor sentiment continues to be cautious on Wipro scrip which also made a new 52-week low on Thursday. This is because the company has consistently lagged industry growth over the past few quarters now. Its forecast of -1 to one per cent sequential movement in constant currency organic revenues for the on-going quarter is rather muted indicating that the company still continues to struggle. Weak show of energy vertical (13 per cent of revenues) as well as limited success in ramping up client mining are the key pressure points/monitorables for the company, believe analysts. At 13 times FY17 estimated earnings, Wipro stock is the cheapest among large IT companies. However it has to witness sustained improvement in growth for investor sentiments to turnaround.

Trump shadow on stocks offers easy Infosys entry The Indian IT sector is going through a structural change as it realigns its business model to the next growth engine of digital technology. Macro headwinds such as Brexit and US elections have only added to the woes. Though Infosys’ exposure to Europe is amongst the lowest, coming quarters will be a test of analysts’ faith in Infosys. The strategies and agility with which IT companies adapt to the changing macro scenario will determine their prospects. Thus, though investors can consider Infosys post the correction, next few quarters will throw more clarity on how the macro headwinds unfold.

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Trump shadow on stocks offers easy Infosys entry

UK says 600 million pounds of masala bonds to be listed in London

Four rupee-denominated bonds worth a total of 600 million pounds ($748 million) are expected to be listed in London in the next three months, the British government said on Monday, as Prime Minister Theresa May began a two-day visit to India.

The latest four bonds will provide financing to expand India’s highway and rail networks and meet its plans to boost energy efficiency and renewable energy, the government said.

They will be issued by Indian government-backed corporates Indian Railway Finance Corporation, Indian Renewable Energy Development Agency, Energy Efficiency Services Limited, and National Highways Authority of India by the end of January 2017.

May has said she wants to use the trip India, her first bilateral visit to a non-European Union country since taking office in July, to boost ties between the countries and pave the way for a post-Brexit trade deal.

The government said that since July, more than 900 million pounds of so-called masala bonds have been issued in London, an equivalent of more than 70 per cent of the global offshore market.

“This government will continue to work closely with both India Company News and our financial services sector to ensure our growing rupee bond market continues to help finance India’s ambitious infrastructure investment plans,” May said in a statement.

Masala bonds, unveiled in 2015, are an opportunity for Indian firms to raise money while giving international investors access to higher yields in a zero-yield world.

They can be more expensive than issuing bonds in the local market because of India’s 5 per cent withholding tax on such international deals.

As well as a way to borrow overseas, they are also an attempt to make the tightly-controlled rupee more widely available in global markets, similar to the way in which China has moved to sell more yuan debt to overseas investors.

UK says 600 million pounds of masala bonds to be listed in London

India pie in global fund flow dips

India’s share in overseas flows to emerging markets and emerging Asia (EMEA) has contracted in 2016.

The country accounted for only 22 per cent of the total fund inflows in the EMEA region this year. In comparison, its share was 48 per cent in 2015, 43 per cent in 2014 and 57 per cent in 2012, Bloomberg data showed.

Foreign portfolio investors (FPIs) have bought equities worth $6.9 billion in Indian markets in the year till date.

This reduction in India’s share of FPI inflows comes as global funds reduce their India weightage in favour of markets like South Korea and Taiwan. Also, India’s recent underperformance and expensive valuations have weakened its appeal.

The benchmark Sensex has yielded 5 per cent return in the year so far against a 9.3 per cent surge in the MSCI EM Asia index.

According to HSBC, overseas funds are increasing their participation in South Korea and Taiwan in order to have exposure to a US demand recovery. Overseas funds have so far purchased net equities worth $14.2 billion in Taiwan and $9.7 billion in South Korea.

India pie in global fund flow dips “India slipped to fourth position, a level last seen in February 2012. In terms of absolute exposure, funds continued to reduce their holdings of Indian equities, Economy Newsthough India still remained the consensus overweight trade in the region,” said Herald van der Linde, head of equity strategy for the Asia Pacific, HSBC.

