Q2 earnings, IPO listings, updates on US stimulus among top 10 factors guiding market this week

After a stellar performance last week which propelled investors’ wealth to an all-time high, the Indian equity market is now staring at an earnings-heavy week, as a slew of companies, IT majors in particular, unveil their September quarter report cards, and may provide a glimpse on what to expect in the current quarter and fiscal year.

Listings of Mazagon Dock Shipbuilders and UTI Asset Management Company (AMC) on Monday, may set the tone for the primary market going ahead.
Investors will also closely look out for updates on a second round of US stimulus, and also keenly await the Supreme Court verdict in the loan moratorium case.
Key IT majors such as Infosys, Wipro, HCL Technologies and Mindtree are due to announce their June quarter earnings in the week. The guidance ahead will be keenly watched. Hopes of a decent set of numbers have taken the centerstage after forecast-beating earnings by sector leader Tata Consultancy Services (TCS) last week.

While US President Donald Trump abruptly halted talks over a coronavirus relief bill on Tuesday, negotiations between the White House and Democratic congressional leaders have resumed. US House of Representatives Speaker Nancy Pelosi on Saturday said a new $1.8 trillion economic stimulus proposal from the Trump administration “amounted to one step forward, two steps back” and would need changes to get support from congressional Democrats.
Last week, Principal Economic Adviser Sanjeev Sanyal said the government recognises the need for further stimulus at an appropriate time to perk up demand in the Indian economy. Sanyal’s views followed Finance Minister Nirmala Sitharaman’s comments last week that the government may offer a second stimulus package.

Mazagon Dock Shipbuilders and UTI AMC are set to make their debut on the bourses on Monday. The grey market activity suggests a robust debut of PSU ‘Miniratna’ Mazagon Dock shares on Monday, while mutual fund firm UTI AMC may open flat to marginally lower from the issue price.

The Supreme Court is scheduled to hear the crucial loan moratorium case on October 13. In an affidavit, the Reserve Bank of India (RBI) said that it is not possible to give more relief to sectors affected by the coronavirus pandemic. The central bank said it is also not possible to extend the moratorium period beyond six months.
Market participants will closely watch the data of Index of Industrial Production (IIP) and Consumer Price Index (CPI), which is scheduled to be released on October 12. On October 14, the government will detail Wholesale Price Index (WPI) data for the month of September. India’s WPI increased 0.16 percent from a year earlier in August, after a 0.58 percent fall in the previous month.

On the global front, investors will be eyeing macro-economic reports from the world’s largest economy, United States, starting with core inflation rate, inflation rate on October 13 followed by PPI, Redbook on October 14, initial jobless claims, import & export prices on October 15, retail sales, industrial production, Michigan inflation expectations and Baker Hughes total rig count on October 16.

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This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.

TCS shares scale new high on buyback plan

TCS shares scale new high on buyback plan

Shares of Tata Consultancy Services (TCS) scaled a fresh record level in early trade Monday as company board said it will consider share buyback. The share price of India’s largest software services exporter was up 5.25% to Rs 2,655.90 apiece on NSE.
The company board will meet later this week, on October 7, to consider a share buyback proposal.
In the said meeting board is also going to consider its financial results for the September quarter and declaration of a second interim dividend to the equity shareholders.
The Tata Group company has initiated two equity share buybacks in the recent past, both of which were for an aggregate amount of Rs 16,000 crore, coming in 2017 and 2018. In 2018 the shares were bought back by TCS at a price of Rs 2,100 per share — a 14% premium to the stock price back then. TCS bought 7.61 crore equity shares back then. In 2017 the Rs 16,000 crore share buyback, saw TCS buy shares at a price of Rs 2,850 per share, again at a premium to the market value back then.
Decision on the buyback and the size of it will be known later this week when the company meets to discuss the financial performance for the previous quarter. It is believed that TCS has the potential to do a buyback of Rs 20,000 crore, which is 2% of its market capitalization.
TCS is expected to post a strong set of numbers in the quarter on the back of healthy deal wins and uninterrupted business.
Deal momentum has been strong across the sector in 2Q, and deal TCV is likely to be robust for TCS (Phoenix, Morrisons, Coop, and ABB), Infosys (Vanguard and ConEd), HCLT (Ericsson), Wipro (Marelli), Mphasis (RBS), and Mindtree (Husqvarna).
Along with Tech Mahindra, TCS is expected to post one of the strongest margin expansion in the second quarter when compared to the previous quarter.
Along with the equity share buyback proposal announcement, TCS would be providing Rs 1,218 crore as an exceptional item in the upcoming results. On August 20, 2020, the US Court of Appeals, 7th Circuit, Chicago, returned a verdict on the appeal filed by TCS, reducing the damages award. The Court held that the punitive damages award of $280 million is constitutionally excessive, vacated the punitive damages award and directed the Trial Court to reassess the punitive damages. The US Court upheld the compensatory damages award of $140 million.

