3 Years after exit, SoftBank looking to reinvest in Flipkart
SoftBank Vision Fund has held discussions with Flipkart to invest around $600-700 million, three years after the Japanese group exited the Indian online retailer by selling shares to Walmart Inc. This would mean that Flipkart will stay on as a private company for longer than what was being earlier talked about going Public early next year.
Flipkart is pushing to build an ecosystem in order to compete with Amazon, Reliance and the Tata Group. While it leads in fashion e-commerce with Myntra. Online payments player PhonePe, which was a part of the Flipkart Group, was spun off from the e-commerce company last year. In April, the online retailer acquired Cleartrip to strengthen its presence in the travel and hotel booking space. Last year, Flipkart invested ₹1,500 crore to pick up nearly 8% stake in brick-and-mortar fashion retailer Aditya Birla Fashion and Retail Ltd (ABFRL) and also bought a 27% stake in Arvind Fashions’ subsidiary Arvind Youth Brands. Other recent investments include Shadowfax, a logistics startup and Ninjacart, a fresh produce supply chain company.
If the deal materialises, it will be a big move by SoftBank in India’s e-commerce market, which it has reordered with massive cash infusions.
DMart acquired as many as seven properties worth ₹400 crore
DMart goes on a property acquisition spree during COVID-19 as the company looks to increase its footprint by taking advantage of the subdued real estate prices. The company has the same ideology as that of McDonald’s that is instead of leasing the property it purchases the property in this way the Assets of the company increases and also the ecosystem that it will build near its property increases the value of the property multifold times. DMart has increased its presence in places such as Mumbai, Hyderabad, Pune and Bengaluru with the recent property acquisition.
Rossari Biotech to acquire Unitop Chemicals
Rossari Biotech a specialty chemicals company on Wednesday announced that it will acquire Unitop Chemicals, a supplier of surfactants, emulsifiers, and specialty chemicals, for ₹421 crores. Rossari will be acquiring 100 percent of the equity capital of Unitop Chemicals. The acquisition will be done on an all-cash basis as the company concluded a preferential issue of equity aggregating to ₹300 crores to augment the strength of its balance sheet. In this way, the company won’t be adding any additional debt to its book and would just use the money raised from equity to fund its acquisition.
This acquisition will bring complementary dimensions to Rossari Biotech and help expand its product portfolio, presence in adjoining areas of specialty chemical segments, pooling together of related technologies, larger international exposure, better domestic market reach, well-experienced and competent talent pool, and increased end-user industry applications.
RBI’s Monetary Policy Committee meeting
India’s Monetary Policy Committee meeting announced that the panel is maintaining repurchase rate unchanged at 4%. The RBI expects the economy to expand 10.5% in FY2022E, and its view on GDP growth rate after a slew of recent high-frequency indicators showed a hit to activity will be key to watch out for. RBI’s current reading is underpinned by expectations of a normal monsoon, a return of pent-up demand once lockdowns end and an improved pace of vaccination. A rise in input and wholesale costs due partly to supply disruptions caused by the pandemic are beginning to feed into retail inflation — the measure targeted by the RBI to decide its monetary policy setting. That could nudge the central bank to revise its forecast, which is pegged at 5.2% for H1 FY2022, 4.4% for the Q3 FY2022E and 5.1% for Q4 FY2022E.
Model Tenancy Act
The Centre on Wednesday had approved the Model Tenancy Act(MTA), 2021 with a provision to set up district-wise rental courts, authorities and tribunals across the country for adaptation of enacting fresh legislation or amending existing rental laws.
India has over 1 crore units which are lying unutilised, and the number may be much higher now. The MTA will unlock vacant houses for renting purposes and promote private participation in addressing the housing shortage. This move will be a big boost for the rental housing space in India.
Balanced Advantage Funds have cut their exposure to Equity
Fund Managers have reduced their equity stake in Balanced Advantage Funds as they see that the valuations of the companies are no longer cheap and the current bullish run of the market is due to the excess liquidity present in the market. Fund managers feel that there is a bubble in the market which would bring a correction in the market. Most of the fundhouses have reduced their stake towards equity to approximately 30-35% of the total portfolio and are currently sitting on cash reserves.
Tesla preparing its India arrival
The EV makes is closely following changes in GST that may reduce the cost of owning an electric car. Tesla is recruiting its India leadership and senior-level roles as it gears up to break into one of the world’s emerging car markets. Tesla has picked up Karnataka to set up its first plant. Under PLI manufacturing incentive will keep on rising. Major pushback for Tesla will be the major middle-class population and lack of charging infrastructure.