A month-wise analysis of the data shows that the pace of FPI inflows has slowed down in the last three months amid concerns about an interest rate hike by the US and its presidential elections. In October, FPIs turned net sellers for the first time in eight months, when they sold equities worth $616 million.

“Although 2016 has been a positive year in terms of FPI inflows, the flows are not as good as they were in the last few years. Even in the near term, there might be nervousness among FPIs over the outcome of the US elections. However, from a long-term perspective, Indian markets are still positive,” said Rajat Rajgarhia, managing director, institutional equities, Motilal Oswal Securities. Not just India, inflows have been slowing down across the globe. In the EMEA universe, FPIs bought equities worth $300 million during October, the lowest in nearly six months. “Investor sentiment remains subdued amid uncertainty over the timing of a US rate hike,” der Linde added.

FPI inflows to India have spiked since 2013 when Indian equities scaled new heights on the hopes of a new government at the Centre. Since then India has been a relative outperformer. Even in 2015, when FPIs were net sellers in a majority of emerging markets, India witnessed inflows of $3.3 billion.

India pie in global fund flow dips

Flipkart looks inward for leaders after failed hires from Silicon Valley

India’s largest e-commerce player Flipkart has begun looking for its next generation of leaders from within the company after failing to build a world class culture by hiring its top management from outside.

In January this year Flipkart underwent a massive top management restructuring that saw Binny Bansal take over as CEO from partner Sachin Bansal. Several executive roles were also changed, resulting in a slew of exits including that of Punit Soni, Mukesh Bansal and Sanjay Baweja.

“A bunch came together and then they really built the company, but it is fair that last year we were largely looking outside and I think it was too much. So my core philosophy has been to re-pivot from hiring to a lot more internal talent development,” said Nitin Seth, Chief Administrative Officer at Flipkart.

Since the start of the year, Flipkart has cut down the size of its management team from 18 members to eight today. The new management team, including Kalyan Krishnamurthy who was brought in from Tiger Global (one of Flipkart’s largest investors) is now believed to be a lot more confident and focused.

Flipkart’s game of musical chairs with its top management India Business News came at a time when rival Amazon was growing its business by investing heavily in the country. The US retailer has managed to close the gap between it an Flipkart and is within striking distance of taking over the leadership position in India.

Binny Bansal now has a hard task of growing the company while fending off Amazon, and in the nine months that he’s been at the helm of the company, there have been positive signs of change. In the recent festive sales, Flipkart is believed to have sold far more products than Amazon and remains clearly in the lead according to industry watchers.

Core to this change is a complete overhaul of Flipkart’s culture, says Seth. “If you always bring senior talent from outside you cannot hold the culture, so we have put the focus on internal talent development. Earlier we would have probably gone to the market, instead we have chose to promote young talent and they are doing exceptionally well.”

Flipkart is now looking at putting in place a system for internal talent development that will give people who’ve been in the company a chance to grow. It is also encouraging its employees to stay for longer stints by offering ESOPs. It claims that 40 per cent of all eligible people in the company have been offered stocks.

Even when it comes to hiring new talent, Flipkart is working on rationalising its costs. While the it has come to be known for exuberant spending on top talent, it says that that was a part of a strategy and has now set benchmark salaries for every role in the company.

“We erred too much to this side (hiring externally) in the past but very clearly it is encouraging our internal talent. That is also something we have to get better at. We are exceptional at attracting great talent and giving them impossible tasks to work on. But now we have to develop them so that they can do different things,” added Seth.

Flipkart looks inward for leaders after failed hires from Silicon Valley

Trump accuses IBM of shifting jobs to India

Republican presidential nominee Donald Trump has accused American tech giant IBM of laying off 500 workers in Minneapolis and shifting their jobs to India and other countries, saying he will levy a 35% tax on companies doing so.

“IBM laid off 500 workers in Minneapolis and moved their jobs to India and other countries. A Trump Administration will stop the jobs from leaving America, and we will stop the jobs from leaving Minnesota,” Trump said in his speech yesterday in Minneapolis, as part of efforts to woo voters in Minnesota state which has been a Democrat stronghold.

