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Weekly Indian Sector Outlook -26.09.2016 -30.09.2016

Indian Market Outlook for the week – 26 to 30.09.2016

Indian Market Outlook for the week – 26 to 30.09.2016

 Seen volatile next week before F&O expiry Thu


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   Domestic  equities  are  likely  to  be  volatile  next  week  as  traders  roll  over  positions  to  the  October derivatives contracts ahead of the expiry of the September series on Thursday. Market participants believe  the  index  will  face  strong  resistance  at  the  psychological  9000-point  mark.  In  a  lacklustre session yesterday, the Nifty 50 and S&P BSE Sensex ended 0.4% lowers each at 8831.55 points and 28668.22 respectively. Investors, especially foreign institutional investors, booked profits after buying in the last two sessions. FIIs yesterday net  sold shares worth  nearly 3  bln rupees after net buying over  5  bln  rupees  worth  of  shares  in  the  last  two  days.  The  underlying  bias  for  equities,  though, remains bullish as indices approach their lifetime highs. Some of sectors are being re-rated which is what  the  bull  market  does,  and  identifying  those  trends  can  lead  to decent  capital  appreciation in those stocks.   Market participants are upbeat about pharmaceutical, bank and energy stocks, and  expect them to extend gains next week. The Nifty Bank index is expected to rise towards 20400 points next week, and if traders book profits then losses in the index are seen capped at 19700. Yesterday, the index ended  at  19901.80  points,  down  1%.  Pharmaceutical  stocks  are  likely  to  gain  on  optimism  that regulatory issues around companies in the sector will be resolved in the next one year. On Monday, investors would focus on shares of real estate and infrastructure companies, hotels and hospitals as SEBI has made changes to norms for investing in real estate and infrastructure investment trusts.

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Cement Stocks Outlook for the week – 26 to 30.09.2016

Cement Stocks Outlook for the week – 26 to 30.09.2016

 Mixed next week, large-caps seen under pressure 


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  Stocks  of  cement  manufacturers  are  seen  trading  on  a  mixed  note  next  week,  with  large-cap companies such as ACC Ltd  and Ambuja Cements expected to bear the brunt  of higher valuations, while  mid-  and  small-caps  likely  to  fare  better.  For  cement  stocks,  the  profit  bookings  have  just started. Ambuja Cement stocks fell 1.3% during the week and analysts expect it to remain weak next week as well. Among large-caps in the sector, UltraTech Cement is seen bucking the negative trend. It  has  been  in  the  positive  territory  and  is  expected  to  continue  to  be  there.  Companies  with operations in north and east India are likely to face some resistance due to weak demand and on the impact of the ban on sand mining in Uttar Pradesh. Companies having a presence in west and south India are likely to fare better.


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Auto Stocks Outlook for the week – 26 to 30.09.2016

Auto Stocks Outlook for the week – 26 to 30.09.2016

 Seen range bound; bias remains positive overall 


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 Seen range bound; bias remains positive overall   Stocks  of  major  automobile  companies  are  seen  trading  in a  narrow range  next  week,  with  some possibility of a correction, as most of the stocks have  performed well  and  are in the "overbought" category.  However,  bias  for  the  consumer  discretionary  sector  remains  positive.  Payout  of  arrears after  the  salary  hike  of  government  employees  and  good  monsoon  rains  are  seen  lifting  demand during Sep-Oct. Earlier this month, the Society of Indian Automobiles Manufactures revised upward its projection for growth in sales of passenger vehicles in 2016-17 (Apr-Mar) to double digit, from 7-8% seen at the beginning of the year. The CNX Auto index, which ended higher by 1.06% on week at 10224.95 points yesterday, is seen trading sideways in line with broader indices over the next few sessions.   Stocks of Maruti Suzuki India Ltd has been trading in the "overbought" zone in the last few weeks and analysts see some correction in the stock going forward. For the longer term, however, the stock remains positive, backed by strong fundamentals and a good order book. Analysts are also bullish on Tata Motors Ltd in the long term but expect some pullback in the stock. Two-wheeler companies are seen consolidating at current levels with stocks like Bajaj Auto Ltd, Hero Motocorp Ltd entering into overbought zone. Analysts expect some pullback in Hero Motocorp Ltd. Shares of Bajaj Auto Ltd and Mahindra & Mahindra Ltd are seen trading in a narrow range next week.