Mercedes-Benz’s out of the box thinking
The most successful luxury brand in the country has plans to stay at the top, even as a pandemic has taken a toll on its business in the country. The German luxury carmaker with its new ROTF (Retail of The Future) model will be a direct D2C business model, the company will have franchise partners in India and under the new model, they will have a low market and investment risk. The company will own the entire stock of cars so it will be invoicing cars to customers directly, the franchise will be responsible for sales, customer relations, and lead generation. Not owning the inventory, the franchise partners will have access to centralized stocks owned by the company, this will help the customer with more options on the model, variant, and color of their preference and no longer limit their choice to inventory available at the franchise only. Customers can avail best prices from the company itself under the new model, the model is expected to start from a quarter of CY 2021. As of now, it seems like a masterstroke by the company to stay ahead of the competitors and increase market share.
Pent-up demand coming soon – Electronics, Mobile & Auto
Consumer electronics, smartphones, and auto companies are raising production this week after plants were shut for more than 2 weeks on the back of rising covid cases. Companies are expecting sales to normalize soon as pent-up demand comes into play. Companies to track Maruti, Tata Motor, M&M, Bajaj auto, hero moto.
Radico Khaitan Ltd – Good times ahead
The company reported a 2-fold jump in profit for Q4. Strong demand led to a 30% rise in revenue to 2881.19 crores compared to last where it stood at 2209.11 crores. The company experienced YoY growth in most markets they perform, despite the pandemic company reported strong earnings expansion. For a full year companies net profit rose by 20.96%, revenue rose to 10.08%. For the first time sales have crossed 10,000 crores. Unlike last year’s partial and localized lockdown, this year has not disrupted the company’s business. Plants running at optimum capacity and the company declared a dividend of 2.40 per equity share
Motherson Sumi Robust Q4
The share price rallied by 13% on the back of splendid Q4 performance. Net profit rose to 713.62 crores compared to 183.38 crores. Revenue rose by 17.57%, EBITDA by 38.7%, and margin by 10.1%. Dividend of 1.50 per equity share declared. Semiconductor shortage globally is likely to a headwind for OEM productions. Vivek Chand Sehgal (chairman) Q4 results are a reflection of our hard work that our teams have put in globally and sets the tone for us to achieve our Vision 2025 targets.
India walking the talk on Ethanol blending
The government has set up a target of 10% ethanol blending in petrol by 2022 and 20% ethanol blending in petrol from 2025 to 2023 which will help reduce the country’s dependence on costly oil export. This will be another big boost for the sugar industry after the failed crop season in brazil. The sugar industry will divert 6 million tonnes of surplus sugar to produce 7 billion liters of ethanol.
Snowman Logistics Ties-up with Dr. Reddy
The company announced a strategic partnership with Hyderabad-based Dr. Reddy’s to provide temperature-controlled end-to-end logistics solution for delivery of two dose sputnik covid-19 vaccine across India. This will give a huge boost to the company’s earnings and possibly more tie-ups with global vaccine manufacturers for delivery across India.
Reliance Industries Ltd share prices may jump 45%, which are already up 10% in 3 days
The rally in RIL share may continue if current Petrochemical spreads sustain, this will result in Re-Rating of Oil to Chemical stake sale by RIL, which may drive the stock price up by 45% from current levels.
The polymer spreads are at decade highs, helped by strong downstream demand from industries like Auto,Durables,Consumer Goods,Packaging and Medical supplies.
RIL share price has underperformed since the beginning of the year, with Nifty up 10.8% and RIL shares up only 8%. The sustained strong growth of petrochem performance will improve the stock performance as well, with Jefferies having a Target price of Rs.2580 and an optimistic target price of Rs.3150.
Carlyle Group to acquire a controlling stake in PNB Housing Finance
Private Equity firm Carlyle Group will acquire a controlling stake of more than 50% in PNB Housing Finance for Rs. 4000 crore.
The transaction is expected to be completed by 1st Jan 2022 and the Carlyle group will have the right to nominate the chairperson of PNB Housing Finance.
The Carlyle Group will own 50.2% stake through 2 of their entities namely Pluto Investments & Quality Investment holdings.
PNB will continue to be the promoter and a key stakeholder, till 31st March 2021 it held 32.65% stake,which will reduce to 20.3%.