“If a company wants to leave Minnesota, fire their workers and move to another country and then ship their products back into the United States, we will make them pay a 35% tax. We will also unleash American energy including shale oil, natural gas and clean coal,” he said.

Trump said he will cancel all harmful Obama regulations that hurt Minnesota farmers, workers and small businesses.

“We will become a rich nation once again Donald Trump. But to be a rich nation, we must also be a safe nation,” he said.

He claimed that Democratic presidential nominee Hillary Clinton wants a 550% increase in Syrian Refugees pouring into the US wants virtually unlimited immigration and refugee admissions from the most dangerous regions of the world.

“Her plan will import generations of terrorism, extremism and radicalism into your schools and communities. When I’m elected President, we will suspend the Syrian Refugee Program and we will keep Radical Islamic Terrorists out of our country,” he added.

“Here, in Minnesota, you’ve seen first-hand the problems caused with faulty refugee vetting, with large numbers of Somali Refugees coming into your state without your knowledge, support or approval and with some then joining ISIS and spreading their extremist views,” Trump said.

He asserted that a Trump administration will not admit any refugees without the support of the local community where they are being placed.

“And we will pause admissions from terror-prone regions until a full security assessment has been performed, and until proven vetting mechanisms have been established,” he said.

A Trump administration will also secure and defend the borders of the United States, he said reiterating that he will build a wall along the Mexico border.

“Hillary supports totally open borders, and strongly supports Sanctuary Cities like San Francisco where Kate Steinle was murdered by an illegal immigrant deported 5 times. Thousands of Americans would be alive today if not for the open border policies of Obama-Clinton,” Trump said.

Trump accuses IBM of shifting jobs to India

Markets snap 4-day losing streak on Clinton’s victory hopes

Benchmark share indices snapped a four-day losing streak amid a rally in global stocks after the FBI’s clean chit on the alleged email scandal boosted her prospects in the race to the White House.

The S&P BSE Sensex ended up 185 points at 27,459 and the Nifty50 ended up 63 points at 8,497. In the broader markets, the BSE Midcap and Smallcap indices gained between 0.6%-1.2% each. Market breadth ended strong with 2001 gainers and 873 losers on the BSE.

“Indian markets rose in line with positive global markets, in a clear sign that financial market’s near term direction is closely intertwined with US electoral developments. PNB’s numbers showing improvement in asset quality have allowed banking sector to lead the rally, and at least temporarily forget NPA worries, but with ICICI Bank and SBI’s figures expected shortly results, caution continues to remain the watchword. UK court’s ruling over Brexit looks to have complicated trade negotiations, and not surprisingly, Pound’s recovery was short lived, and IT stocks look to continue under pressure.” said Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services

Foreign institutional investors were net sellers in equities worth Rs 343 crore on Friday, as per provisional stock exchange data.

Global Markets

Asian shares ended higher on Monday after reports suggest that the FBI that it has not changed its view on the closure of the investigation into the alleged email scandal of Democratic presidential candidate Hillary Clinton after its review of new emails. Stocks in Japan were the top gainers in the region with the benchmark Nikkei up 1.6% followed by Straits Times and Hang Seng which gained 0.4%-0.7% each while China’s Shanghai Composite ended up 0.3%.

European stocks surged on Monday after the latest developments indicated that Hillary Clinton was seen leading her rival in the race for the Presidency after the FBI following an investigation cleared of the alleged email scandal. The CAC-40, DAX and FTSE-100 were up 1.4%-1.8% each. Meanwhile, the Dow futures were trading higher.

Index Stocks

Lupin ended up 7% after the pharma major said that it has received Establishment Inspection Report (EIR) from the US health regulator for its Goa plant leading to closure of all outstanding inspections of the facility.

Sun Pharma and Dr Reddy’s Labs gained over 0.4% each. In the broader markets, Glenmark Pharma, Aurobindo Pharma, Neuland Labs, Dishman Pharma, ended up over 3% each.

