Mumbai: Investors should forget white noises such as elections and trade wars, and buckle up for the next bull run, HSBC has said in a note.
“Many of the elements required for a sustained bull run are now in place. Sectors that have done well in past bull markets — such as banks, and some recent laggards, consumer discretionary, metals, energy and real estate — look well positioned,” the brokerage said in a note authored by analysts Amit Sachdeva, Anurag Dayal, and Herald Van der Linde.
HBSC has analysed key drivers for Indian equities over the past 20 years and applied it to the current state of the market. India has seen five bull markets, four bear markets, and six periods of temporary weakness over the past two decades. Our verdict is that most of the necessary elements are now in place for the start of a bull run, says HSBC, which recently upgraded its stance on the Indian markets from “neutral” to “overweight”.
“Valuations are well within the boundaries of the peaks and troughs of past bull and bear cycles. The earnings outlook for FY19 and FY20 is the highest in the region. Macro indicators, such as inflation, GDP growth, bond yields, and crude oil prices, also paint a positive picture,” said the note.
Last year, the Indian market averted entering the bear territory. The benchmark Nifty came off as much as 15 per cent between September and October. After bottoming out in October, the 50-share index is currently up 13 per cent from 2018 lows.
HSBC has listed several reasons behind improved sentiment towards domestic equities. It says inflation has been persistently low and is expected to remain stable, which would warrant another rate cut by the Reserve Bank of India in April. Also, India’s economic growth will remain healthy and among the fastest in the region.
On the global front, US bond yields have softened significantly and crude oil prices are “within the tolerance level,” it says.
In the past, rising bond yield and crude prices had led to turmoil in the Indian market. HSBC says India’s valuations are no longer excessive and most sectors are trading well below their five-year average. The benchmark Nifty currently trades at about 17 times its estimated one-year forward earnings.
Also, on the back of tepid flows over the past two years, the Indian markets are “quite under-owned by foreign institutional investors,” it points out. HSBC is the most bullish on the financial sector with Axis Bank, IndusInd Bank, HDFC Bank and Bajaj Finance being the key picks.
“Banks have outperformed almost every time the market has moved out of a bear market,” it says.
Besides financials, consumer discretionary (favoured stocks include Asian Paints, Kajaria Cements and Jubilant Foodworks); real estate (Godrej Properties and Prestige Estates); consumer staples (Avenue Supermarts and ITC); and energy (Gail and HPCL) are among the sectors the brokerage is positive on.
HSBC, however, has stated that the bull market prognosis is its non-consensus view. Also, there are key risks to the assumption.
“The deteriorating macro picture, such as a steep rise in inflation, any large-scale escalation in geopolitical tensions, a slowdown in global growth, or a sharp rise in crude prices,” are key risks, it says.
RBI asks banks to grout ATMs to wall, floor for security by September-end
Mumbai: The Reserve Bank asked banks to ensure their ATMs are grouted to a wall, pillar, or floor by September-end, except those installed in high secured premises such as airports, to enhance security of the cash vending machines.
In 2016, the RBI had st up a Committee on Currency Movement (CCM) to review the entire gamut of security of treasure in transit.
Based on the recommendations of the panel, the central bank has now issued instructions aimed at mitigating risks in ATM operations and enhancing security.
As part of the security measures, all “ATMs shall be operated for cash replenishment only with digital One Time Combination (OTC) locks”.
Also, “All ATMs shall be grouted to a structure (wall, pillar, floor, etc.) by September 30, 2019, except for ATMs installed in highly secured premises such as airports, etc. which have adequate CCTV coverage and are guarded by state/central security personnel”.
Further, banks may also consider rolling out a comprehensive e-surveillance mechanism at the ATMs to ensure timely alerts and quick response, it said.
The new measures to be adopted by banks are in addition to the existing instructions, practices and guidance issued by the RBI and law enforcement agencies.
The RBI also warned the banks that non-adherence of timelines or non-observance of the instructions would attract regulatory action including levy of penalty.
SBI refuses to disclose communication from RBI, govt on electoral bonds
New Delhi: The State Bank of India has refused to disclose any communication it received from the government or the Reserve Bank of India on electoral bonds, terming it “personal information” and held in “fiduciary capacity”.
Responding to an RTI filed by Pune-based activist Vihar Durve who had demanded copies of all letters, correspondence, directions, notifications or e-mails received from the RBI or any government department between 2017 and 2019, the SBI said it cannot be provided by it.
The bank cited two exemption clauses under the RTI Act to deny information — Section 8(1)(e) which pertains to information held in fiduciary capacity and Section 8(1)(J) which pertains to personal information of a person which has no link to any public activity.
“Information sought by the applicant cannot be disclosed as it is in fiduciary capacity, disclosure of which is exempted under Section 8(1)(e) and 8(1)(j) of the RTI Act, 2005,” the Central Public Information Officer of the bank said in his reply.
The bank also refused to give any details of action taken by it on such communications from the RBI and the government.
The electoral bonds, for giving donations to political parties, are being sold through SBI only. The sale opens in SBI branches when the Finance Ministry issues a notification of their sale for a given period.
The scheme of electoral bonds notified by the Centre in 2018 has been challenged in the Supreme Court.
Only the political parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the bonds.
The bonds may be purchased by a person who is a citizen of India “or incorporated or established in India,” the government had said in a statement last year.
The bonds remain valid for 15 days and can be encashed by an eligible political party only through an account with the authorised bank within that period only.
A voluntary group working in the field of electoral reforms, Association for Democratic Reforms (ADR), has demanded a stay on the sale while the CPI(M) has challenged it before the Supreme Court in separate petitions.
ADR recently filed an application in the Supreme Court seeking a stay on the Electoral Bond Scheme, 2018 which was notified by the Centre in January last year.
Walmart’s Flipkart, Indian startup GOQii settle dispute over sharp discounting
New Delhi: Walmart unit Flipkart has settled a legal dispute with an Indian startup that alleged it suffered losses because its products were sharply discounted on the global retailer’s website.
GOQii, a seller of smartwatch-type health devices, sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 per cent to the retail price, much more than the two sides had agreed. The court had, as an interim measure, ordered device sales to be halted on Flipkart.
In a joint statement , the companies said the dispute had been resolved and GOQii health devices would again be available on Flipkart. They didn’t say how the settlement was reached.
Vishal Gondal, CEO of GOQii, told Reuters the company would withdraw the case against Flipkart. The e-commerce retailer’s “team worked on a resolution benefitting the brand and the customers”, Gondal said in the statement.
The legal spat was seen as a test case of the giant retailer’s operating strategy in the country.
Small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party have raised concerns about large e-commerce companies, saying they burn billions of dollars deeply discounting some products to lure customers onto their sites, in the expectation that they will also buy other goods.
GOQii said it signed an agreement last year with a Flipkart unit to sell two of its devices at a price not below 1,999 rupees (USD 28.63) and 1,499 rupees. It later found the devices were being sold for 999 rupees and 699 rupees, calling it “unauthorized” discounting.
In response, Flipkart said it reserved “the right to institute actions for defamation, both civil and criminal”, arguing it wasn’t responsible for any discounts which are determined by third-party firms which sell via its website.
The two companies struck a friendlier tone in their joint-statement on Friday as they brought the legal battle to an end.
“We have ensured constant engagement with GOQii to resolve any differences,” Flipkart said in the statement.
With a 19 per cent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC showed. The market is dominated by China’s Xiaomi, with Samsung a small player.