Aditya Puri former MD of HDFC Bank will infuse capital of 25 crores into PNB Housing Finance for a stake of 0.2% through Family investment firm Salisbury Investments.Since this news the stock was up 20%.
The Carlyle Group has invested more than $1.7 billion of equity in 8 financial services companies as of March 2021, and $3.2 billion in India overall.
Auto Sales hit in May 2021 due to lockdown
Auto sector has been hit by the second wave and lockdowns across states.
Market Leader Maruti Suzuki reported 71% decline in sales in the months of May, along with them, Mahindra & Mahindra also reported 52% drop and Hyundai sales also declined by 48%.
Sales of Tractors, Private Vehicles, Commercial Vehicles and 2 Wheelers are going to be affected by the current lockdown like restrictions.
Tractor volumes are low since some rural areas are severely affected, Personal Vehicle and 2 Wheeler sales will likely be slow, along with that Commercial Vehicle volumes will be affected due to lower freight availability which will result in postponement of new orders.
Oil extends gains on OPEC supply discipline and demand prospects
Oil prices increased with OPEC sticking to cautiously bringing back the soil supply in the market in June and July, with the expectations of robust recovery in the USA and China the world’s 2 biggest oil consumers.
Brent Crude price is at $70 currently, after solid demand from USA and China, also the vaccine rollouts will only help to further rebalance the global oil market.
The producer group will return to 7 million barrels per day in June and 8.4 million barrels per day in July.
The ongoing talks about sanctions between Iran and the USA have hit a roadblock this week and it is unclear if they will be restored before Iran’s presidential elections on June 18, which will provide room for the demand to catch up.
India’s GDP grows 1.6% in fourth quarter, contracts 7.3% in FY 20-21
Amid the coronavirus pandemic, India’s gross domestic product (GDP) grew at 1.6% in the January-March quarter of fiscal year 2020-21, but witnessed a contraction of 7.3 per cent for the entire fiscal year.
This is the first full-year contraction in the Indian economy in the last four decades since 1979-80, when GDP had shrunk by 5.2%. This is also the second straight quarter of expansion since India exited a rare recession.
India’s GDP figures showed the growth at 3% in Q4 of FY20, while growth for FY20 came at 4%, an 11-year low.
Sector wise Q4 FY20 GVA Growth Analysis:
- “Manufacturing sector”- accelerated to 6.9% in Q4 FY20 compared to a contraction 4.2% a year ago.
- “Farm Sector”- down at 3.1%, compared to 6.8% a year ago.
- “Construction Sector”- grew by 14.5% from 0.7% a year ago.
- “Mining Sector”- shrank by 5.7 per cent, as against a contraction of 0.9% a year ago.
- “Electricity, gas, water supply and other utility services Sector”- grew by 9.1%, against 2.6% expansion a year ago.
- “Trade, hotel, transport, communication and broadcasting services Sector”- contracted by 2.3% from 5.7% growth earlier.
- “Financial, Real estate and Professional services Sector”- grew by 5.4% from 4.9% growth a year ago.
- “Public administration, defence and other services Sector”- growth fell to 2.3% from 9.6% a year earlier.
RBI Governor-led Shaktikanta Das Monetary Policy Committee, in its first bi-monthly monetary policy review for FY21, retained its GDP growth projection at 10.5% for FY21.
The economy, which was facing a slowdown even before the pandemic, now confronts a crash of consumer demand – constituting over 55% of the economy – as household incomes and jobs have declined. Unemployment soared to a near one-year high of 14.73% in the week ending May 23, according to the Centre for Monitoring Indian Economy, a Mumbai-based private think tank
Finance Minister Nirmala Sitharaman, who said on Friday that “no decision has been taken for another stimulus package”, has limited space due to a fall in tax collections and rising public debt.
11 year low growth in GDP, one-year high unemployment of 14.73%, no signs of stimulus package from government due to falling tax collections & rising public debt, seems to worsen the situation going forward for next year. Though GDP growth in Q4 has given hopes & experts are still positive while making optimistic Growth projections for the upcoming year.
Government approves four firms under PLI scheme for bulk drugs
The government has given approval to four waitlisted firms under the Production Linked Incentive (PLI) scheme for domestic manufacturing of bulk drugs.
The companies which have been given approval are — Solara Active Pharma Science Ltd, Rajasthan Antibiotics Ltd, Dhatri Lab Pvt Ltd and Vital Laboratories Pvt Ltd.