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Telecom Stocks Outlook for the week – 26 to 30.09.2016

 Telecom Stocks Outlook for the week – 26 to 30.09.2016

 May fall next week; Bharti Airtel seen outlier


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  Telecom stocks, except Bharti Airtel Ltd, will continue to decline over the next week due to impact of 4G services rollout by Reliance Jio Infocomm. The stocks will remain dull in the run up to the largest ever spectrum auction in India on Oct 1. Airwaves for high-speed 4G services worth over 5 trln rupee at  the base  price will  be  auctioned by  the government. But  Bharti Airtel,  country's largest telecom operator,  saw some  recovery this  week and is likely to  rise more.  In a  fight back  to Reliance Jio's offer, Bharti Airtel yesterday launched its most aggressive data plan that offered users unlimited 4G data for  90 days for 1,495 rupees. Airtel  is forming a pull-back. The upward trend for Bharti Airtel may not last beyond the end of next week.   Stocks of Idea Cellular and Reliance Communications Ltd are likely to decline next week. Idea Cellular has been the worst  performing stock since  Jio's entry.  Reliance  Communications  may continue  the downward  trend  until  clarity  emerges  on  the  plans  of  the  Anil  Ambani-group  company's  proposed merger of its mobile operations with Maxis Communications-owned Aircel Ltd into a separate entity. The  market  will  wait  for  details  of  the  final  debt  on  the  books  of  Reliance  Communications.  The telecom sector will remain under pressure over the next couple of weeks as operators typically add hundreds of  millions of  rupees  in  debt to  fund  spectrum  purchases.  Recently, Vodafone  Group  Plc made an equity infusion of 477 bln rupees into its fully-owned subsidiary Vodafone India, a part of which will be used to buy airwaves. Seven operators have submitted their letters of interest to the government for the auction


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FMCG Stocks Outlook for the week – 26 to 30.09.2016

FMCG Stocks Outlook for the week – 26 to 30.09.2016

 May fall next week as raw material cost high


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   Stocks  of  fast  moving  consumer  goods  companies  may  fall  in  the  coming  days  as  the  sector continues to face pressure from rising cost of raw materials. Prices of crude oil rose 10.8% on month, palm oil over 20% and sugar about 2% in August. Revenue momentum in the fast moving consumer goods  sector  will  continue  to  remain  subdued.  Though  expectations  of  an  earnings  recovery  are strong in the Oct-Mar period owing to normal monsoon this year, the green shoots may appear very late. The extent of recovery may not be as strong as market expectations.    In the Jun-Sep monsoon season, India received 813.1 mm of rainfall until Thursday, 96% of the long period average. A normal monsoon could also see the demand for household insecticide business rise during  the  Jul-Sep  quarter.  The  brokerage  has  a  'buy'  rating  for  stocks  of  Emami  Ltd  and  a  'sell' rating for  Godrej Consumer Products Ltd.  A pick-up in consumer demand in the  festive season will
   help  companies  perform  better  in  the  immediate  quarter.  HUL  (Hindustan  Unilever  Ltd),  given  its widest rural reach, is expected to be the biggest beneficiary of this pick-up in consumer demand.   Jubilant FoodWorks Ltd, the food service company that operates Domino's Pizza and Dunkin Donuts chains in India, may face a tough time ahead. The resignation of the company's chief executive Ajay Kaul on Sep 19 after being at the helm for 11 years is seen by many in the market as an outcome of the  company's  poor  show  in  the  Apr-Jun  quarter  this  year.  The  company  reported  a  net  profit  of 189.9  mln  rupees in  Apr-Jun,  down  31%  on  year.  The  company's  volume  in  the  same-store  sales category fell 3.2% on year. The de-growth in same-store sales was a "matter of concern". The long-term  story  of  food  service  industry  is  in  place  and  Jubilant  FoodWorks  Ltd  may  benefit  from  the demand revival. But until same store sales improves, margins and earnings may remain suppressed


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Banks Stocks Outlook for the week – 26 to 30.09.2016

 Banks Stocks Outlook for the week – 26 to 30.09.2016

  Seen volatile next week ahead of Sep F&O expiry


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   Banks stocks are likely to be volatile next week, ahead of the expiry of the September futures and options contracts on Thursday. The Nifty Bank is expected to trade in the range of 20500-19500 next Week. Yesterday, the index ended at 19907.80, down 1% for the week. Consolidation is expected in the  broader  market.  A  correction  in  the  market  is  likely  due  to  profit  booking  as  the  Nifty  50 approaches 9000 levels. However, we continue to feel that the outperformance in banking stocks is likely to continue, unless the index holds above 19700 levels. Stocks of private sector banks are likely to  continue being preferred compared  to  those of  their  state-owned peers. Next  week,  build-up of long  and  short  positions  is  seen  in  Allahabad  Bank  and  Kotak  Mahindra  Bank,  respectively,  while unwinding of long bets is seen in YES Bank.
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Pharma Stocks Outlook for the week – 26 to 30.09.2016

