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Emerging East Asian Bond Yields Decline Amid Subdued Global Growth
Sep 19,2016

Yields on bonds in emerging East Asian markets declined as inflationary pressures remained largely muted and persistently low global growth increased the attractiveness of East Asian bonds, the Asian Development Banks (ADBs) latest Asia Bond Monitor said.

While the Brexit vote created uncertainty and volatility, especially in the developed markets in the immediate aftermath of the vote, the markets in East Asia have largely regained calm,n++ said Shang-Jin Wei, ADBs Chief Economist. ADB research suggests that countries with capital flow management measures or a flexible nominal exchange rate regime are likely to be better prepared to n++deal with the risk associated with a future US interest rate increase, especially if they have adequate foreign exchange reserve as a cushion, which characterizes most countries in the region.

The report notes that yields for 2-year and 10-year local currency government bonds in emerging East Asia were mostly lower between 1 June and 15 August and stock markets in the region recorded gains as well, giving investor sentiment a lift. Over the same period, most East Asian currencies also appreciated against the US dollar, with the Korean won recording the biggest gain of 7.7%. The exception was the Chinese renminbi, which fell 0.9% during the period.

Emerging East Asias outstanding local currency bonds were up 6% quarter-on-quarter and nearly 22% year-on-year, reaching $10 trillion. Local currency bond issuance in the second quarter totaled $1.3 trillion, recording double-digit growth both on a quarterly and year-on-year basis. Bond issuance was led by the Peoples Republic of China which remains the largest local currency bond market in the region with outstanding bonds of $6.9 trillion at the end of June.

Moving forward, the report notes that while markets are calm, there are rising risks to East Asian bond markets. A hike of the interest rate by the US Federal Reserve could prompt foreign investors to cut their holdings of East Asian local currency bonds. Negative interest rates in markets such as the European Union and Japan, could increase capital inflows to emerging markets, jeopardizing financial stability in Asian markets. The report cautions that increased capital inflows could lead to currency appreciation, which would undercut economies heavily reliant on exports and contribute to deflationary pressures.

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RCom gains on bargain hunting
Sep 19,2016

Meanwhile, the BSE Sensex was up 43.64 points, or 0.15%, to 28,642.67.

On BSE, so far 10.12 lakh shares were traded in the counter, compared with an average volume of 28.71 lakh shares in the past one quarter. The stock hit a high of Rs 49.20 and a low of Rs 48.40 so far during the day. The stock hit a 52-week high of Rs 91.80 on 1 January 2016. The stock hit a record low of Rs 45.55 on 24 June 2016. The stock had underperformed the market over the past one month till 16 September 2016, rising 0.52% compared with Sensexs 1.9% rise. The scrip had also underperformed the market in past one quarter, gaining 2.99% as against Sensexs 7.82% rise.

The large-cap company has equity capital of Rs 1244.49 crore. Face value per share is Rs 5.

From a close of Rs 51.05 on 14 September 2016, the stock dropped 5.58% in two sessions to settle at Rs 48.20 on 16 September 2016. Reliance Communications (RCom) announced after market hours on 14 September 2016 that the company and Maxis Communications Berhad (MCB), promoters of Aircel, a leading pan-India mobile operator signed definitive documents for the merger of their Indian wireless businesses-the largest-ever consolidation in the Indian telecom sector. The stock had dropped 2.45% to Rs 49.80 on 15 September 2016 following the announcement of merger. The RCom-Aircel combination will create a strong operator ranked amongst Indias top 4 telecom companies by customer base and revenues, also ranking amongst the top 3 operators by revenues in 12 important circles.

The merged company will be one of Indias largest private sector companies, with an asset base of over Rs 65000 crore ($9.7 billion) and net worth of Rs 35000 crore ($5.2 billion). The combined entity will enjoy substantial benefits of scale driving significant revenue growth, and capex and opex synergies with an NPV of Rs 20000 crore ($3 billion).

RCom and MCB will each hold a 50% stake in the merged entity with equal representation on the board of directors and all committees. The company will be managed by an independent professional team under the supervision of the board. RComs overall debt will reduce by Rs 20000 crore ($3 billion) or over 40% of its total debt, and Aircels debt will reduce by Rs 4000 crore ($600 million), upon completion of the transaction in 2017.

