CBDT notifies foreign tax credit rules, corporates to gain -:- Equity Research

To provide relief to corporates with income abroad, the tax department has notified 'Foreign Tax Credit' rules allowing companies to claim credit for taxes, surcharge and cess paid overseas. The rules, which come into effect from April 1, 2017, allow taxpayers to claim credit of foreign tax under dispute once it is finally settled. Foreign tax credit (FTC) will be available against tax, surcharge and cess payable under the Act, including minimum alternate tax (MAT) but not in respect of interest, fee or penalty. The rules also provide that disputed foreign tax will be allowed as credit for the year in which the income is taxed in India, subject to certain conditions.

To avail of the credit, the taxpayer will have to furnish evidence of settlement of the dispute and evidence of payment of the foreign tax. The taxpayer is also required to provide an undertaking that no refund, directly or indirectly, will be claimed for this foreign tax. "The rules are progressive and provide much-needed clarity as well as certainty in claiming FTC," said Rakesh Nangia, Managing Partner, Nangia & Co. Taxpayers claiming FTC shall now be required to file a Statement of Income from a foreign country with details of tax paid in the prescribed Form 67. "Rules also provide for situations of carry backward of loss of the current year resulting in refund of foreign tax," said Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP.

The Central Board of Direct Taxes (CBDT) has also allowed tax payers to give self-certified statement, giving the nature of income and the amount of foreign tax deducted or paid accompanied with the counterfoil or acknowledgment of taxes paid and/or proof of taxes having been deducted at source, for claiming FTC. "This process is much simpler than the complex and difficult procedure involving obtaining a certificate from a foreign tax authority," Nangia said. The tax credit, the rule said, "shall be the aggregate of the amounts of credit computed separately for each source of income arising from a particular country or specified territory outside India".

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Microsoft CEO Satya Nadella's debut book to come out in 2017 -:- Equity Research

Microsoft CEO Satya Nadella's debut book will hit stores next year with the writer saying it is neither a 'how-to-succeed' book nor a memoir but about change. 'Hit Refresh' follows three storylines: Nadella's personal journey of transformation, the change that is taking place today inside his storied technology company, and one that is coming in all of our lives as intelligent machines become more ambient and more ubiquitous throughout society, publishers Harper Business said. "Harper Business, an imprint of HarperCollins Publishers, has acquired World English rights to Microsoft CEO Satya Nadella's first book, 'Hit Refresh'. Hollis Heimbouch, vice-president and publisher, Harper Business, negotiated the deal with James Levine of Levine Greenberg Rostan Literary Agency. This book is about change," said Nadella. "It is not a 'how to succeed' book, nor is it a memoir - it's premature for that. Ultimately, I am writing for Microsoft team members, customers, and partners in hopes that these stories of transformation will be useful to them as they navigate their own path." The author's proceeds from the book will be donated to Microsoft Philanthropies to benefit nonprofits, specifically those working on public cloud for public good projects.

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Nifty likely to see 9100 levels soon -:- Equity Research

Post the major economic triggers like the Brexit and RBI governor Raghram Rajan's bowout, the Indian markets have bounced back, and Atul Suri of Rare Enterprises believes that the inverse head and shoulders pattern of Nifty50 will get around 9100 levels soon. He added that despite the ongoing volatility in the global markets, he is optimistic with the way many Indian sectors have performed; EMs are gaining strength as opposed to the developed nations. "India may soon get to the level of outperformance and the sectors that will lead the charts are consumer, FMCG and auto," he said. "Pharma has been a disappointing space. In the last three months they have been the most underperforming sector after performing well for 3-4 years," he maintained.  He is also bullish on gold and added: "After a great run-up it has a long correction. Gold is a defensive bet and a favourite among hedge fund managers." 

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Manufacturing data in July next trigger for mkts -:- Equity Research

Post Brexit, markets have seen volatility, but have recovered well in the last few trading sessions. There is enough liquidity which is pushing this rally, says Sameer Goel, Head of Asia Rates & Currency Research at Deutsche Bank. Repercussions of the UK Referendum and what it means for politics in the Europe will be closely watched. However, the economic backdrop continues to remain weak. The next trigger for global markets will be manufacturing and Purchasing Managers’ Index (PMI) numbers in July, says Goel. Deutsche Bank expects sterling to remain weak in the medium-term while it is bullish on the dollar. For currencies, too, the next leg of growth data will be crucial. On India, Goel says that it will be harder for Indian assets to benefit much from the global rally as concerns over growth stays. Worries over the Reserve Bank’s successor too remain a constraint for growth. 