It envisages setting up greenfield plants in four different target segments with a total outlay of Rs 6,940 crore for the period 2020-21 to 2029-30.
The “PLI scheme” was launched by Department of Pharmaceuticals for promotion of domestic manufacturing of critical bulk drugs- KSMs/APIs. With this, a total of 46 applications with committed investment of Rs 5,355.44 crore and expected employment generation of about 11,210 have been approved by the government so far under the PLI Scheme for Bulk Drugs. Setting up of these plants will make the country self-reliant to a large extent in respect of these bulk drugs
“Solar active Pharma science Ltd.” is the only listed company out of the 4 approved companies. Due to the approval by the government under PLI scheme for domestic manufacturing, we can expect the positive growth in share prices of Solar active Pharma science Ltd in the longer term.
PSU banks plan Rs. 8,500-9,000 crore of QIPs
Public sector banks are expected to launch qualified institutional placement (QIP) offerings worth ₹8,500-9,000 crore in the next quarter amid a rebound in equity markets, according to sources in the know.
“Indian Bank”, “Bank of Maharashtra”, and “Canara Bank” expected to launch their offerings between July and September.
These QIP offerings are going to boost the PSU Banking sector. Such offering is also expected to provide cushion for further declines in the performance of the PSU banks. The launch of Rs 8,500-9,000 crore of QIPs can be considered as the relieving news for the investors. And the stocks of Indian Bank, Bank of Maharashtra, and Canara Bank should be kept on watchlist as with the execution of expected launch of offering between July & September has fair amount of chance to increase market shares.
Auto companies prepare financial packages to help dealerships
Several of India’s leading automakers are working on or rolling out incentive packages to support their dealers who have been hit hard by lockdowns in states to check the spread of the Covid-19 pandemic.
These incentives being planned or offered by “Maruti Suzuki”, “Tata Motors”, “Renault India”, “Toyota Kirloskar Motor”, “Daimler India Commercial Vehicles” and “Honda Motorcycle” & “Scooter India” include financial support to offset interest cost on inventory during the lockdown, extension in credit periods, insurance cover, salary support and vaccination expenses.
Companies are also working at quick resolution of claims to facilitate cash flow at dealerships, as retail outlets gradually open up with several state governments expected to ease restrictions over the next few weeks, as the number of Covid-19 cases falls.
These incentives are expected to help the dealers, who were badly affected by the pandemic, to improve their operation and sales & in-turn these are expected to help the auto companies to achieve growth in the net revenues.
Banks begin process of restructuring of loans up to Rs 25 cr
To provide support to small businesses hit by the second coronavirus wave, banks have initiated the process of restructuring pf loans up to Rs 25 Crore in line with the Covid-19 relief measures announced by the RBI earlier this month. Many lending institutions have got board approval for the resolution framework and eligible borrowers are being contacted For example, “Bank of India” has already sent messages to its eligible customers, meanwhile “Punjab & Sind Bank’s” debt recast plan has been approved by the board.
With this the Banking Sector can be expected to perform good at least for THEnext Quarter, though chances can’t be neglected to see the sector again in trouble 2-3 Quarters down the line.
Has RBI really endorsed crypto transactions in India?
Hours after major Indian banks, including State Bank of India (SBI) and HDFC Bank sent emails to customers warning against using their services to trade in crypto currencies, the Reserve Bank of India (RBI) has clarified that banks cannot cite the 2018 circular for such communications. This is because the circular was quashed by the Supreme Court of India on a petition filed by Internet and Mobile Association of India in March, 2020.
Clearly, the clarification doesn’t mean that the RBI is endorsing crypto trading. The regulator, in fact, has not taken any position on the validity and legality of cryptocurrency transactions in India. It has only avoided a potential legal hazard—inviting contempt of the apex court by maintaining silence when a clutch of banks has used its old, invalid circular to keep the crypto lobby away. The RBI has only asked banks not to shoot from its shoulder. The language indicates high caution. Banks will not have the backing of the regulator and will have to deal in crypto at their own risk.
Pepperfry expects to join unicorn club soon, to launch IPO after booking profit
Online furniture company Pepperfry would be in the unicorn club – companies with a valuation of more than USD 1 billion – by the time its initial public offer hits the market,
The company has raised USD 235 million till date from Norwest Venture Partners, Goldman Sachs, Bertelsmann Investments India (BII).