RComs consolidated net profit rose 5.9% to Rs 54 crore on 3.8% decline in net sales to Rs 5247 crore in Q1 June 2016 over Q1 June 2015. The result was announced after market hours on 14 September 2016.

RCom is an integrated telecommunications service provider.

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Inflation in Manufactured Products May Intensify
Sep 19,2016

Manufacturing inflation may inch up further as consumption demand gets a fillip from a higher rural demand, 7th Pay Commission payout and the festival season round the corner, says India Ratings and Research (Ind-Ra). With consumption demand showing signs of improvement and commodity price cycle bottoming out, it appears that manufacturers are now raising prices, albeit gently, to test the water. The Wholesale Price Index (WPI) inflation increased to 3.74% in August 2016 from 3.55% in the previous month, because of an increase in manufactured product inflation and to a lesser extent fuel inflation. This is at variance with the moderation in retail price inflation for the same month.

Crop sowing data suggest while pulse prices are likely to soften further, sugarcane and cotton prices may remain firm with an upward bias. However, a third consecutive month of cereal price inflation in excess of 7% after a gap of 24 months, is an early warning that the fight against food inflation is far from over.

Fuel price inflation, which has a weight of 14.9% in WPI, came in at 1.6%, after 13 months of consecutive negative growth. Wholesale food prices, which had been the key driver of WPI, moderated to 8.23% in August from 11.82% in July 2016. Prices of fruits and vegetables declined to 7.0% in August 2016 from 22.3% in the previous month. This, however, was offset by an increase in manufacturing inflation to 2.42% in August from 1.82% in July 2016. Manufacturing inflation has clocked a modest but steady rise since April 2016, led by a price increase in manufactured food products. This suggests manufacturing inflation which had remained down and out due to (i) tepid demand and (ii) lower manufacturing input cost is finally inching up as manufacturers especially in the food products category are gradually passing on cost increases in input costs and/or have begun to exercise the pricing power. Prices of manufactured food products increased to 11.4% in August from 10.2% in July 2016.

Since manufactured products have nearly 65% weight in WPI compared to 14.3% for food articles, an accentuation of the price increase trend witnessed in the manufacturing inflation, since the beginning of this fiscal, is likely to push WPI inflation further. However, sustainability of this gradual increase in the prices of manufactured items would depend on the future consumption demand.

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Raymond hits 52-week high
Sep 19,2016

Meanwhile, the S&P BSE Sensex was up 41.61 points or 0.15% at 28,640.64

On BSE, so far 3.55 lakh shares were traded in the counter as against average daily volume of 27,460 shares in the past one quarter. The stock hit a high of Rs 534 in intraday trade so far, which is 52-week high for the counter. The stock hit a low of Rs 474.05 so far during the day. The stock had hit a 52-week low of Rs 351.50 on 12 February 2016. The stock had outperformed the market over the past 30 days till 16 September 2016, rising 13.43% compared with 1.69% rise in the Sensex. The scrip, however, underperformed the market in past one quarter, rising 2.57% as against Sensexs 7.41% rise.

The small-cap company has equity capital of Rs 61.38 crore. Face value per share is Rs 10.

Shares of Raymond have been on a roll recently, gaining 8.97% in three trading days to settle at Rs 476.75 on Friday, 16 September 2016 from its close of Rs 437.50 on 12 September 2016. The stock rose 2.7% to settle at Rs 476.75 on Friday, 16 September 2016 on reports that the company is planning to cut about 10,000 jobs in its manufacturing centres in the next three years, replacing them with robots and technology. Raymonds CEO Sanjay Behl was quoted as saying that through technological intervention the company is looking to scale down the number of jobs to 20,000 in its manufacturing centres in the next three years, from existing strength of about 30,000 people.

On a consolidated basis, Raymond reported net loss of Rs 16.61 crore in Q1 June 2016, higher than net loss of Rs 14.47 crore in Q1 June 2015. Net sales rose 4.81% to Rs 1057.36 crore in Q1 June 2016 over Q1 June 2015.

Raymond offers end-to-end solutions for fabrics and garmenting.