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Prices may remain firm for 2 yrs on supply lack -:- Equity Research

Sugar prices are likely to stay firm over the next couple of years according to M Manickam, MD of Sakthi Sugars, who says production in Maharashtra and Karnataka might be down by around 4 million tonnes each this year. In an interview to CNBC-TV18 Manickam says although currently the real problem is sugar supply shortage, elections in Uttar Pradesh will prove beneficial as the government there has been supportive of the industry and are likely to be more prudent on the matter. For every Re 1 increase in sugar prices, the company’s earnings improve by nearly Rs 20 crore, he says. Currently, sugar prices are around Rs 34-35 per kilogram, which is the breakeven level for sugar companies and anything above this price proves to be profitable, he adds. Sugar prices have risen nearly 10 per kg from end of FY16 to now, so earnings for the current year should be fairly good, he says. 

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GST Bill is a do-or-die situation for NDA -:- Equity Research

The Monsoon session of the Parliament will begin on July 18 and will continue till August 12. So, can the GST Bill finally see the dawn? In an interview with CNBC-TV18, Anil Padmanabhan, the deputy Managing Editor of Mint said that GST Bill is a do or die situation for NDA. "If the government doesn't push it in this session, it won't happen during the remaining regime of the Modi government," he added.   Soumya Kanti Ghosh, the Chief Economic Advisor of SBI also said that the GST Bill is a top priority of the government and that it is giving definite signals about clearing the Bill soon. "After the Brexit fiasco Indian markets declined, hence it is about time for markets to price in the GST Bill if it is passed," he said.  Apart from the GST Bill, the focus will also be on other 25 pending Bills in the monsoon session, said Padmanabhan. 

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RPG Life Sciences eyes extra revenues from new dermatology bet -:- Equity Research

RPG Life Sciences   has forayed into cosmetic dermatology market after joining hands with an Italian cosmetic firm Labo Cosprophar. The company will manufacture hair growth and anti-aging products, branded as Crescina and Fillerina, respectively. The MD of the company, CT Renganathan, said the agreement is for the long-term and expects good additional revenue from this deal. "The dermatology market is growing very fast and hair growth space is promising," he added. He expects the operating margins to be around 8-10 percent in FY17 and revenue to be in line with the last year's Rs 277 crore. The company expects to grow at 18-20 percent in FY17, he added. 

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Tough to gauge real step-up in demand until September -:- Equity Research

It is best to take a view on turnaround in demand conditions only around September by which time it will be clear if monsoons have panned out as expected, says Saugata Gupta, MD & CEO of Marico. Pay revisions due to upcoming Seventh Pay Commission will certainly improve sentiment but may not immediately translate into consumption, feels Saugata Gupta, Managing Director and CEO of fast moving consumer goods major Marico   .  Speaking to CNBC-TV18 Gupta says it is best to take a view on demand conditions and its impact on volume growth only around September by which time it will be clear if monsoons have panned out as expected. As of now, the company expects about 8 percent volume growth in FY17.  He does not expect any further price cuts to be taken in its Parachute range of products as key raw material (Copra) prices are likely to have bottomed out. "These products are consumed more in rural markets which are yet to recover, so we need to maintain a balance between volume growth and market share,"he says.

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Essar Steel Pune unit eyes Rs 3,000 cr turnover in FY17 -:- Equity Research

Riding high on increasing demand for pre-coated steel in domestic as well as international markets, Essar Steel Pune Facility (ESPF) is eyeing a 43 percent jump in turnover to Rs 3,000 crore in the ongoing fiscal. The unit is located at Sanaswadi, Maharashtra. "We are looking at achieving a turnover of Rs 3,000 crore in FY17 compared with Rs 2,100 crore achieved in FY16. We expect our sales volume of PPGI (Pre-Painted Galvanised Iron) products to grow by 35 percent to 6,25,000 tonnes per annum and turnover by 45 percent in the current fiscal," ESPF CEO R V Sridhar told PTI here. ESPF offers innovative products like camouflage steel, wood finish, abrasion resistant systems and wrinkle finish products, which caters to customers from automobile, defense, home appliances, construction and industrial sector. The company's sales volume rose 71 percent to cross 4,62,000 tonnes in FY16 compared with 2,70,000 tonnes in the previous fiscal. Total revenue was Rs 2,070 crore, a growth of 45 percent as against a revenue of Rs 1,425 crore in FY15. The growth of ESPF is in line with the rising capacity utilisation in Essar Steel India's overall operations the company had a capacity utilisation of 70 percent in the last quarter of FY16. ESPF's capacity utilisation in the current quarter ending June 2016 has already shot up to well over 98 percent, Sridhar said. ESPF's turnaround has been triggered primarily by process innovations, operational excellence, low rework, expansion into new international markets, and a renewed focus on the domestic market  and the value-added product range. Increased productivity as a result of record capacity utilisation across all lines led to higher yields, he said. Commenting on exports prospects, Sridhar said, the emphasis was on value added products and making inroads into geographies like Africa, NAFTA & EU. The company expects to export 100,000 tonnes in the current year. During FY16 ESPF added over 125 customers in international market. It also doubled its customer base in the Middle East and some other regions. ESPF exports its products to more than 110 countries across the world. Sridhar pointed out that the company exports 14 percent of production in international market and 86 percent in domestic market and hope to maintain the ratio due to higher domestic demand for its products.