   Pharma Stocks Outlook for the week – 26 to 30.09.2016 

 In range; Glenmark may witness profit booking


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   Stocks of pharmaceutical companies are likely to trade range bound next week after the recent gains in the sector. Glenmark Pharmaceuticals, which has risen 12% in the past one month, may witness some profit booking. The overall bias for pharmaceutical sector remains positive, particularly due to favourable valuations of large caps. Regulatory compliance issues at a number of manufacturing units of pharma companies have hampered growth in the last couple of years, especially in the US.   However, fresh regulatory concerns have not emerged recently, which has lifted investors' sentiment.  Improvement in domestic sales in August also provided some support. According to data from market research firm AIOCD-AWACS, India pharma market grew 14.7% on year in July as against a growth of  9.7%  in  June  led  by  growth  in  sales  of  anti-infective  and  respiratory  drugs.  Growth  in  anti-infective,  respiratory  and  anti-malarial  drugs  in  August  was  due  to  rise  in  seasonal  ailments  but performance  of  most  other  therapeutic  areas  was  stable.  Thus,  sustainability  of  overall  growth numbers  beyond  the  next  two  months  remains  uncertain.  On  technical  charts,  the  trend  for  Sun Pharmaceutical Industries and Aurobindo Pharma is seen positive.   Though there could be some profit booking in Aurobindo Pharma after it rose 7% in one week, the trend  remains  firm.  Volatility  is  expected  next  week  in  the  broader  market  due  to  expiry  of  the derivatives contracts on Thursday.

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Oil Stocks Outlook for the week – 26 to 30.09.2016

  Oil Stocks Outlook for the week – 26 to 30.09.2016

 Shares of retailers seen trading range-bound 


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   Next week, stocks of state-owned oil refining companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd,  and  Hindustan  Petroleum  Corp  Ltd--are  seen  trading  positively,  albeit  within  a  range.  With refining  margins  improving  globally  and  strong  fundamentals  in  the  domestic  market,  these  stocks are likely to continue with the positive momentum in the near term, despite some minor correction and  consolidation  intermittently.  Over  a  longer  term,  Indian  Oil  is  the  preferred  pick  for  most analysts. They expect India's largest oil retailer to be the biggest beneficiary of the continuous rise in domestic demand for petroleum products.   The  company  offers advantage of scale in  refining,  petrochemical and  marketing business,  and  its new  projects  will  improve  efficiency.  In  the  absence  of  any  other  major  triggers,  the  trend  for  oil companies over the next  few sessions will be determined by the  movement in crude oil prices and sentiment in the broad market. Crude oil futures on domestic and global exchanges are seen falling, as  market  participants  are  cautious  ahead  of  a  meeting  of  major  oil  producers  next  week.  The Organization of the Petroleum Exporting Countries and other oil producers are meeting next week in Algiers to discuss ways to stabilise the market, including a freeze on output. However, high levels of crude oil production by OPEC countries such as Saudi Arabia and Iran indicate that a deal to freeze output  may be unlikely.  The meeting  next  week is  expected  to  end without  any  result.  The global bank also cautioned that prices could fall due to "high net long positioning" of investors.   Crude oil exports from Libya, too, could increase after the country re-established control over its oil ports seized by militants. A decline in oil prices would be a negative for upstream companies such as ONGC, Oil India and Cairn India Ltd, but a positive for downstream companies, and may impact the stocks accordingly. Despite the weakness in crude oil prices, stocks of upstream companies appear to be positive on the charts. Among upstream companies, ONGC is the preferred pick, as most analysts believe that its  valuations are cheap. Fluctuation  in the  dollar-rupee exchange rate is  also likely to affect  the  shares  of  oil  companies.  If  the  dollar  strengthens  against  the  rupee,  it  will  hit  refining companies  and  benefit  upstream  players.  A  weak  dollar,  on  other  hand,  is  advantageous  for downstream companies


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Metal Stocks Outlook for the week – 26 to 30.09.2016

