Sensex Up Over 100 Points, Nifty Above 8,400; HCL Tech Falls Post Q3

Sensex and Nifty edged higher in opening deals on Tuesday tracking gains in banking, oil & gas, power, capital goods and metal stocks amid subdued trading in other Asian markets. MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 per cent but Tokyo's Nikkei slipped 0.3 per cent.

Among Asian share markets, Hong Kong's Hang Seng was up 0.32 per cent, China's Shanghai Composite jumped 0.1 per cent and South Korea's KOSPI was down 0.16 per Cent.
Back home, analysts say traders are cautious ahead of the Union Budget 2017-18 which will be announced by the government on February 1 and will keep a close eye on how the government spends the money on various social and infrastructure projects.

Meanwhile, BSE's initial public offer -- the first by a domestic stock exchange in India -- to raise up to Rs 1,243 crore received 50 per cent subscriptions on the first day of the 3-day bidding on Monday.
The IPO, which closes on January 25, received bids for 54,30,204 shares as against the total issue size of 1,07,99,039, data available with NSE till 1700 hours showed.The portion set aside for qualified institutional buyers (QIBs) was subscribed 17 per cent and that of non-institutional investors 12 per cent. The retail investor category got 86 per cent bids.

On Dalal Street, buying was visible across the sectors barring a few IT and FMCG shares. Banks, metal, oil & gas and capital goods stocks were among the leading gainers in the morning deals.
From the Nifty basket of shares, 41 were advancing while 10 were declining.
Yes Bank was the top Nifty gainer, up 2 per cent at Rs 1,410. Coal India, Power Grid, Bharat Petroleum, Bank of Baroda, HDFC, IndusInd Bank, Axis Bank and ACC were also among the gainers.

On the other hand, HCL Technologies was the top Nifty loser, the stock fell 2.2 per cent to Rs 838 after company announced third quarter earnings. The company's net profit rose 2.3 per cent to Rs 2,062 crore in the December quarter.

Hindutan Unilever which reported a jump of 7 per cent in its net profit post market hours on Monday also declined in trading as its December quarter earnings came in below analysts' estimates.
Bharti Airtel, Infosys, Asian Paints and Hero MotoCorp were also among the laggards.
The broader markets were in-line with the benchmark indices as the BSE mid-cap and small-cap indices jumped 0.45 per cent each.

HCL Tech Q3 Net Rises 2.3% To Rs. 2,062 Crore, Meets Estimates

HCL Technologies reported 2.3 per cent sequential rise in its net profit for the December quarter, meeting the Street's estimates. The Noida-based outsourcer reported a net profit ofRs. 2,062 crore compared to Rs. 2,016 crore in the September quarter. Its revenue increased 2.6 per cent to Rs. 11,814 crore compared to Rs. 11,519 crore sequentially.

The highly-tracked dollar revenue of HCL Tech grew 1.3 per cent sequentially to $1,745 million, meeting Street estimates.

Meanwhile, HCL Tech expects its FY2017 revenue to grow at the middle of its guidance of 10-12 per cent based on the December 31, 2016 exchange rates. Earlier the outsourcer had guided for a revenue growth of 12-14 per cent based on the average exchange rate for FY2016.

HCL Tech's operating margin or EBIT margin came in at 20 per cent in Q3. The outsourcer expects its FY2017 EBIT margin to remain in the range of 19.5-20.5 per cent. As of 9.25 a.m., HCL Tech shares traded 2.37 per cent lower at Rs. 836.95 apiece. It was the top loser in the Nifty50 index.

Oil Slips As US Drilling Recovery Offsets OPEC-Led Cuts

New York: Oil prices fell 1 percent on Monday as signs of a strong recovery in U.S. drilling largely overshadowed news that OPEC and non-OPEC producers were on track to meet output reduction goals.
Ministers representing members of the Organization of the Petroleum Exporting Countries and non-OPEC producers said at a meeting in Vienna on Sunday that of the almost 1.8 million barrels per day (bpd) they had agreed to remove from the market starting on Jan. 1, 1.5 million bpd had already been cut.

"Despite comments over the weekend at the OPEC compliance meeting that cuts in OPEC/non-OPEC production were ahead of schedule, a sharp rise in U.S. rig counts and talk of large increases in capital spending seem to be souring the bullish mood," said Phil Flynn, analyst at Chicago-based brokerage Price Futures Group.
U.S. drillers added the most rigs in nearly four years last week, data from energy services company Baker Hughes showed on Friday, extending an eight-month drilling recovery.
Brent crude settled down 26 cents, or 0.5 percent, at $55.23 a barrel. U.S. crude futures closed the session at $52.75 a barrel, down 0.9 percent, or 47 cents.

The front-month Brent crude spread, however, tightened to the narrowest discount, or contango, in more than four months amid signs of tightening supplies and firm Asian demand.
Prices pared some losses after Iraq's oil minister said it was too early to say whether the deal needed to be extended and that he expected oil prices to rise to $60-$65 per barrel.