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7th Pay Commission cleared: A look at the facts & numbers -:- Equity Research

The Union Cabinet on Wednesday cleared the 7th Pay Commission recommendations. The report had suggested a 15 percent hike in base salaries of government employees. The average hike will be around 23-24 percent. The report was finalized by the Empowered Committee of Secretaries. Government officials have said that only salaries and hikes have been cleared by the government, which will spend Rs 52,000 crore over it in this fiscal. The 15 percent hike will be the lowest in 70 years. The 6th Pay Commission had recommended a 20 percent hike, which was doubled at the time of implementation in 2008.  The government may also have to shell out additional Rs 20,697 crore for the pay hikes. Arrears for the six months will be paid in tranches and impact of which will be Rs 20,787 crore. Burden of arrears will be felt by the government over next two quarters. The impact of Pay Commission will be 72 percent on the Finance Budget and 28 percent on the Railway Budget. The annual outgo on back of this is expected to be Rs 1.02 lakh crore. Some additional provisions have been made for the defence personnel. The Central Pay Commission is set up at regular intervals (usually every 10 years) by the government to review the existing pay structures for government employees. As many as 48 lakh central government employees and 55 lakh pensioners will be befitted thanks to this payhike. 

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Government taking care to see there are more inflows -:- Equity Research

In a conversation with CNBC-TV18, Ramesh Abhishek, the Secretary of Department of Industrial Policy & Promotion (DIPP) said that there has been tremendous interest among foreign investors in India and that the government is doing active investment promotion to attract more inflows.   He said, "The climate for doing business has become simpler hence we expect FDI inflows to go up from here," he said, adding "India needs huge investments both through foreign and domestic investments." He added that there are areas that need Foreign Investment Promotion Board (FIPB) approval where FDI is banned, and DIPP is working towards shortening the list, by making the process for FIPB nod simpler. He maintained that doing business has become a lot easier in India. It will get reflected in the ranking this year. 

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Complacency over Brexit impact worrying -:- Equity Research

The high level of complacency among investors about the impact of Brexit and that Brexit's impact will be restricted to Europe and the UK is worrying, said Abhay Laijawala, Head-India Research at Deutsche Equities, speaking to CNBC-TV18. This, unlike the Lehmann Crisis of 2008, is a political event which can translate in to systemic risks for global markets, he told CNBC-TV18, cautioning investors to closely watch global currency swings. "We have to brace ourselves for high levels of volatility," he said. Laijawala said FII inflows depend on global risk aversion. US' 10-year yields have gone down in the recent past but there hasn't been a sharp fall in oil prices and so far markets haven't seen a global risk aversion, he said. India is well positioned on the external front. The country is less vulnerable because of strong FDI inflows offsetting deficit and government's reforms push coupled with FDI liberalisation should help the rupee do well, he said

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Liquid Telecom to buy Tata's South African arm for Rs 2900 cr -:- Equity Research

Liquid Telecom, a pan-African telecom group has entered into an agreement to acquire Neotel, a Tata Communications subsidiary in South Africa, for Rs 2,900 crore. Liquid Telecom will be partnering with Royal Bafokeng Holdings (RBH), a South African empowerment investment group, which has committed to take a 30 percent stake in Neotel. “Through a single access point, businesses across Africa will be able to access Liquid Africa’s 24,000km of cross-border, metro and access fibre networks. These currently span 12 countries from South Africa to Kenya, with further expansion planned,” the press release said. Certain regulatory approvals for the deal in South Africa are still awaited by the companies. “Convergence of technologies and services will be the key driver of growth across the globe and this transaction will encourage inclusion and support the growth aspirations of the African continent,” said Vinod Kumar, MD & CEO of Tata Communication. 