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This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.

Markets week ahead: F&O expiry, IPO, border spat key drivers

India’s benchmark indices remained in a consolidation mood for a third consecutive week, though it managed to end marginally high as mixed global cues combined with lingering India-China border issue weighed on investor sentiment.
The broader market came into the limelight after a Sebi rule mandating multicap funds to invest equally in stocks across market-caps, as there was heavy buying in these pockets during the week. Midcap and smallcap indices gained 2-5%.

Thanks to a net Rs 5,276.50 crore inflow into the Indian equities, foreign institutional investment for the month has come back to the positive territory. In September till now, the equity market has seen an inflow of Rs 1,766 crore from the overseas portfolio investors. Along with debt market inflows, net investment during the month stands at Rs 6,259 crore.

The coming week will see three IPOs opening for subscription to raise a total of Rs 3,160 crore, a portion of which has already been collected from anchor investors. The offers for Chemcon Speciality Chemicals and CAMS will open on Monday while that of Angel Broking will open on Tuesday. Going by grey market interest, the issues are likely to get good buying interest from investors.

The RBI will release loan and deposit growth data for the fortnight ended September 11 on Friday. Traders will also keep an eye on the weekly forex reserve data that will be released on the same day, which will give an indication on the central bank’s stance on dollar buying from the market.
Investors will track any development in dozen-odd Covid-19 vaccine trials that are going on, which if completed successfully, will lead to an eradication of the virus. Meanwhile, India has been reporting nearly a lakh new cases every day, which is a grave concern for authorities.

On the global front, investors will await the Federal Reserve meeting outcome. The two-day meeting is expected to end Wednesday with minor tweaks to Fed’s statement and some clarity on how it plans to use forward guidance. The Fed also updates its economic and interest rate outlook, including forecasts for 2023 for the first time. Retail sales, jobless claims, housing starts, are other key data that will be eyed.

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This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.

Dhanuka Agritech fixes share buyback

Shares of Dhanuka Agritech rallied over 9% after the company’s board approved the buyback of equity shares at a final price of Rs 1,000 per share.
The company approved the proposal of up to 10,00,000 equity shares buyback worth up to Rs 100 crore and fixed September 28 as the record for determining the entitlement of equity shareholders.
Retail investors are unlikely to subscribe the buyback proposal given the Dhanuka Agritech’s asset-light business model, superior return ratios, and recent product launches are expected to drive growth.

In fact, the company is expected to perform better in the near future given the favourable monsoon forecast coupled with the addition of new products to the portfolio.
In the just concluded quarter, Dhanuka performed exceedingly well. For the quarter ended June 2020 (Q1FY21), the company’s consolidated net profit surged 253.03% to Rs 51.79 crore on 70.72 per cent jump in net sales at Rs 373.84 crore over Q1 June 2019.