The trend therefore remains bullish for oil until the charts say otherwise, he added.
U.S. oil production has risen by more than 6 percent since mid-2016, though it remains 7 percent below the 2015 peak. It is back to levels of late 2014, when strong U.S. crude output contributed to a crash in oil prices.
"There is a widely held view that prices should be higher because that is what Saudi Arabia is strongly pushing for through immediate supply cuts, but there is concern as to the speed and scale of the response of U.S. shale oil supply to higher prices," Standard Chartered said in a note.

"While we have argued that U.S. shale cannot increase fast enough to balance cuts in production elsewhere, we  think that market concerns on the potential U.S. response are still providing short-term resistance to prices heading closer to $60."

Markets in general were also rattled by early signals from U.S. President Donald Trump highlighting a protectionist stance on trade, putting investors on the defensive.

Trump told U.S. manufacturing executives he would impose a hefty border tax on firms that import products into the United States after moving American factories overseas. He also signed an executive order, formally withdrawing the United States from the Trans-Pacific Partnership trade deal.

Oil market speculators added to bullish bets last week, showing increased optimism about higher prices.
However, a record high gross long position among money managers in NYMEX crude oil futures and options leaves the market ripe for a correction, traders said.

Against RBI's Demand, Government Mulls Seperate Regulator For E-Payments

New Delhi: With digital transactions gaining traction, the government is mulling setting up of a separate regulator for enabling electronic payment system in the country as well as regulate transaction charges. While the Ratan Watal committee on digital payments suggested that the government makes regulation of payments independent from the function of central banking, sources said the RBI is not very keen on giving up the regulation on Payment systems.

Official sources said that RBI, as a banking regulator, frames policies to benefit banks and not enforcement of competition and innovation objectives in conduct of firms in the payment industry.

"So far, regulations are becoming bank focused. If there is a separate regulator, the focus would be on ease of transaction and rationalisation of cost. Hence, there is a case for setting up of an authority for enabling electronic payment system in India," an official source told PTI.

The Reserve Bank, in its representation before the Watal Committee, has stated that regulation of payments should be with the central bank because regulating money supply is an integral function of a central bank and includes maintaining the confidence in money as a means of exchange. Explaining the need for a separate regulator, the source said that electronic payment does not entail exchange of physical cash and it does not involve deposit taking or credit offtake or servicing of loans/deposits.

"Payments can happen without banking. Payment regulation is different from banking regulation. RBI is not agreeing to it," the source said, adding the proposed regulator should have majority of its membership from businesses having direct familiarity with the payment process, or allied businesses.

The Watal Committee, which submitted its report to Finance Minister Arun Jaitley last month, weighed two options on how best regulation of electronic payments can be made independent from the function of central banking. The committee considered creation of a new payments regulator, or making the current Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) within RBI more independent.

Sources said that RBI, as a regulator, is focusing more on the interest of banks rather than creation of a financial ecosystem and even after coming up with consultation paper on fixing MDR charges in March 2016, it has not been able to fix the charges.

Panel To Relax 2017-18 Fiscal Deficit Target To 3-3.5%: Report

New Delhi: The government has barred cooperative banks from accepting deposits under the new tax amnesty scheme - Pradhan Mantri Garib Kalyan Yojana (PMGKY), a move that comes amidst the Income Tax Department uncovering anomalies post-demonetisation.After junking old Rs. 500 and Rs. 1,000 notes, the Centre had come up with an amnesty scheme for holders of unaccounted cash by asking them to pay 50 per cent tax and parking one-fourth of it in a no-interest bearing four-year deposit.

This deposit could be made with any banks. But now cooperative banks have been barred from accepting such deposits. The PMGKY scheme is open till March 31.
"Application for the deposit in the form of Bonds Ledger Account shall be received by any banking company, other than Co-operative Banks, to which the Banking Regulation Act, 1949, applies," the government said while amending the notification for Pradhan Mantri Garib Kalyan Yojana (PMGKY), 2016.

Under the scheme, holders of unaccounted cash willing to avail the offer will have to first pay the tax amount and then fill up a challan form provided by the bank for availing the four-year deposit scheme.

The authorised banks have to electronically furnish the details of deposit to the Revenue Department on the next working day to enable information verification of the deposit before accepting the declaration under the PMGKY.

Full confidentiality of the data would be ensured by the Reserve Bank of India and authorised banks.
The amendment to the notification comes after the I-T department spotted irregularities in deposits of cooperative banks following demonetisation.

The I-T department's investigation revealed that deposits in the books of certain cooperative banks were in excess of the physical holding of the now-defunct 500 and Rs. 1,000 currency notes.
Initially cooperative banks were allowed to take deposits of old currency notes and as per estimates, about Rs. 16,000 crore was deposited. But six days into demonetisation, the RBI barred these banks from exchanging old currency notes or accepting deposits.