   Metal Stocks Outlook for the week – 26 to 30.09.2016

 Likely to continue rising next week  


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 The rise in stocks of major metal and mining companies is likely to sustain in the coming week as impact of government measures to limit imports into India is helping domestic companies. The index has risen 53% since September 2015. Market participants would be eyeing any development related to imposition of anti-dumping duty on certain steel products. Earlier this week Steel Secretary Aruna Sharma had said that the government would further prune the list of steel products under minimum import price and levy anti-dumping duty on them instead. The anti-dumping duty is likely to be levied in the next one or two weeks.   The  government  had  imposed  minimum  import  price  on  173  steel  products  in  February  for  six months.  On  Aug  4,  the  government  removed  minimum  import  price  for  107  specific  items,  and simultaneously  imposed  anti-dumping  duty  on  broader  categories  of  hot-rolled  and  cold-rolled products.  A  dampener  for  metal  stocks  could  be  the  sharp  rise  in  prices  of  coking  coal  that  can reduce competitiveness of the steelmakers.   Prices of coking coal, a crucial raw material used in the production of steel, has shot up to $200 per tn, a nearly 80% rise over the last month. India imports most of its coking coal requirement. Vedanta is the top pick in the metals and mining space.

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Telecom Stocks Outlook for the week – 19 to 23.09.2016 Seen down as auction nears, RJio impact weighs

Telecom Stocks Outlook for the week – 19 to 23.09.2016
Seen down as auction nears, RJio impact weighs

Stocks of mobile services providers are seen down next week as the market begins to price in the
pressure of the upcoming spectrum auction and also the impact of Reliance Jio Infocomm Ltd's free
services. The stock looks positive in the first part of the week but selling will be there after the initial
rise. Both heavyweights will continue to remain under pressure and investors will do well to exit on
the first bounce-back. All existing mobile services operators barring Telenor India will compete for thespectrum auction that starts Oct 1.

This (the auction) will put further pressure on the balance sheets of these companies. The capex
cycle for telecom companies never seems to end and hence it is unlikely the shares will show any
significant gains in near future. Reliance Communications share is falling next week as analysts
advise caution on its plan to merge its mobile services with that of Aircel Ltd. Moody's Investor
Service has put the company under review for a possible ratings downgrade 

Capital Goods Stocks Outlook for the week – 19 to 23.09.2016 Seen range bound; Cummins India in focus

Capital Goods Stocks Outlook for the week – 19 to 23.09.2016
Seen range bound; Cummins India in focus

Capital goods stocks are expected to trade within a range with largely a negative bias next week, in
the absence of significant triggers and a continued bleak outlook on the sector. So far in 2016-17
(Apr-Mar), capacity utilisation of industries has been lower than 2015-16, and hence, the capital
goods segment might not do that well in the near to medium-term.

Stocks of sector bellwether Larsen & Toubro might see a slight upside in the upcoming week with the
initial public offering of its subsidiary L&T Technology Services getting subscribed 2.5 times on the
final day. The company received bids for 18.4 mln shares against 7.28 mln shares on offer.

Analysts have maintained a dull outlook on state-owned Bharat Heavy Electricals on the back of likely weak operating margins, due to pricing pressure in the coming quarters. Cummins India could see buying in the short-term, as the company is "well-placed" to take advantage of the government's
increased emphasis on roads and railways.

Oil Stocks Outlook for the week – 19 to 23.09.2016 Shares of retailers seen down on steep valuations

Oil Stocks Outlook for the week – 19 to 23.09.2016
Shares of retailers seen down on steep valuations

Stocks of state-owned oil retailers are expected to correct next week as sharp gains in the last few
months have made their valuations expensive. Stocks of Indian Oil Corp, which has risen 45% in the
last six months, is seen neutral-to-negative on charts. Indian Oil shares yesterday ended 570.20
rupees on the National Stock Exchange. However, over a longer term, the stock is still the preferred
pick for most analysts. They expect India's largest oil retailer to be the biggest beneficiary of
improvement in demand for petroleum products.

The company offers advantage of scale in refining, petrochemical and marketing business, and its
new projects will improve the efficiency. Among the explorers, Oil and Natural Gas Corp is the
preferred pick as most analysts believe that the valuations of the stock are cheap. Even if crude oil
prices were to decline, it would not impact the stock, which factors in realisations at a very low price
of crude oil. At 1915 IST, the November futures contract of Brent crude oil was at $45.66 per barrel
on the Intercontinental Exchange in Europe, down nearly 2%.

Reliance has been trading below 1150 rupees since January 2010 and the success of Reliance Jio
Infocomm will be crucial for a breakout from this level. The fate of Cairn India stock is linked to
 Vedanta Ltd, into which it will be merged. Cairn India is now an arbitrage play with Vedanta, the
fundamental analyst mentioned earlier said. Apart from crude oil prices, fluctuation in the dollarrupee
exchange rate is also likely to affect shares of oil companies. If the dollar strengthens against
the rupee, it will hit refining companies and benefit upstream players. A weak dollar, on other hand,
is advantageous to downstream companies.