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India appoints Vishwanathan as new RBI deputy governor -:-Equity Research

A government-appointed panel has selected N S Vishwanathan as a Reserve Bank of India deputy governor, replacing incumbent H R Khan, NDTV Profit TV and ANI television news agency reported on Tuesday without citing sources. Vishwanathan is currently an executive director at the RBI, overseeing the banking regulation and non-banking department. He would succeed Khan, who will retire on July 3, ANI tweeted. The key departments under Khan are financial markets, external investments and operations, payment and settlements, information technology, foreign exchange and internal debt management. The RBI currently has four deputy governors.

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Indiabulls Housing Finance to raise Rs 625 crore -:- Equity Research

Indiabulls Housing Finance is planning to raise Rs 625 crore through issuance of non-convertible redeemable debentures, the company said today. "The company proposes to issue 6,250 secured non- convertible redeemable debentures with a face value of Rs 10 lakh each aggregating Rs 625 crore (plus greenshoe option) on a private placement basis," the company said in a BSE filing. The issue will open on June 30 and close on the same day. The non-convertible redeemable debentures will have a coupon rate of 9 per cent and are proposed to be listed on NSE and BSE. Last week, the company said it is planning to raise Rs 300 crore through issuance of non-convertible redeemable debentures. The scrip was trading 0.19 percent lower at Rs 657.60 on BSE.

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Buy Balrampur Chini, Triveni Engineering -:- Equity Research

SP Tulsian of sptulsian.com told CNBC-TV18, "Those who are taking a call on the sugar stocks need to have conviction that the things are going to be very good for the next season as well, because I have been calculating the production of the next season that is the season which will start on October 1 and I was stunned to take up estimated production of less than 200,000 lakh tonne. So, situation is going to be seen quite precarious." "In the current situation, the drop in the production will be seen in the Maharashtra and Karnataka and if you see the status quo production in Andhra Pradesh and Tamil Nadu, in this scenario if you really want to take a call then if you take a call today practically today about 25 stocks are hitting upper circuit. You have seen Dalmia Bharat Sugar just hitting 20 percent circuit. Since morning we have been seeing Oudh Sugar , Upper Ganges , Ugar Sugar and so many other stocks, Dhampur Sugar - all hitting upper circuit and if you see the theme that has been, the UP based sugar mills which have been holding the inventory where the unrealised gain is anywhere between Rs 100-400 crore depends on the quantity held by them, the results of Q1 that is June quarter and September quarter are going to be bumper because of the unrealised gain, which will be get booked in this two quarters," he said. "So, keep a faith for these two quarters profits to come from the inventory held by these mills, especially, the UP based sugar mill and then thereafter the more positive outlook on the sugar season which will start in the month of October. So, if you go by this thesis or if you take a call on this basis then probably at least in today’s market you only get two stocks - Balrampur Chini and Triveni Engineering." "Both the stocks are up by about 8-9 percent, but at least both are quality stocks where the sugars are held to the extent of about 60 lakh bag by Balrampur and 40 lakh bag by Triveni Engineering. So at least you have comfort that production is going to be maintained for next season and margins are going to be seen quite good even for the next season as well." "In the current situation, I won’t be jumping for, because there is a lot of left out feeling among the people and that’s why they are running for any kind of sugar stocks without taking a fundamental call on those stocks, but in the current situation because other stocks have already frozen on the upper circuit, I will advise to buy into these two stocks that is Balrampur Chini   and Triveni Engineering ." 

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Nifty fails to hold 8100, Sensex flat; Midcap shines, IT loses -:- Equity Research

It was a consolidation day for the market on Monday as investors digested the Friday's sharp fall led by Britain's vote to leave the European Union and feels India will have minimal impact of Brexit among Asian countries. The 30-share BSE Sensex rose 5.25 points to 26402.96 and the 50-share NSE Nifty was up 6.10 points at 8094.70 while the broader markets outperformed benchmarks. The BSE Midcap and Smallcap indices gained 0.8 percent and 1.5 percent, respectively following positive market breadth. About 1826 shares advanced against 786 declining shares on the Bombay Stock Exchange. Tanvee Gupta Jain of Macquarie Capital Research says India will be least impacted from the Brexit event amongst its peers. Currently, there are three things playing out for India – macros are good, growth is recovering and consumption too is improving, although the recovery is not yet broadbased. "We are in the F&O expiry week so volatility is obvious, but news flow from global front especially from the European markets adding to the traders' difficulty. As a defence, it's advisable to focus more on risk management aspects at present and the rest will fall in place," says Jayant Manglik of Religare Securities. European markets extended losses as the fallout from Britain's decision to leave the European Union (EU) continues, sending the pound to a 31-year low. Germany's DAX and France's CAC were down 2 percent each followed by Britain's FTSE with 1.6 percent loss (at 16 16:15 hours IST). Asian markets ended mostly higher with the Nikkei leading rally, up 2.4 percent followed by Shanghai Composite with 1.4 percent upside.

