- Sona Comstar’s ₹5,550 crore IPO subscribed 27% on day 2. At a price band of ₹285-291, the IPO of the company is roughly valued at 76 times one-year forward earnings, making it one of the most expensive issues to hit the primary market in recent times. Analysts said Sona BLW is a play on the electric vehicle theme. They said while the IPO valuation appears rich but the auto component maker is a consistent performer. They are bullish on the counter.
- Ruchi Soya said that it has acquired the biscuits business from Patanjali for ₹60 crores and under the agreement, it is required to pay the balance 75 percent of the consideration for acquiring the business to its promoters within three months from the sale that took place in May. Ruchi Soya is aiming to raise ₹4,300 crores from a follow-on public offer. The company plans to use ₹2,663 crores for repayment of the company’s borrowings and ₹593.4 crores for working capital. The remainder of the proceeds will be used by the company for general corporate purposes.
- India’s exports rose by 69.35% to USD 32.27 billion in May, driven by healthy growth in sectors such as engineering, petroleum products, and gems and jewellery, even as the trade deficit widened to USD 6.28 billion, the lowest in 8 months. Imports in May were up 73.64% year-on-year to $38.55 billion. Exports to USA, UAE & Singapore recorded the highest jumps. Exports of engineering, petroleum & gems & jewelry were worth $8.64 billion, $5.33 billion & $2.96 billion respectively.
- The Pension Fund Regulatory and Development Authority (PFRDA) also increased the maximum age of entry into the National Pension System (NPS) from 65 to 70. The exit age limit has also been extended to 75 years. The regulator has allowed subscribers to withdraw the entire accumulated pension wealth without purchasing an annuity if the pension corpus is less than ₹5 lakh. Currently, NPS subscribers having a corpus of over ₹2 lakh at the time of retirement or attaining the age of 60 years need to buy an annuity, offered by insurance companies, on a mandatory basis.
- Tata Motors Limited announced on Monday that it will raise ₹500 crores by offering 5,000 Non Convertible Debentures (NCDs). The face value of the security is ₹10 lakh each. The date of redemption for these NCDs is May 29, 2026, with the period of maturity being 1,808 days. The interest will be payable annually and on redemption. These will be offered on a private placement basis and are rated, listed, unsecured and redeemable.
- Reliance Jio has commenced 5G trials in Mumbai as it races with rival Bharti Airtel to introduce mobile technology in India. While Jio’s trials in Mumbai are being carried out using indigenously developed technology, the company has tied up with multinational vendors, including Ericsson, Nokia, and Samsung for trials in Delhi, Pune, and Gujarat.
- The annual retail inflation rate rose 6.30% year-on-year in May, up from 4.29% in April and sharply above analysts’ estimate of 5.30%. The wholesale price inflation rate rose 12.94%, its highest in at least two decades. India’s economy grew 1.6% in the March quarter compared with the same period a year earlier, but that was before a massive second wave of infections hit the country which prompted fairly stringent lockdowns across most states causing another round of job losses and a significant dent to demand.
- ICICI Bank raises ₹2,827 crores by issuing bonds on a private placement basis. The bonds carry a coupon of 6.45% per annum payable annually and were issued at par. The allotment date is June 15, 2021. The redemption date of the bonds is June 15, 2028.
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Cyclical sectors are directly affected by the economic cycle of a country. So when the economy goes up, prices for these cyclical stocks also tend to go up & when the economy turns down, their stocks prices tend to fall. Few examples of these sectors- cement, steel, automobile manufacture, financial services, hotel industry, airlines.
Current Economic outlook
- In its latest edition of World Economic Outlook, IMF said it expects India’s GDP to grow 12.5 per cent in FY22, the highest among emerging and advanced economies. India is the only country expected to register double-digit growth this fiscal.
- Positive FII inflows of Rs. 41,143 Cr (Jan21 to 4th May 2021)
- As per India Meteorological Department (IMD), the 2021 southwest monsoon starting in June is expected to be normal at 98 per cent of the Long Period Average (LPA).