'Reasonable' Valuation Makes BSE IPO Attractive, Say Analysts

The BSE is offering shares for public subscription through its initial public offer (IPO), which opened on Monday. BSE's Rs 1,243 crore IPO is priced in a narrow range of Rs 805-806. The IPO, from Asia's oldest and world's largest exchange by number of listed companies (5,963 companies), is open till Wednesday and can be subscribed in lot sizes of 18. Out of the total issue, 35 per cent is reserved for retail investors. BSE has already raised Rs 373 crore from anchor investors by allotting shares at Rs 806. Its shares will be listed on National Stock Exchange on February 3.
Here are 10 things to know before you decide to invest in the IPO:

1) BSE's IPO is purely an offer for sale. This means that it does not intend to raise any fresh capital from the issue. Through this IPO, BSE's investors like Deutsche Boerse, Singapore Exchange, State Bank of India, LIC etc. are selling around 28 per cent stake in the exchange.

2) Established in 1875, BSE is Asia's oldest and is world's tenth largest exchange according to market capitalisation.

3) In FY2016, BSE had 15 per cent market share in the equity cash market segment and 6 per cent share in the equity derivative segment. In interest rate derivatives and currency derivative derivatives, it had a market share of 17 per cent and 36 per cent respectively.

4) BSE has a diversified source of revenue: In FY2016, 39 per cent of its revenues came from securities services, 26 per cent came from services to corporates, 4 per cent came from data dissemination fees and remaining 31 per cent came from investments and deposits.

5) BSE's revenues have grown at a CAGR of 3.5 per cent during FY2012-16 to Rs 616 crore. In the first half of FY2017, the exchange already generated revenue of Rs 353 crore. Most of its incremental revenues in last fiscal and current fiscal has come from corporate services like listing fees, which accounts for 21 per cent of its overall revenue and has witnessed a CAGR of 20 per cent during FY2012-16.

6) BSE's net profit however has remained sideways in last three fiscal because of its falling profit margins. In FY2016 its net profit was at Rs 123 crore, down from Rs 130 crore in FY2015. In the first half of the present fiscal, BSE's net profit was Rs 105 crore. BSE's net profit margin has fallen from 32.1 per cent in FY2012 to 19.9 per cent in FY2016 and its operating margin (EBITDA) has dropped to 41.9 per cent in FY2016 from 59.3 per cent in FY2012.

7) However, analysts are positive on the future revenue growth prospects of BSE as equity investment as a percentage of total savings in India is 5 per cent, which is very low compared to other countries. (14 per cent in China, 15 per cent in Brazil, 20 per cent in Indonesia and 42 per cent in USA).

8) At Rs 806, the upper end of the IPO price band, BSE's shares are valued at 20.6 times its FY2017 annualised earnings per share, which is a "reasonable" valuation, says Angel Broking. In comparison, Multi Commodity Exchange shares are trading at 44 times its FY17 estimated earnings per share. Angel Broking has a "subscribe" rating on the issue. Other brokerages like ICICI Securities, Geojit BNP Paribas also have a "subscribe" rating on the issue.

9) BSE currently holds 54.2 per cent stake in Central Depository Services Ltd (CDSL), which is a highly profitable venture for the exchange. As per regulatory guidelines, BSE is required to reduce its stake in CDSL to less than 24 per cent, which will create value for the exchange in the future, says Angel Broking.

10) BSE faces strong competition from market leader National Stock Exchange and MCX, which may put pressure on its future revenue growth and is a key concern, say analysts. Volatility in trading volume and technological changes are other key concerns in the business of BSE, analysts said.

Income Tax Exemption Limit May Go Up To Rs 3 Lakh: Report

New Delhi: The Government is likely to make sweeping recast of direct taxes in the ensuing Budget to give a boost to the economy following demonetisation, says a report.
According to SBI's research report Ecowrap, the upcoming Budget is likely to see an increase in personal income tax exemption limit, increase in section 80C exemption limit, interest exemption on housing loan and and at least reducing (if not abolishing) the lock in period for bank fixed deposits.

"We expect an increase in personal income tax exemption limit from Rs. 2.5 lakh to Rs. 3.0 lakh, increase in section 80C exemption limit from current Rs. 1.5 lakh to Rs. 2 lakh, interest exemption on housing loan from Rs. 2 lakh to Rs. 3 lakh and at least reducing (if not abolishing) the lock in period for bank fixed deposits from 5 years to 3 years for availing tax exemption," SBI Research said in its Ecowrap report.

The report, authored by Soumya Kanti Ghosh, Chief Economic Adviser & GM, Economic Research Department, SBI noted that "such giveaways will cost Rs. 35,300 crore but we expect this to be more than balanced by IDS2 revenue and cancelled note liabilities of RBI".
SBI Research expects tax collection under IDS to be around Rs. 50,000 crore and cancelled liabilities from RBI to be around Rs. 75,000 crore.

Following the demonetisation move, the recast in direct tax moves is expected to give a boost the economy.
"The demonetisation has changed the entire gamut of the economy. The GDP growth is expected to be grow by 7.1 per cent in 2016-17 compared to 7.6 per cent growth in 2015-16," it said. The report further noted that the challenges for the budget this year are more formidable than they were in the previous year. "There is no substitute to investment led growth as opposed to consumption led. A more prudent approach will be to select two-three high potential sectors for fiscal stimulus, agriculture being the most promising followed by SME," it said.