Banks Stocks Outlook for the week – 19 to 23.09.2016 Seen up next week as US Fed rate hike fears wear

Banks Stocks Outlook for the week – 19 to 23.09.2016
Seen up next week as US Fed rate hike fears wear

Bank is seen rising next week as fears of the US Federal Reserve hiking interest rates recede and the
charts support gains. The Federal Open Market Committee's two-day meeting will conclude post
Indian market hours on Wednesday. While most investors expect the FOMC to not raise interest
rates, Fed Chair Janet Yellen's policy guidance will be closely eyed for cues regarding the pace and
timing of rate increases in future. Investors will also take cues from Bank of Japan's policy meeting,
this decision as well being detailed on Wednesday. We are expected recovery in the stocks of select
private sector banks may also support broader indices.

In the current week, fall in the stocks of YES Bank had weighed on its peers. Its qualified institutional placement being deferred ensured that the bank's share price fell 8.3% over the week, the largest decline among the large banks. We expected the Nifty Bank index to outshine the Nifty 50 in days to come and head towards the 20500-20800 levels shortly. ICICI Bank is likely to be under focus as the initial public offering of its subsidiary ICICI Prudential Life Insurance Co will open on Monday. The offer will be watched as it is the first IPO in the insurance sector. The extent of success of ICICI Life Insurance issue would show the extent of liquidity in the system and the willingness of the investors to invest in equities.

Cement Stocks Outlook for the week – 19 to 23.09.2016 In a range next week, some profit booking seen

Cement Stocks Outlook for the week – 19 to 23.09.2016
In a range next week, some profit booking seen

Stocks of major cement manufacturers are seen trading in a narrow range next week, with spells of
profit booking likely as the stocks are still trading at their peak valuations. The stocks are expected to
remain range-bound and experience bouts of profit booking. So far in 2016, stocks of ACC, Grasim
Industries, Ambuja Cements, UltraTech Cement, JK Lakshmi Cement, Shree Cement, India Cements,
Ramco Cements, Heidelbergcement, Mangalam Cement, Dalmia Bharat have risen 20-106%. Stocks
of JK Lakshmi Cement touched a record high yesterday.

Cement stocks have touched their peak valuations in the last couple of years, driven by demand in
south India and the proposed development of new cities in Telangana and Andhra Pradesh. The
average capacity utilisation rate of domestic cement makers' plants had touched a low of 68% in the
year ended March due to a supply glut. In the improving demand scenario, the utilisation rates are
seen rising to 72% and 78% for 2017-18 and 2018-19, respectively. In the medium- to long-term, a
pick-up in construction activity in the infrastructure space, revival of investment cycle and likely
recovery of rural demand following good rains will benefit the cement industry.

Pharma Stocks Outlook for the week – 19 to 23.09.2016 Positive; valuations of large-caps favourable

Pharma Stocks Outlook for the week – 19 to 23.09.2016
Positive; valuations of large-caps favourable

Stocks of pharmaceutical companies are likely to trade with a positive bias next week with buying
interest being supported by favourable valuations, particularly those of large-caps. Improvement in
sales of domestic pharmaceutical products in July is also seen keeping sentiment upbeat. According
to data from market research firm AIOCD-AWACS, the domestic pharmaceutical market grew by
14.7% on year in July as against a growth of 9.7% in June, led by robust sales of anti-infective and
respiratory drugs. Stocks of large-cap companies like Sun Pharmaceutical Industries, Dr Reddy's
Laboratories, and Lupin have been under pressure due to regulatory issues at their manufacturing
units and price erosion in products in the US. However, looking at their current valuations, upside
momentum is expected in the medium term.

Moreover, these companies have taken sufficient remedial measures at their plants and hence the
regulatory issues are likely to be resolved sooner rather than later. Aurobindo Pharma is receiving
support from a strong product pipeline for the US market and by good pace of product approvals. On
technical charts, the trend for Sun Pharmaceutical, Dr Reddy's, Lupin, and Aurobindo Pharma is seen
positive. Cipla, which has gained significantly over the last one month, may see some consolidation in the near term. The technical analyst is also positive on Glenmark Pharmaceuticals and Divi's
Laboratories in the near-to-medium term.