Profit before tax (PBT) soared 234.02% to Rs 69.21 crore in Q1FY21 as against Rs 20.72 crore in Q1FY20.
As on June 2020, promoters held 75% stake in Dhanuka Agritech. Out of 25% public shareholding, mutual funds held 12.83% holding, followed by individual shareholders (8.57%) and overseas corporate bodies (1.41%).

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This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.

Markets week ahead: Momentum to continue; GDP data, Fed message eyed

MarkeIndia’s benchmark indices continued its unabated liquidity-driven up-move and ended yet another week with gains. The market remained less volatile than expected over the past five days as Nifty moved in a defined range of 275-odd points. The move, however, remained unidirectional as the index continued to move higher.
Banking and financial stocks grossly outperformed frontline indices. Despite Nifty’s relative underperformance, it still ended the week with a net weekly gain of 276 points, or 2.43%.

Overseas fund inflow played a key role in pushing indices higher and the surge was driven mainly by a huge gush of liquidity. Bank Nifty played a massive catchup as the index gained a massive 2,224 points, or 9.97%. Volatility, too, declined further, with INDIA VIX coming off 7.97% to 18.35 on a weekly basis.
Foreign portfolio investors (FPIs) bought shares worth Rs 1,164.32 crore, while domestic institutional investors (DIIs) were net sellers to the tune of Rs 809.27 crore in the Indian equity market on August 27, provisional data showed.

Given the current technical setup and the ongoing weakness in the US dollar, Nifty is likely to move higher and financial stocks should stay resilient along with other defensives.
In the event of any consolidation, the index is expected to stay within a broad range. Market participants will need to guard against any likely surge in volatility at higher levels.

September is historically challenging for the market, but stocks could start the month on an upswing.
Nifty is expected to see a stable start in the coming week. The 11,735 and 11,885 levels will act as key resistance points, while supports will come in at 11,410 and 11,330. Nifty is also likely to have a wider trading range on either side in the coming week.

India GDP data release, vehicle sales, will be watched keenly next week.
In US, the Fed speakers and economic reports, including the important August employment count Friday will be watched closely. Fed Vice Chairman Richard Clarida speaks Monday on monetary policy. He is is one of several officials, who are expected to reiterate Chairman Jerome Powell’s Jackson Hole message that the Fed would be willing to let inflation run hot temporarily to help the economy and job market.

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This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.

Redington India Q1 net profit falls 19%

Shares of Redington India climbed over 18% to Rs 111.40 on the BSE on Friday, a day after the company declared its financial results for the quarter ended June 2020 (Q1FY21). 
The company’s net profit declined 19.31% to Rs 88.78 crore during the quarter as against Rs 110.03 crore profit logged during the corresponding quarter of the previous fiscal.

Total revenue came in at Rs 10,722 crore, down 8.2% as against Rs 11,686.6 crore in the year-ago period.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at Rs 230.1 crore, down 6% YoY.
For the quarter ended March 2020 (Q4FY20), the company had posted revenue of Rs 4,403.10 crore as against Rs 4,691.93 crore in Q4FY19. Net Profit, however, was at Rs 177 crore against Rs 36.16 crore in Q4FY19.
Redington’s execution in spite of the lockdown-induced challenges is commendable. Although, the ProConnect profitability needs to be closely tracked, the overall business is well managed.

Considering the company’s improving return on capital employed (RoCE), its valuation at 6.1x FY21E earnings per share (EPS) is attractive.
Recently, Redington sold entire stake in its wholly owned subsidiary Ensure Support Services (India) to Accel. The deal is subject to required regulatory approvals.

Ensure is in the business of providing after sales support services like warranty and out-of warranty services independently and on behalf of Original Equipment Manufacturers (OEM) and other allied services. This business vertical is not strategic to the future plans of the Company and hence this divestment of 100% shareholding in Ensure.

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This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.