- As per a private weather forecasting agency, Skymet had made a similar prediction that the southwest Monsoon would be normal at 103 per cent of the LPA. Rainfall between 96 and 104 per cent of the LPA is considered normal.
- Both IMD and Skymet predictions come with a model error of plus and minus 5 per cent.
- A good monsoon will mean another year of bumper farm production and cascading positive impact for the economy battling Covid-19 infections. If the forecast comes true, this will be the third consecutive year of normal or above-normal monsoon
Low Interest Rates
- After lowering the rates by 115 points since the virus hit, the RBI(Monetary Policy Committee) in its last meeting maintained a status quo. The current Repo Rate is 4%.
Mutual Fund witnessed high exposure of few industries in the cyclical sector-
- Mutual Fund companies have increased their hold on the cyclical sector recently. They have increased their exposure to the auto sector to 6%, NBFCs 8.8%, cement 3.3%, real estate 0.7%, chemicals 3%, & infrastructure 0.5% in FY 21.
When to Invest Money in Cyclical Stocks
When the government is undertaking a major capital spending thrust.
We have seen Budget’s Thrust for Capital Expenditure. Union budget has allocated The proposed capital expenditure in the budget is ₹5.54 lakh crore, which, as per the finance minister’s budget speech, is 34.5% higher than the capital expenditure proposed in the previous budget. The budget proposes to invest in national highways and roads, railways, urban infrastructure, port, shipping and waterways and petroleum and natural gas.
When the Metals, Infrastructure & Cements are seeing the start of a super cycle
Steel and cement, two capital-intensive sectors that are crucial for building hard infrastructure, are witnessing better sales since October. That could boost margins and growth outlook for the companies in these sectors, which are benefiting from a quicker-than-expected pickup in construction, rural consumption and a visible sales revival in the automotive industry. Analysts expect a 10-20% year-on-year rise in demand in the second half (H2) of FY21
When there is any outrage
Due to the current COVID situation, People are concern regarding the safeguard of health and life insurance as seen in the past Quarter. Also in the recent budget, FDI is increased to 74% from 49%. The financial services sectors look positive.
The crux is that cyclical stocks are largely dependent on economic growth. When the combination of investment and growth is in their favour, these cyclical stocks can give humongous returns in a very short period of time. That is what makes these cyclical stocks very critical from a portfolio point of view.
- Shares of Signal Advance INC. spiked up by almost 600% in two days. This is because the Twitter followers of Elon Musk misunderstood his advice of using signal messaging app as investing in the shares of Signal Advance Inc.
- Avenue supermarkets reported or 16% year on year rise in the consolidated net profit of DMart for the December quarter. The total revenue for the quarter came to Rs. 7542 crore which is almost 10.76% over its year-ago quarters which was Rs. 6809 crores. The possible reason for this performance he compared to the previous 2 quarters could be an agile operating expenses management along with a good search in festival shopping allowed.
- The government is considering easing the NPA non-performing assets classification. 2 between 120 -180 days up from 90 days. This has been taken with an objective to provide relief to the industry and smaller businesses in the light of COVID-19. this will not only help the companies pay interest in time but also the banks maintain their capital adequacy ratios even with the COVID-related defaults.
- The Department of Revenue has now mentioned that any purchase of gold, silver, jewelry all precious gems, and stones below Rs. 2Lakh does not require PAN or Aadhar of a customer as a mandatory KYC document.
- Due to the loss of excessive expenditure due to the Coronavirus pandemic the government is in talks to introduce a new COVID-19 cess on taxpayers who fall under the high-income bracket. it might also be imposed on some indirect taxes. COVID-19 cess will allow the government to quickly generate funds as opposed to raising taxes. The generated funds could help the government in the planned COVID-19 inoculation drive, the distribution, manpower, training, cost of vaccination, etc.
- Equity markets scaled lifetime highs in November lead by optimism over the COVID-19 vaccine and surging inflows to emerging markets. The mutual funds industry too reached a new milestone with AUM touching Rs. 30 trillion as of November. While this is impressive, equity inflows were disappointing.