Auto Stocks Outlook for the week – 19 to 23.09.2016 Seen range bound on concern over Fed rate hike

Auto Stocks Outlook for the week – 19 to 23.09.2016
Seen range bound on concern over Fed rate hike


Stocks of major automobile companies are seen trading in a narrow range next week, with some
possibility of a correction as the market is yet to allay the concerns of a hike in interest rate by the
US Federal Reserve later this month. Overall, however, bias for the sector remains positive. Pay out
of arrears relating to the salary hike of government employees and good monsoon rains are seen
lifting demand during Sep-Oct. Last week, the Society of Indian Automobiles Manufactures revised
upward its projection for growth in sales of passenger vehicles in 2016-17 (Apr-Mar) to double digit,
from 7-8% seen at the beginning of the year.

The CNX Auto index, which ended down 1.8% on week at 10117.95 points yesterday, is seen trading
sideways, in line with broader indices over the next few sessions. Stocks of Maruti Suzuki India Ltd
are seen "overbought" but positive on the charts for next week, backed by strong fundamentals and
a good order book. Analysts are also bullish on Tata Motors Ltd in the long term but expect some
pull-back in the stock. Among two-wheeler companies, Hero MotoCorp Ltd is seen consolidating at
current levels and analysts expect some pull-back in the scrip. Stocks of Bajaj Auto Ltd and Mahindra & Mahindra Ltd are seen trading in a narrow range next week.

Indian Markets Outlook for the week – 06 to 09.09.2016 Positive next week; infra companies may sustain gain

Indian Markets Outlook for the week – 6.Sep.2016 to 9.Sep.2016
(Positive next week; infra companies may sustain gain)
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Capital Goods Stocks Outlook – 06 to 09.09.2016 Seen range bound, bias negative


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Benchmark indices are seen positive next week because sentiment remains buoyant after
announcement of new policy initiatives for the construction sector and robust sales numbers reported
by most automobile companies in August. The US non-farm payrolls data for August, released post
market hours yesterday, was weaker than expected but its impact on the Indian equities could be
diluted as Indian stock exchanges are closed Monday for Ganesh Chaturthi.

US non-farm payrolls rose by 151,000 last month, against The Wall Street Journal poll that had
projected a rise of 180,000 jobs. A strong growth in the world's largest economy would have
increased chances of interest rates being raised by the US Federal Reserve in September. Swiss
investment advisor Marc Faber told Cogencis that the US Fed is unlikely to raise rates, when it meets
later this month, as it comes ahead of Presidential elections in the country in November.

Next week, investors will eye earnings of Nifty 50 constituents Oil and Natural Gas Corp, GAIL India, Coal India and Bharat Heavy Electricals. Yesterday, the index gained 0.4% to end at 8809.65 points, while the Sensex ended 0.4% higher at 28532.11. Infrastructure companies are likely to extend gains next week, as the Union Cabinet cleared a proposal to release 75% of all dues stuck in appeals after arbitration award to construction companies in government contracts.

This move will help restart stalled projects and clear bank loans, which will ensure fresh lending for
the completion of projects. As a result, sentiment for banks, public-sector banks in particular, also
remains buoyant. We look at this as a positive development for the banking sector, as the delay in
payment has resulted in significant working capital shortfall that has been funded by banks. We
believes ICICI Bank and public-sector banks would be the biggest beneficiaries. Telecom companies--
Bharti Airtel and Idea Cellular--are seen resuming their weak trend next week even after a rebound
yesterday, as the entry of Reliance Jio Infocomm will put pressure on their tariffs and profitability.

Year-to-date, Bharti Airtel has lost 6.3% while Idea Cellular has fallen 41.2%.

Capital Goods Stocks Outlook – 06 to 09.09.2016 Seen range bound, bias negative

Capital Goods Stocks Outlook – 06 to 09.09.2016
Seen range bound, bias negative

In the forthcoming week, stocks of capital goods companies are likely to trade within a range with a
negative bias in the absence of near-term triggers, and recent rating downgrades on a couple of
companies in the sector. Sector bellwether Larsen & Toubro may see some stock-specific action next
week, with L&T Technology Services Ltd--its wholly-owned subsidiary--set for an initial public
offering, which opens for subscription on Sep 12. The offer will close on Sep 15. The company has
set the price band for its 10.40-mln-share initial public offer at 850-860 rupees a share.

UDAY (Ujwal DISCOM Assurance Yojana) led benefits are now expected to be long drawn. Also
margin profile will remain lumpy given sale of various businesses and related costs. Crompton
Greaves' recent run-up caps near-term upsides. However, analyst said he was optimistic about the
Avantha Group Company’s industrial growth in the short term, owing to its favourable positioning in
low-tension/high-tension motors. State-owned Bharat Heavy Electricals is unlikely to gain much next
week.

