RIL, HDFC Bank, DRL in Barclays' global stock picks


 Reliance Industries Ltd (RIL), HDFC Bank and Dr Reddy's Laboratories are the only three Indian firms to figure in Barclays' top 111 stock picks from across the world for 2015.

In its 'Global Top Picks' report, Barclays has said more than six years into the recovery, the key drivers of the market rally ? low inflation, moderate growth and unprecedented monetary support ? are set to have a reduced impetus.

"We are entering the next phase of the business cycle where valuations in equities and fixed income are relatively expensive and evidence is accumulating that the recovery is becoming self-sustaining, suggesting that monetary policy will be less supportive going forward," it said.

RIL was the only stock pick in energy segment in Asia, while HDFC Bank is featured with China Taiping and China Resources Land in the Financial Services sector. Dr Reddy's Laboratories also is the only stock pick in healthcare segment in Asia.

On RIL, it said it expects earnings to grow 47 per cent over 2015-18 even if oil prices remain low and volatile, helped by the completion of USD 16 billion in downstream projects that are all slated to come online over the next 6-15 months.

"We believe this provides one of the strongest growth outlooks among the global energy stocks Barclays covers," it said.

Higher output from select offshore India gas projects that raises upstream production and a credible path to profitability in its ambitious data-centric telecom project (launch expected in December 2015) should drive earnings growth thereafter.

On HDFC Bank, Barclays said the bank was ideally placed to benefit from a macro recovery, owing to its strong low-cost deposit (CASA) franchise, clean balance sheet and increased investment in the network.

"It remains a leader in key retail lending segments and is strong in transaction processing, giving it access to float (CA income).

"The recent pickup in network investments and its focus on digital transactions should help it maintain its leadership position in CASA and grow loans 3-6 per cent faster than the system," it said.

Dr Reddy's (DRL), Barclays said, was a strong play on niche therapeutic areas (injectables and oncology) driven by a robust Para-IV pipeline in the near term and a significantly differentiated R&D strategy for Proprietary products and Biosimilars.

"We forecast revenue and earnings CAGR of 15 per cent and 20 per cent, respectively, over FY15 to FY17 along with a 440 basis points increase in ROIC. DRL is the least expensive large-cap stock in our Asia ex-Japan Healthcare & Pharma coverage," it said

Sensex vaults to 28K, Nifty reclaims 8,400-mark.

 The bull run gained momentum as the benchmark Sensex recaptured the 28,000 level for a brief period amid heavy buying across the board, led by capital goods and healthcare.

Investor sentiment got a boost after data showed core infra sector growth rose to a 6-month high and Asian markets turned firmer, shrugging off a Greece default, a broker said.

The broader midcap and smallcap indices also rallied, tracking the positive cues.

The 30-share Sensex got off to a solid start at 27,823.65 and surged to 28,007.42 before quoting 27,960.87 at 1213 hours, up 180.04 points, or 0.65 percent.

Similarly, the 50-share Nifty rose 61.25 points, or 0.73 percent, to 8,429.75 at 1213 hours.

The major gainers include GAIL (up 1.90 percent), L&T (1.63 percent), Cipla (1.58 percent), Bharti Airtel (1.50 percent) and Coal India (1.40 percent).

Meanwhile, foreign investors offloaded shares worth Rs 551.38 crore yesterday, according to provisional data.

In overseas markets, Asian stocks ruled higher as investors appear to have factored in Greece's loan default to IMF.

Key equity benchmark indices Japan, Indonesia, South Korea, Singapore and Taiwan inched higher by up to 0.95 percent. 

China's Shanghai Composite slumped 0.31 percent. 

Rupee covers up early loss, rules flat

 The rupee pared its initial loss and ruled at the same overnight level of 63.64 against the American currency in late morning deals amid bouts of dollar selling by banks and exporters, and bullish equities.

The rupee opened lower at 63.66 per dollar at the Interbank Foreign Exchange (forex) as against 63.64 previously. It depreciated further to 63.68 before it was quoting at 63.60 at 1220 hours.

The domestic unit moved in a range of 63.68 and 63.64 in morning deals.

Overseas, the US dollar was higher in early Asian trade while the euro got off to a cautious start with Greece's fate still hanging in the balance.

Meanwhile, the benchmark Sensex rallied 198.05 points, or 0.71 percent, to 27,978.88 at 1225 hours.

Citi cuts base rate to 9.35%

Citi on Tuesday became the first overseas bank in India to lower base rate, which it slashed by 15 basis points to 9.35 percent, citing falling interest rates.

The US financial behemoth's action comes on the heels of lending rate cuts by its domestic peers like SBI, ICICI Bank and HDFC Bank.

The new rate, effective July 1, makes it the most competitive one among large lenders.

At 9.35 percent, the base rate is significantly lower than 9.7 percent offered by SBI, ICICI Bank and HDFC Bank. Axis Bank's offer comes at 9.85 percent, which it announced last week.

Citi attributed the downward revision in the base rate, or the minimum rate of lending, to "the falling interest rates reflected in lower deposit costs".

Since January this year, RBI has reduced the repo rate, at which it lends funds to banks, by 75 basis points but banks have passed only around 30 bps to customers so far.

SBI was the first off the block to lower base rate earlier this month (by 15 bps) after RBI Governor Raghuram Rajan, in the June 2 policy meet, asked banks to pass on the benefit to consumers.

HDFC Bank followed suit with a similar 0.15 percent cut to 9.7 percent and ICICI Bank brought down its rate by a marginal 0.05 percent last week.

The South-based private lender Lakshmi Vilas Bank, too, cut its lending rate today by 0.15 percent to 10.95 percent, as did Allahabad bank earlier last week, reducing base rate by 0.3 percent. 

Kotak Bank lowers base rate to 9.75%

The fourth largest private sector lender Kotak Mahindra Bank (KMB) on Wednesday cut its base rate by 0.10 per cent to 9.75, joining its larger rivals which have announced such downward revisions in the recent past.

"Kotak Bank has reduced its base rate from current level of 9.85 per cent per annum to 9.75 per cent per annum with effect from July 2," the city-based lender said in a statement.

The bank's executive vice-chairman and managing director Uday Kotak had last week hinted of a cut in the base rate. The new rate being offered by the bank is 5 bps higher than its larger rivals.

Larger players like ICICI Bank, HDFC Bank and Axis Bank have each announced two rate cuts this fiscal. The most competitive offering in the system is at 9.70 per cent.

SBI was the first off the blocks to reduce its base rate earlier this month after Rajan in the June 2 monetary policy statement urged banks to pass through the sequence of rate cuts into lending rates.

SBI had reduced its base rate by 15 basis points to 9.70 per cent. The second largest private sector lender HDFC Bank followed suit last week by slashing its base rate by 0.15 per cent to 9.70 per cent and ICICI Bank also tweaked its offering to match the leader.

Rajan, who has been pressing hard for the banks to transmit the 0.75 per cent cut in repo rate to the borrowers, 
has also warned bankers of dis-intermediation by other money market instruments where the rates are lower.

Banks are flush with liquidity and have not seen substantial rise in credit demand, which is forcing them to act on rates.