- Investors pulled around Rs 13,004 cr from equity funds in November which is three times higher than the previous month. However, in the past five months, gross inflows/ subscriptions into equity funds have hovered around Rs. 14000-17,000 crore a month.
- Amazon is evaluating a potential investment of nearly $100 million (Rs. 737 crores) in India’s largest branded pharmacy chain Apollo Pharmacy. This is Amazon’s way to enter the Indian Pharmacy segment as they will gain access to Apollo’s front end pharmacy business with over 3,700 outlets from where medicines can be delivered to consumers’ doorsteps.
- This will give the American giant a major foothold in the country’s burgeoning e-pharmacy market where rivals such as Reliance Industries and the Tata Group are also making a play.
- JSW Steel’s crude steel production for the month of November 2020 rose by 3% and was at 13.32 lakh tonnes. JSW Steel has recorded a 7% year-on-year rise in crude Steel production for the month of October 2020 at 13.38 lakh tonnes. The company faced troubles due to a shortage of Iron ore in November 2020 to achieve higher capacity utilization.
- The steel industry is witnessing an acute iron ore shortage, one of the significant raw materials for making steel. Amid a sharp increase in iron ore prices, along with an improved domestic demand, Indian steel mills have hiked steel prices by around Rs 2500 – 2700 per tonne on the 1st of December. Newly acquired iron ore miners are yet to ramp up production leading to a supply shortage of iron ore.
- Standard & Poor’s (S&P) Global Ratings has revised Tata Steel and its Singapore-based subsidiary ABJA investments’ outlook to stable from negative on the back of solid earnings rebound. Tata Steel expects to sustain solid earnings over the next 12 to 18 months following a rebound in the second quarter of fiscal 2021, helped by a supportive steel price environment and lower input costs.
- Jaguar Land Rover Automotive Plc is raising $500 million via an overseas bond sale as it seeks to reduce funding costs and meet its business expenditures. The company has launched the high-yield issuance, which will have about seven-year maturity at a funding cost, estimated 100 basis points lower than its previous sale in October, banking sources told ET. The initial yield guidance is expected to be around 6.75 percent.
- Nokia has started the production of 5G equipment in India and the equipment is being shipped to countries that are in advanced stages of deploying the next-generation technology. The roll-out of 5G services in India is dependent on spectrum auction as telecom operators need suitable wireless frequencies to start 5G in the country. Nokia was the first to manufacture the 5G New Radio in India, and it is now producing the cutting-edge Nokia AirScale massive Multiple Input Multiple Output (mMIMO) solutions
- Among the local giants, Reliance Jio has plans to launch 5G services in the second half of 2021, Reliance Industries Chairman Mukesh Ambani said on Tuesday. It will be powered by an indigenous-developed network, hardware, and technology components. India is today among the best digitally-connected nations in the world, Ambani said, but there are 300 million phone users “trapped” in 2G and there is a need for policy intervention to bring to them smartphones that are capable of doing digital transactions. According to the company, the market is growing by leaps and bounds and shows immense potential.
- India’s top air conditioner manufacturer, Tata Group company Voltas hinted that it might hike the prices to offset the rising commodity prices. However, it is waiting for demand to improve. This decision of hiking the prices may be further expedited by the fear of the Indian government raising the import duty after the recent tensions with China. The company said it would need a 3-4% price hike after it finds an alternative source of raw material domestically
● The arrival of a prospective Pfizer and BioNtech vaccine might affect the dollar rates
negatively. The Dollar being the safe haven for many investors and savers in times of stress
will sink down by 3-6 percent as an economic rebound tends to occur. This is because, with
the introduction of the vaccine, there will be greater confidence in the global economy
encouraging investors to select riskier bets to make money.
● Vodafone Idea (Vi) has acquired 3,760 Crore from the sale of the 11.15% stake in Indus
towers. The company plans to invest this sum to the entity created after the merger
between the tower firm and Bharti Infratel. The merged entity, Indus towers Ltd, will be one
of the world’s greatest telecom tower corporations and will be headed by Bimal Dayal
as the MD and CEO.