Markets week ahead: US stimulus, AGR verdict, Q1 earnings will guide markets

India’s benchmark indices head to a new week looking for cues in updates on a fresh US stimulus, outcome of US-China trade talks and, back home, the Supreme Court verdict on AGR dues and the state of coronavirus infections.
April-June quarter earnings from midcap and smallcap companies may also trigger stock-specific movement in a market which has already been seeing a shift in action to the broader market.

Benchmark equity indices Sensex and Nifty declined last week, hurt by worse-than-expected Chinese macro data, falling European markets, lacklustre macroeconomic data and concerns over rising coronavirus cases in India.
Frontline indices Sensex and Nifty dropped 0.43% and 0.32% respectively. However, the interest in mid and small cap stocks rose, with BSE mid and small cap indices logging 2.56% and 1.98% gains, respectively.

Meanwhile, the Covid-19 pandemic crossed another grim milestone as India reported 63,489 new coronavirus cases, taking the total tally at 25.89 lakh. The death toll from the virus went past 50,000 on Saturday. Over 13,500 deaths have been reported from across the country so far this month. By contrast, the whole of July saw a total of 19,122 fatalities.

The next Supreme Court hearing of the adjusted gross revenues (AGR) case for telcos is scheduled for August 17. The apex court, in its hearing on August 14, directed telcos under insolvency to submit details of spectrum sharing agreements that they have entered into. The court has also asked for the spectrum sharing agreement between Reliance Communications and Reliance Jio to be placed on record.

Investors will also watch out for the foreign exchange reserves data slated to be released on August 21. Foreign exchange reserves in India increased to $534570 million in July 31 from $522630 million in the previous week.
On the global front, investors will be eyeing macro-economic reports from the world’s largest economy, United States, starting with Foreign Bond Investment, Overall Net Capital Flows on August 17 followed by Redbook on August 18, FOMC Minutes on August 19, Philadelphia Fed Manufacturing Index, Initial Jobless Claims on August 20 and finally Markit Manufacturing PMI Flash, Existing Home Sales andBaker Hughes Total Rig Count on August 21.
FII were net buyers in the equity segment last week, with gross purchases of Rs 41,926.41 crore and gross sales of Rs 23,620.90 crore, leading to a net inflow of Rs 18,305.51 crore.

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This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.

HAL: Flying high

Shares of Hindustan Aeronautics (HAL) rallied as much as 5.8% and hit fresh 52-week high of Rs 1,078 on the BSE on Wednesday after the Ministry of Defence (MoD) on Tuesday approved the acquisition of ‘Make in India’ equipment worth Rs 8,722 crore.
Of this, bulk will go towards purchasing the first fixed wing aircraft that HAL has designed and developed in decades.
The Defence Acquisition Council (DAC), in its meeting held [with] Defence Minister Rajnath Singh, accorded approval for capital acquisitions of various platforms and equipment required by the Indian Armed Forces.

During this meeting a proposal for an approximate cost of Rs 8,722.38 crore were approved. With prototypes and certification process underway, the DAC approved procurement of 106 basic trainer aircraft (BTA) from HAL to address the basic training requirements of the IAF. Post certification, 70 BTA will be initially procured from HAL and balance 36 after operationalisation of HTT-40 fleet in IAF.

HTT-40’s cost has been fixed at approximately Rs 50 crore, which means the acquisition cost of the entire fleet will come to about Rs 5,300 crore. The IAF was pushing for the acquisition of 38 more Pilatus PC-7 Mark II basic trainers from Switzerland, to supplement its existing fleet of 75 aircraft. However, HAL’s rapid success in developing the HTT-40 has ensured that the additional BTAs will all be Indian.
HTT-40 is in the final stages of spin trials, the make-or-break capability demonstration for a basic trainer. Production planning for building the trainer is already underway.

On August 9, MoD had announced a phased, year-wise embargo on the import of 101 items of defence equipment, invoking the Prime Minister Narendra Modi’s Atmanirbhar Bharat (Self-Reliant India) initiative.
The embargo list is expected to enable estimated Rs 4 lakh crore worth of contracts, that would be placed to the domestic industry over the next five to seven years. This comes to average contract of Rs 57,000 crore to Rs 80,000 crore per annum. This would provide significant thrust to defence manufacturing companies in scaling up their production capabilities in long term.