Pharma Stocks Outlook for the week – 06 to 09.09.2016 Mixed; broader market trend to lend cues

Pharma Stocks Outlook for the week – 06 to 09.09.2016
Mixed; broader market trend to lend cues

Stock-specific movement is likely in pharmaceutical companies next week amid lack of fresh triggers. Trend in broader market will lend some cues to the sector. Benchmark indices are seen positive next week because sentiment remains buoyant after announcement of new policy initiatives for the construction sector and robust sales numbers reported by most automobile companies in August. While the broader market is seen positive, the gains in pharma space are expected to be limited compared to other sectors like infrastructure and banking. Stocks of Cipla, which hit a six-month high of 587.50 rupees on Aug 31, may consolidate next week after the recent rally but a sharp correction is unlikely. The bias for Cipla remains firm on optimism that the company's business restructuring plans will propel future growth.

Stocks of Sun Pharmaceutical Industries have rebounded 4% during the week. Among mid-caps,
stocks of Ajanta Pharma, which have surged more than 20% in the last one month, are likely to
continue the upward movement as analysts are positive about its long-term fundamentals. However,
some bouts of profit booking cannot be ruled out in the near term. We are positive about Ajanta
based on its continuing outperformance in domestic formulations and healthy ANDA (abbreviated
new drug applications) pipeline (in the US). To factor in the faster ANDA approvals, strong execution and better returns.

IT Stocks Outlook for the week – 06 to 09.09.2016 Subdued next week as negative view to continue

IT Stocks Outlook for the week – 06 to 09.09.2016
Subdued next week as negative view to continue

Stocks of information technology companies are expected to trade in a narrow range with a negative
bias next week as investors continue their cautious stance on the sector. Buying in the IT sector is
expected to be limited to select frontline companies in the four-day truncated week. Mindtree
yesterday issued a profit warning that due to various challenges it expects weaker sales and
operating margin in Jul-Sep as compared to the quarter ended June. Sector leader Infosys has
already said that Brexit-led challenges will continue to impact the company's earnings and indicated a
likely second-time revision in sales growth guidance for 2016-17 (Apr-Mar).

With Mindtree issuing a profit warning, this confirms that the financial year is a complete washout for the entire IT sector. Stocks of Mindtree, which ended down 0.9% at 548.85 rupees yesterday. Stocks of other IT companies are also expected to be impacted as concerns over performance of peer
companies would raise. Any rise in the stocks would be momentary as investors may chose to exit
the company.

FMCG Stocks Outlook for the week – 06 to 09.09.2016 To rise more next week on price hikes, monsoon

FMCG Stocks Outlook for the week – 06 to 09.09.2016
To rise more next week on price hikes, monsoon

Stocks of fast moving consumer goods companies are seen extending their gains next week on hopes
of above-normal monsoon rains in September and price hikes. Though raw material costs have been
rising in the past few months, fresh spell of rains across the country has heightened hopes of an
above-normal rainfall, which could cool off some raw material prices. In the Jun-Sep monsoon season so far, India has received 709.6 mm rainfall. Though rains have been 3% below the normal of 728.3 mm for the period, it is unlikely to affect stocks as the deficit is manageable. Stocks of ITC and

Hindustan Unilever are expected to break out and touch fresh highs during the week. Last week,
analysts maintained a positive stance on Britannia Industries due to innovation-led growth and
product launches. We remain overweight to neutral on pure play defensives as secular earnings
coupled with sector rotation could lead to consolidation in near term valuations and offer stockspecific opportunities. Despite some hardening in menthe oil prices, input prices have largely been benign. Further, price hikes (2.0-2.5% in FY17) and a better mix could help counter the higher ad spends and maintain the present margin.

Telecom Stocks Outlook for the week – 06 to 09.09.2016 May fall more, seen under pressure for 1 month

Telecom Stocks Outlook for the week – 06 to 09.09.2016
May fall more, seen under pressure for 1 month

Stocks of telecom companies are seen down over the next week and the trend is expected to
continue for at least a month. Reliance Industries Ltd shook up the market on Thursday by
announcing the launch of its telecom venture Reliance Jio Infocomm Ltd, and its unprecedented tariff
plans. From Monday, Reliance Jio will offer its voice services for free and data packages starting at 19 rupees per day. All Reliance Jio services will be free till Dec 31.

The historical discourse metrics for the sector--voice, data, RPM (revenue per minute), ARPU
(average revenue per user), MOU (minutes of use), etc--these have become irrelevant. All bets are
off on how the industry financials shape up over the next couple of years. Top incumbents such as
Bharti Airtel Ltd and Idea Cellular Ltd will see some impact on their Jul-Sep and Oct-Dec numbers as the allure of the three-month unlimited free usage will shift users to Reliance Jio's network.