● The US plans to implement a digital tax on the usage of Internet websites like Google,
Facebook etc. for Italy, Austria, and India by next year. It also plans on introducing this tariff
for other countries like Brazil, the Czech Republic, Indonesia, Spain, Turkey, the U.K. and the
European Union bloc. Without an OECD deal, countries are pressing forward with
implementing their own versions of the taxes, which could result in a world-wide retaliatory
tax and tariff war between the U.S. and countries that want a share of the taxes from
American tech giants’ revenue.
● Lakshmi Vilas Bank (LVB) investors are planning to approach the Reserve bank of India to
oppose its decision to amalgamate LVB and DBIL (DBS India Ltd) as the former is
experiencing a crisis. The investors have requested the RBI to consider other options for the
resolution of the stressed lender, including a bidding process from prospective suitors. In
addition, this amalgamation is also opposed by the Public sector banks’ officer union AIBOC,
saying it is not in the national interest and demanded consolidation with any PSB.
● ICICI Bank has introduced a new fully digital mode of payment called “Cardless EMI”. This
allows its pre-approved customers to buy gadgets and home appliances by using their
mobile phone and PAN rather than their wallet or cards. The bank has tied up with Pine labs
in order to provide this service to pan-India outlets of retailers like Croma, Reliance Digital,
My Jio Stores, and Sangeetha Mobiles. Customers can purchase electronics from brands like
Carrier, Daikin, Dell, Godrej, Haier, HP, Lenovo, Microsoft, Motorola, Nokia, Oppo,
Panasonic, Toshiba, Vivo, Whirlpool, and MI.
● The sale of new homes in Mumbai and other parts of Maharashtra has risen almost 1.1-1.3
times compared to January this year. A possible reason for this spurt could be the reduction on
stamp duty, from 5 to 2 percent up to December 2020, and to 3 percent from January to
March 2021, by the government. This has been a major contributor to increased
- Ecommerce Giant Amazon and Walmart owned Flipkart Group had a separate discussion with Aditya Birla Fashion & Retail (which owns brands like Pantaloons, Allen Solly & Peter England) to acquire a minor stake. According to the sources, offline retailers specifically in the fashion & apparel segment, have been severely hit by the covid 19 pandemic & the resulting lockdown.
- Bharat Biotech- a Hyderabad based Indian company has received approval for the final round of trials of Covaxin. 25,000 people are inclined to enrol for the trial in India and they will be given two doses of the experimental vaccine 28 days apart. Preliminary results from the Covaxin trials have shown promising results.
- Gland Pharma gets Sebi’s approval for Rs.6,000 crore IPO- first listing of an Indian firm with a Chinese parent. It may launch the IPO in November 2020. The IPO is a mixture of primary & secondary issue of shares with both China’s Fosun Group and the founders of Gland Pharma due to dilute shares. A series of IPOs have been launched in recent months, but no pharma company has listed for more than 3 Years. The last IPO by an Indian drugmaker was Eris Lifesciences in June 2017.
- HDFC deposits rates fall to lowest in 43 years. Deposit rates on a 66-month investment fell 20 basis points to 6.25%. A year ago, an investor could earn 7.75% On a deposit with similar tenure.
- Highway builder Dilip Buildcon said its joint venture has emerged as the lowest bidder for a stretch of the Delhi-Vadodara expressway in Rajasthan. The company had bid Rs. 1,000.08 crores for the project to be executed under Bharatmala Pariyojna.
- One of the richest men & owner of the $48 billion conglomerate spread across 34 Countries, billionaire Kumar Mangalam Birla is pleasantly surprised by the comeback In infrastructure. The reversal of fortunes in the second quarter can be explained by what’s happening in rural India. It started with migrant workers hustling back to their villages & hometowns as daily work dried up amid lockdown. People are now building a new home, they are adding one more room to their existing houses out of safety- Just in case they have to stay at their homes for longer. Production saw a massive dip of 86% in April, since then it has shown a V-shaped recovery in the sector. Ultra Tech Cement- a subsidiary of the Aditya Birla Group has shown a 113% rise in net profit in their second-quarter results.