PNB ended nearly 7% higher post the strong India Business News listing of its housing finance arm.

PNB Housing Finance ended up 15% at Rs 891. Earlier, the stock had listed at Rs 863 on the BSE, an 11% premium over its issue price of Rs 775 per share. PNB Housing Finance, promoted by Punjab National Bank (PNB), raised Rs 3,000 crore through initial public offer (IPO). The issue was oversubscribed 29.55 times at a price band of Rs 750-775 per share.

ICICI Bank ended up 3% ahead of its second quarter earnings due for release today.

ITC extended gains and ended nearly 3% higher after the Goods and Services Tax (GST) Council’s propose to place tobacco products in the 28% tax slab and an additional cess. The current rate of taxation on cigarettes is around 64% and 81% on chewing tobacco.

Broader Markets

Nilkamal dipped 7% after the company’s net profit was flat at Rs 26.33 crore for the quarter ended September 30, 2016 (Q2FY17), due to lower volume growth. The plastic products maker had posted a profit of Rs 26.12 crore in the same quarter last fiscal.

Shares of Dalmia Bharat Group companies OCL India and Dalmia Bharat ended higher by up to 4% on BSE after their respective boards approved the merger of the two firms in an effort to simplify the group structure.

Seshasayee Paper & Boards jumped 12.7% after the company reported an over four-fold jump in net profit at Rs 30.70 crore for the quarter ended September 30, 2016 (Q2FY17), due to lower raw material and finance cost. The company had posted a profit of Rs 7.19 crore in the same quarter last fiscal.

Crompton Greaves surged 12% after the company announced that it has received a binding offer for acquisition of its B2B Automation business from Alfanar.

Heritage Foods ended 10% higher on BSE on back of heavy volumes after a media report suggests that Future Group to announce acquisition of the company’s retail outlets today.

Markets snap 4-day losing streak on Clinton’s victory hopes

GST: Centre hopeful of consensus on assessee scrutiny

The Centre is hopeful of a consensus around ‘vertical division’ of assessees, one without a turnover threshold, to resolve the issue of dual administrative control under the proposed goods and services tax (GST) regime.

While most states are in agreement over the principle of division in a pre-decided ratio between the two authorities, Kerala, West Bengal and Tamil Nadu have pressed for exclusive state control over those with annual turnover up to Rs 1.5 crore and dual control for beyond that.

Also termed ‘horizontal division’, this threshold formula would ensure states get control over most assessees. By government data, 88% of assessees are below the Rs 1.5 crore threshold.

“A consensus appears to be evolving around the ‘vertical division’ of assessees for scrutiny and audit. Negotiations will centre around the ratio of division. We are willing to do less assessment than states,” said a central official. The ratio could be 1:2 or 1:3 in favour of states.

Resolution of the issue is needed to prevent harassment of taxpayers. “We can’t have two competing authorities for the same assessees,” said the official.

Assam’s finance minister, Himanta Biswa Sarma, India Economy News told a television channel after the Council meeting on Friday: “When the meeting started, the Council was leaning towards a Rs 1.5 crore threshold but now many states feel that it should be vertical division. We expect the dual control issue to be resolved soon.”

Jammu & Kashmir’s Haseeb Drabu said the state would back a vertical split of administrative powers. While the states had earlier agreed to exclusive assessment of manufacturing units with turnover of up to Rs 1.5 crore, they went back on it as the Centre retained administrative control over all 2.6 million service tax assessees.

Finance Minister Arun Jaitley said after the meeting, “We don’t want to take a decision in a hurry because, administratively, any mistake on this front could be chaotic.”

The finance ministers will have an informal meeting on November 20 to discuss it. “Sometimes ministers in the Council meeting discuss a politically correct stand in the presence of everyone. Informally, they might have a different view,” said an official.

Pratik Jain, partner at consultancy PwC, said: “With services also getting split between Centre and States, it is unlikely the Centre would agree on horizontal division. A vertical division on an agreed ratio seems more viable.”

GST: Centre hopeful of consensus on assessee scrutiny