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This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.

IDBI Bank agrees to sell insurance arm stake; signs SPA

IDBI Bank, the state owned lender will receive up to Rs 595.30 crore from the sale of up to 27% stake in its joint venture arm, IDBI Federal Life Insurance Company (IFLI), valuing the insurance arm at Rs 2,205 crore.
The lender has entered into a Share Purchase Agreement (SPA) with Ageas Insurance International NV and Federal Bank on August 5, whereby it has agreed to sell up to 27% stake in IFLI.
The transaction is expected to be completed by the end of Q3 (October-December) FY 2021, subject to regulatory approvals and satisfaction of the terms and conditions set out in the SPA.
Ageas Insurance and Federal Bank are IDBI Bank’s existing JV partners in IFLI.

As per the said agreement, while 23% stake would be sold to Ageas, Federal Bank would acquire up to 4% stake in IFLI from IDBI Bank.
The transaction would be concluded subject to regulatory approvals.
For 23% stake sale to Ageas, the bank will receive Rs 507.10 crore. For up to 4% stake sale to Federal Bank, IDBI Bank will receive up to Rs 88.19 crore.
Ageas will increase its stake in IFLI to 49% while that of Federal Bank’s will go up to 30%. Post-stake sale, IDBI Bank will hold 21% stake in IFLI.

IDBI Bank is required to reduce stake in insurance arm following the Life Insurance Corporation of India (LIC) acquiring 51% controlling stake in the lender during the financial year 2018-19.
The process of acquisition was completed on January 21, 2019, with LIC being re-classified as promoter of the Bank (with management control) and Government of India continuing to be the co-promoter of the Bank (without management control).

As per insurance regulations, an insurer cannot own more than 10% stake in another insurer. Since LIC owns 51% stake in IDBI Bank and the latter owns 48% stake in IDBI Federal Life Insurance Company, the lender has to divest its stake in its insurance joint venture.
Since IDBI Bank will continue to hold more than 10% stake even after the current round of divestment in IFLI, the lender and its promoter LIC may have to seek dispensation from the insurance regulator in this regard

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This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.

Alembic Pharma approves QIP issue

Local drug maker Alembic Pharmaceutical has received a go ahead from the fund raising committee to launch qualified institutional placement (QIP) at Rs 980.75 apiece. The issue price is at 0.44% discount to Monday’s close.
It is not allowed to offer a discount of not more than 5% on the floor price, as per SEBI regulations. The indicative price for the same is Rs 932 per share which is a 5.4% discount to Monday’s close.
The drug makers board will meet on August 6 to consider the issue price. The issue size is tentatively Rs 650 crore with a green shoe option of an additional Rs 100 crore.
Retail investors may take this opportunity and subscribe for the issue considering the price and growth prospect of the drug maker.

Monarch Networth Capital is the lead manager to the issue.
Meanwhile, Alembic Pharma posted robust results for the June 20 quarter. Profit more-than-doubled to Rs 301 crore from Rs 124 crore in the June 19 quarter on account of strong revenue growth in the US market. Sales grew 41% to Rs 1341 crore from Rs 949 crore.
The drug maker has three research and development (R&D) facilities — two in India’s Vadodara and Hyderabad, and one in the US.

The company has six formulation and three active pharmaceutical ingredient (API) manufacturing facilities.
Five formulation production units in Gujarat are located near Vadodara, three at Panelav and two at Karakhadi. This apart, one facility is located in Sikkim.

The company currently manufactures general oral solids in Panelav and is in the process of putting up oncology oral solids and oncology injectable facilities at the same location.
Besides, two API manufacturing plants located at Panelav and one at Karakhadi.

Disclaimer –
This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.