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Volumes jump at Emami Paper Mills counter
Sep 19,2016

Emami Paper Mills clocked volume of 8.06 lakh shares by 13:25 IST on BSE, a 119.03-times surge over two-week average daily volume of 7,000 shares. The stock was up 0.44% at Rs 69.

IIFL Holdings notched up volume of 8.58 lakh shares, a 67.82-fold surge over two-week average daily volume of 13,000 shares. The stock rose 4.83% at Rs 261.50.

Polyplex Corporation saw volume of 2.3 lakh shares, a 42.74-fold surge over two-week average daily volume of 5,000 shares. The stock surged 14.05% at Rs 338.

Sharp India clocked volume of 7.75 lakh shares, a 19.94-fold surge over two-week average daily volume of 38,000 shares. The stock was locked at 20% upper circuit at Rs 68.40.

Cyient saw volume of 2.03 lakh shares, a 17.63-fold rise over two-week average daily volume of 12,000 shares. The stock gained 1.56% at Rs 470.60.

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Interest Rate Cycle Reaching the Bottom; LT Bond Issuance May Pick Up
Sep 19,2016

Inflation has bottomed out leaving the Reserve Bank of India (RBI) with less room to undertake further rate cuts, says India Ratings and Research (Ind-Ra). Ind-Ra believes that in such a scenario companies may lock in their long term funding at the current rates, before the cycle turns.

The shift in RBIs stance with respect to liquidity to neutral from deficit mode has had a significant impact on the yields of Government Securities (G-sec). Liquidity is no longer in the deficit mode, in fact in the last two months there has been net liquidity surplus in the system. The yield on the benchmark 10 year G-sec is presently hovering around 7% as against 7.5% in April 2016. Ind-Ra believes that the possibility for a further liquidity driven drop in the G-sec yield is limited. However, due to negative yields prevailing globally, demand from foreign participants can push yields down further.

One of the unstated objective of the outgoing RBI governor Raghuram Rajan was to maintain real interest rates (difference between risk free interest rate and Consumer Price Index) positive and in the range of 1.5% to 2%. Ind-Ra expects the new RBI governor Urjit Patel to also follow this approach. Real interest rate has remained positive since January 2014. It peaked at 4.91% in November 2014 and has declined since then to 2.06% in August 2016. It may be noted that the period when the real rate of interest was significantly in excess of 2% was also the period when RBI cut the policy rates. As the real rate of interest fell close to/lower than 2% from April 2016 onwards, RBI has maintained a status quo on policy rates.

Inflation appears to have bottomed out, however inflationary expectations have once again shown an up-tick. The RBI carries out a quarterly survey of about 5,000 households across 16 cities in India to assess inflationary expectations of households three months ahead and one year ahead. As per data released by the central bank, mean household inflationary expectations for three months ahead in June 2016 rose by 110bp to 9.2% from the March 2016 survey. The one-year ahead mean inflation expectation is even higher at 9.6% than the three-month ahead expectations, implying households expect the inflation trajectory to move further up.

Though global factors particularly low interest rates and fund inflows into emerging markets have remained favourable for a fairly extended period of time, the likelihood of interest rates moving up from hereon has strengthened - notwithstanding the fact that the US Federal Reserve may still take some time to resume hiking rates. With the backdrop of rising global yields, where global sovereign-bond yields have risen to the highest in almost three months, the Indian currency may come under pressure and push the RBI to turn hawkish.

Corporate India will keenly monitor the nominal GDP growth rate, since the soft trend over the last three years has significantly impacted earnings and debt repayment capacity. Ind-Ra highlighted in the report INR1.4trn Refinancing Requirement Could Put INR11.8trn Debt at Risk in FY17 that the total refinancing required by the top 500 Corporates in FY17 aggregates to INR2.1trn, with potential candidates which will be able to access the bond market being INR0.7trn. While it is early to signal a shift in the revenue trend line, corporates are likely to benefit from the current refinancing opportunities at low rates and will possibly lock-in long term funds since the downside to interest rates are limited/negligible.

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Power Grid Corporation gains after board accords investment approval
Sep 19,2016

The announcement was made after market hours on Friday, 16 September 2016.

Meanwhile, the S&P BSE Sensex was up 63.02 points or 63.02 at 28,671.67.