Assuming 5% impact on FY17/18 revenues, we expect 11.0% and 7.4% EBITDA (earnings before
interest, taxes, depreciation and amortisation) cut Bharti Airtel and Idea Cellular, respectively.
EBITDA margins for the incumbent tele companies could decline by 200-300 bps (basis points) in
FY18. Sector leader Bharti Airtel, arguably the best placed among existing carriers, will continue to be under pressure over the next couple of weeks.

The stock closed over 9% Thursday. However, it recovered yesterday ending up 2.6% at 318.90
rupees on the National Stock Exchange. Bharti saw some bounce back yesterday. The Sunil Mittalowned company, like its peers, announced cheaper data plans to counter Reliance Jio's tariffs. Its prepaid plans allowed customer to avail 1 GB data at 51 rupees per month for an upfront payment of 1,498 rupees, and the same quantum at 99 rupees per month for an upfront payment of 748 rupees.
Analysts, however, said its plans are not adequate to challenge those of Reliance Jio and that further
price cuts on voice and data plans were anticipated. Idea Cellular, the third largest operator, was
worst hit. The company lost over 33 bln rupees in market capitalisation as the stock plummeted
10.5% at 83.65 rupees Thursday on the National Stock Exchange. It may fall to 78 rupees on the
downside, while on the upside the stock can hit the 90-rupee mark. We expect Idea to report losses
at the PAT (profit after tax) level in FY2018 as well as FY2019.

Also, while Idea has improved its preparedness on the (spectrum) capacity front in the past couple of
quarters, we believe it needs to do a lot more. At some level, we believe Idea also needs to reassess
if it can continue with its pan-India ambitions without any equity infusion. Analysts expect Reliance
Communications Ltd to be the first casualty of the war for market share. The latest development
adds to the already-high uncertainty and challenges of valuing RCOM. Though it is expected to
rapidly lose a large chunk of customers to Reliance Jio, the company's share price may be least
affected. Investors holding Idea or Bharti should exit on the first bounce-back. Those having RCOM
should hold.

Bank Stocks Outlook for the week – 06 to 09.09.2016 Eased infra project norms to keep bias positive

Bank Stocks Outlook for the week – 06 to 09.09.2016
Eased infra project norms to keep bias positive

Next week, stocks of banks are expected to extend this week's gains, which were fuelled by easing of
norms for stalled infrastructure projects. Sharp gains, however, are unlikely, as investors may look to
book profits. Any commentary from Urjit Patel, who is set take over as governor of the Reserve Bank
of India next week, may also influence bank stocks. Outgoing RBI Governor Raghuram Rajan has
kept March 2017 as the deadline for banks to clean up their balance sheets. Following the central
bank's asset quality review, Rajan had said that banks have improved recognition of stressed loans
and provisioning requirements.

Indian Overseas Bank will be in focus, as the government is expected to appoint a managing director
and chief executive officer for the lender. The post has been vacant since R. Koteeswaran retired in
June, after the completion of his term. With gross non-performing assets at 20.48%, Indian Overseas
Bank has the highest number of bad loans. Market participants will track the appointment of the new
chief to gauge the roadmap of reducing stressed loans.

Gains in public sector banks are likely to be led by State Bank of India and Bank of Baroda, while
Kotak Mahindra Bank, YES Bank and HDFC Bank are likely to lead the private sector pack. On the
whole, we estimate that small/mid-size private banks can comfortably grow their loan book ahead of
industry at 28-30% over the next few years.

Auto Stocks Outlook for the week – 06 to 09.09.2016 Bias positive as rains, salary hike drive sales

Auto Stocks Outlook for the week – 06 to 09.09.2016
Bias positive as rains, salary hike drive sales

Stocks of major automobile companies are seen moving with an overall positive bias in the near term
due to robust monthly sales that are seen improving further. Sales of most automakers rose in
August. Payout of arrears of government salary hike and good monsoon rains are also seen lifting
demand during the upcoming festive season. The CNX Auto Index, which closed 5.4% higher on
week at 10052.95 points yesterday, may remain range-bound in the next few sessions. Last month,
the government had approved recommendations of the Seventh Central Pay Commission with
retrospective effect from Jan 1, 2016.

The government will have to fork out in excess of 340 bln rupees on account of arrears for January
to July and salary payments for August. Shares of Maruti Suzuki are seen "overbought" but looking
positive for next week, backed by strong fundamentals and a good order book for its Baleno
hatchback and Vitara Brezza sports utility vehicles. Stocks of M&M are also seen continuing its
positive run next week.