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Buy LIC Housing Finance; target of Rs 550 -:- Equity Research

LIC Housing Finance Ltd. is one of the largest Housing Finance company in India with market cap of 24000crs. Currently on the price chart, it is looking bullish from a medium term perspective for target of 550. The below shown daily chart of LICHSGFIN is showing bullish breakout from a 6 month falling trend line. The short term trend of the stock is up. The slope of 50 and 100 DMAs are now up; confirming strength. The medium term MACD indicator is sloping upward and has moved above the zero line indicating start of bullish momentum. Based on relative strength, the stock has outperformed against the broader market in last one year by 7%.  Spurt in total traded volume along with rise in delivery volumes on breakout after a phase of consolidation in last couple of weeks is showing additional bullish evidence while the weekly chart pattern suggest that prices may move higher towards 550 in the medium term.      Based on the above mentioned technical evidences, we are bullish on LICHSGFIN. We recommend accumulating the stock in the range of 475-485 for a target of 550 level. 

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Competition to make it tough for Havells to gain mkt share : Equity Research

Brokerage firm CLSA has a ‘Sell’ call on Havells with a target price of Rs 323. The electrical equipment maker will most likely not be able to corner any significant market share as it will see headwinds from more competition, says the report. The report also flags two key worries: disruption from state-owned EESL and share of unorganised sector which has been going down in most segments. “This growth [for the company] was driven by a focus on a distribution-led model and product branding but more importantly aided by taking market share from the unorganised sector,” it said.  The report adds that although Havells has done well to fend off competition from EESL by its focus on consumer-facing products, it still faces an uphill task. “Given the scale of EESL’s ambition, this is a key area to watch,” it says. On a positive note, the company’s sale of 80 percent in Sylvania, which it acquired in 2008, was a good move, adds the report, as the European lighting maker was an 'major overhang’ on the stock. “A sharp share price increase after the stake sale now leaves little room for a further stock re-rating.” CLSA believes the current share price of the company adequately discounts the positives. “Havells’s valuations (32x 18CL) and EPS growth rates are now on a par with those of domestic consumer companies though we estimate that only two thirds of Havells’ business is consumer-facing.”

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RBI always ready to act when markets misbehave, says Rajan -:- Equity Research

The RBI governor said that all of us had sneakily suspected that the UK opinion polls didn't reflect the true intent. "Hopefully, saner minds will prevail as we look back on this episode and people see the costs of leaving," he said. Brexit reflects the mood of a people who are tired of engaging with the world and with immigrants, Rajan said. UK does face an uphill task in managing its current account deficit, he added.  "If the UK doesn't want inflation perking up, the Bank of England will have to tighten its monetary policy."  Rajan doesn't see more breakaways from the EU happening.  "The euro has been depreciating and dollar strengthening. In general, this is not good news for economic growth," he said. The European Union will figure out ways to get over the Brexit, he said.  Central banks the world over have played a role in calming markets.  Rajan is sure that Britain didn't engineer the Brexit in order to have the pound sterling depreciated. "It is a consequence of this mass movement," he said.  Let me reiterate that the Reserve Bank is watching all the markets; it is ready to act when there is disorderly conduct/behaviour of the market," he said, adding that bond markets, currency and money markets are the most important markets for India that are under watch. Rajan dismisses fears of a global recession as a result of Brexit. There will be no dominoes effect, he added. "The general sense is that we will reflect on this dramatic event and you will see reactions from across the world. It is important that no one panics." Regarding repercussions in the US, Rajan believes there is no one-to-one correspondence to what happened in the UK. "Brexit does sound a warning bell about the kind of anger that people have against the system."  He believes that there is bound to be outflows from India as money has to go somewhere. But as long as India maintains its reputation as a country with macro stability, one shouldn't worry, he said. His message to financial markets was the adjustment will take place and there will be a reassessment of prospects for certain asset classes.

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