On BSE, so far 76,938 shares were traded in the counter as against average daily volume of 4.03 lakh shares in the past one quarter. The stock was volatile. At the days high of Rs 176.70, so far during the day, the stock rose 0.65%. At the days low of Rs 174.25, so far during the day, the stock fell 0.74%. The stock hit a record high of Rs 187.70 on 6 September 2016. The stock hit a 52-week low of Rs 124.80 on 28 September 2015. The stock had underperformed the market over the past one month till 16 September 2016, falling 1.13% compared with Sensexs 1.9% rise. The scrip had, however, outperformed the market in past one quarter, gaining 13.51% as against Sensexs 7.82% rise.

The large-cap company has equity capital of Rs 5231.59 crore. Face value per share is Rs 10.

Power Grid Corporation of India said that the companys board of directors at a meeting held on 16 September 2016 accorded investment approval for System Strengthening in Southern Region - XXI at an estimated cost of Rs 562.25 crore, with commissioning schedule of 30 months progressively from the date of investment approval.

PowerGrid Corporation of Indias net profit rose 32.9% to Rs 1801.77 crore on 29.4% rise in net sales to Rs 6069.06 crore in Q1 June 2016 over Q1 June 2015.

Power Grid Corporation of India is a state run electric power transmission utility company. The Government of India holds 57.9% stake in the firm as at 30 June 2016.

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Richway International Trade to hold AGM
Sep 19,2016

Richway International Trade announced that the 5th Annual General Meeting(AGM) of the company on 30 September 2016.

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RR Securities to hold AGM
Sep 19,2016

RR Securities announced that the 23th Annual General Meeting(AGM) of the company on 30 September 2016.

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South Indian Bank falls as RBI places restrictions on further purchases by FPIs
Sep 19,2016

Meanwhile, the S&P BSE Sensex was up 81.86 points or 0.29% at 28,680.89

On BSE, so far 2.33 lakh shares were traded in the counter as against average daily volume of 2.48 lakh shares in the past two weeks. The stock hit a high of Rs 23.85 and a low of Rs 23.50 so far during the day. The stock had hit a 52-week high of Rs 25.40 on 8 September 2016. The stock had hit a 52-week low of Rs 16.40 on 29 February 2016.

The mid-cap private sector bank has equity capital of Rs 135.06 crore. Face value per share is Re 1.

The Reserve Bank of India on Friday, 16 September 2016 notified that the foreign shareholding by American Depository Receipts (ADR)/Global Depository Receipts (GDR)/Foreign Institutional Investors (FIIs)/Registered Foreign Portfolios Investors (RFPIs)/Non Resident Indian (NRIs)/Foreign Direct Investment (FDIs)/Persons of Indian Origin (PIOs) in South Indian Bank has reached the trigger limit. Hence further purchases of equity shares of the bank would be allowed only after obtaining prior approval of the Reserve Bank of India.

South Indian Banks net profit rose 45.6% to Rs 95.06 crore on 9.47% growth in total income to Rs 1620.67 crore in Q1 June 2016 over Q1 June 2015.

South Indian Bank is a private sector bank in India.

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R-Com- Aircel Merger Spurs Telecom Consolidation, Steps Up Competition
Sep 19,2016

The merger of the wireless business of Reliance Communications (RCom) with Aircel (Aircel), is a key milestone in the ongoing consolidation in the telecom sector, says India Ratings and Research (Ind-Ra). Ind-Ra believes that the merger will enable the new entity RCom-Aircel to give strong competition to its peers in the backdrop of the disruption that the launch of operations by Reliance Jio Infocomm (RJio) has caused. The combined entity RCom- Aircel will now be the third largest telecom entity in India by subscriber base, thus moving ahead of Idea Cellular Limited (Idea). This development coupled with RJios penetration strategy will spur competition and in turn push tariffs lower.

Ind-Ra believes that the spectrum acquisition strategy, particularly around 4G, is an important driver for the consolidation in the telecom sector. This deal provides RCom access to the superior 800MHz band in eight circles with extended validity till 2033, as its own spectrum is scheduled to expire in 2021-2022. The merged entity will have 448MHz spectrum, which is about 17% of the total spectrum held,is the third largest spectrum holding, following 770MHz of Bharti and 596MHz of RJio.

The merged entity will offer strong competition to both Vodafone India (Vodafone) and Idea which are weaker placed, as far as 4G operations are concerned. Ind-Ra believes that the sector will now have five meaningful players namely, Bharti Airtel (Bharti), Vodafone, RJio, Idea and the merged RCom -Aircel- Sistema (with a new brand) as the industry moves towards data driven revenues.

The top five circles of Aircel are Assam, J&K, UP East, Bihar and Gujarat, while those of RCom are Bihar, Tamil Nadu and Chennai, Delhi, and Mumbai. The merged entity will be positioned as the second largest in the Bihar circle, after Bharti, and overtaking Vodafone and Idea, which were number two and number three respectively. In the Tamil Nadu and Chennai circle, the merged entity will vie for the second spot with Vodafone, which is ranked the second largest after Bharti. RCom has a wireless active subscriber base of 92.2m as on March 2016 (market share 9.8%), whereas Aircel has 63.3m subscribers (market share 6.8%), leading to a combined subscriber market share of 16.1% with 155.5m subscribers; which will rank forth after Idea with 19.6% subscriber share and Vodafone with 20.4% subscriber market share as of March 31, 2016. The merged entity could potentially have a revenue market share of 14%, given RComs existing revenue market share at around 11% in FY16 and Aircels 3% revenue market share.

Aircel reported revenues of INR55bn, with EBIDTA of INR8.06bn, and an EBIDTA margin of 14.5%, and net loss of INR14.5bn and cash loss of INR6bn in FY15. Aircel had a total debt of INR209bn in FY15. RCOM reported consolidated revenue of INR221bn, EBITDA of INR74bn and EBITDA margin of 33.6% in FY16 and debt of INR41bn. The combined entitys revenues are estimated at around INR250bn (for full year of operations), with EBITDA of around INR65-70bn.

However, both RCom and Aircel have significant debt and their ARPUs are below industry average, as evident from their low standalone revenue market share and Aircels presence in low ARPU generating circles. Aircel on a standalone basis is a highly leveraged entity (FY15 debt to EBIDTA 26x), whereas RCom had net leverage of 5.6x in FY16. Therefore Ind-Ra believes the merged entity will continue to depend upon the parents support for fund infusion for growth capex. Post the deal the merged entity will hold INR280bn of debt from its parents to start with.

The merger transaction is subject to regulatory and shareholder approvals.

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Tata Consultancy Services listed in Dow Jones Sustainability Index -2016
Sep 19,2016

Tata Consultancy Services announced that S&P Dow Jones Indices and RobecoSAM have listed TCS in the Dow Jones Sustainability Index (DJSI) - 2016 for the forth consecutive year.

TCS is one of the only three Indian companies and the only Tata Group company to be included in the World Index list.

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Fiberweb (India) secures new orders
Sep 19,2016

Fiberweb (India) announced that the Company has secured orders worth Rs 18.1 crore.

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Karur Vysya Bank gains ahead of board meet to consider stock split
Sep 19,2016

Meanwhile, the BSE Sensex was up 86.30 points, or 0.31%, to 28,686.98.

On BSE, so far 7,418 shares were traded in the counter, compared with an average volume of 24,327 shares in the past one quarter. The stock hit a high of Rs 478.95 and a low of Rs 469.90 so far during the day. The stock hit a 52-week high of Rs 541.40 on 11 July 2016. The stock hit a 52-week low of Rs 393.90 on 29 February 2016. The stock had underperformed the market over the past one month till 16 September 2016, falling 3.97% compared with Sensexs 1.9% rise. The scrip had also underperformed the market in past one quarter, dropping 1.41% as against Sensexs 7.82% rise.

The mid-cap private sector bank has an equity capital of Rs 121.86 crore. Face value per share is Rs 10.

Karur Vysya Banks net profit rose 8.7% to Rs 146.35 crore on 1.9% rise in total income to Rs 1547.31 crore in Q1 June 2016 over Q1 June 2015.

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Heritage Foods declared Winner of Special Commendation for Golden Peacock Award
Sep 19,2016

Heritage Foods has been declared as Winner of Special Commendation for Golden Peacock Award for Excellence in Corporate Governance for year 2016.

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