Pepperfry announced plans to add 200 offline studios on FOFO (franchise owned franchise operated) across tier 2 and tier 3 towns. Studios contribute 30 per cent in the overall business. With new studios coming up, their contribution in business should be going to upwards of 40 per cent. The stores will come up with at least 100 new cities. The company has already opened over 70 studios across 40 cities in the last six years out of which 32 are based on the FOFO model.
Currently the online business model contribute to 70% in overall business, which is the main reason that amid the coronavirus pandemic, the company’s business is still in good position and it is further expected to grow once planned addition of 200 offline studios on FOFO model starts contributing to the overall business.
Work From Home (WFH) leads to surge in demand for office furniture rentals: Industry experts
Corporates and independent consumers are renting ergonomic curated products to make working from home more efficient, especially in metro cities, resulting in surge in furniture rentals, according to industry players.
Many companies have also tied up with “Fabrento” for providing a comfortable office set up to their employees, as told by Fabrento founder Sidhant Lamba.
“City Furnish” company has witnessed 40 per cent increase in demand for WFH solutions like study tables and chairs, announced by founder and CEO Neerav Jain.
In the Furniture Sector, such online rental marketplaces like Fabrento & City Furnish are expected to see high consumer demand and good profit-making opportunities for the next 6 months till WFH continues.
RBI Annual Report
The RBI’s balance sheet grew 6.99% YOY to Rs. 57.07 trillion, while the rise in assets was due to an increase in foreign and domestic investment by 11.48 and 13.75%. The bank’s income declined 0.96% YOY as it transferred a surplus of Rs. 99122 crores to government, it fell to Rs. 1.33 trillion. Total expenditure decreased by 63.1%. The stock market bubble has been a worry for RBI, reiterated since August 22, 2020, where the RBI Governor had mentioned that there was a clear disconnect between the equity market and the real economy, where a surplus global liquidity is driving the asset prices worldwide. This asset price inflation in the context of an 8% contraction in GDP in 2020-21 poses the risk of a bubble. The drop in the market proved short-lived even though economic scars were long-lasting. The stock price index is mainly driven by money supply and FPI investments. Though the economic prospects also contributed to the movement, the impact has been relatively lesser. This assessment showed that liquidity injected to support economic recovery can lead to unintended consequences in the form of inflationary asset prices and providing a reason that liquidity support cannot be expected to be unrestrained and indefinite and may require calibrated unwinding once the pandemic waves are flattened and the real economy is firmly on a recovery path. The current report also has concerns about equity markets not reflecting real state of the economy. The impact of the second wave will be done in a month or two and if it is not contained will have long-lasting impacts on employment and output.
Also rea: RBI Monetary Policy – Fintoo Blog
Nifty Hits New High Today at 15455.55
View on Nifty remains bullish as long as 15100-15000 act as strong support for the index. Lot of positive trigger for markets like decreasing cases of Covid, GST meet, stimulus package and ample amount of liquidity to support the ongoing rally.
FMCG companies witnesses 50% Increase in e-commerce sales
The Covid-19 second wave and lockdowns in many states is making people click to buy than going out. While the growth in online sales in April and May was nearly as much as in last fiscal, the online sales in top cities has jumped 4-5% in last 2 months. Biscuit making companies reported online sales from e-commerce segment to around 15% in top 15 cities in April and May. Companies like Grofers have seen sales grew by 46% in April-May as compared to Feb-March period. Tata Consumers has setup separate vertical to cater to online category. Ecommerce as percentage of overall sales has doubled in FY21 compares to FY 20. With this structural change in consumption FMCG companies will see increase in sales with online market share taking away the lunch of offline retailers, going forward online consumption demand will keep increasing and sustain. Early movers will benefit exponentially in terms of gross sales.
Improvement in Q4 results for Kalyan Jewellers
Ramesh Kalyanaraman Executive Director attributed change to massive shift of consumers from unorganised sector to organised gold sector (better hygiene, more space). The shift has helped improve gross margin by 3% to 17% now. Net profit grew 54.1% YOY. Revenue declined 15.1% YOY. Has 30 showrooms in west Asia. Companies outlet increased to 116 in India, opening 9 in April of which 8 where in south India. Has plans to open 21 Showroom in India in current year. The stock should kept on watch list and see how the plans unfold in current year with timely execution of goals set, the company has fair amount of chance to increase market share and sales.
Biden Plans to Propose $6 Trillion Budget
The era of high spending looks likely to continue, President Biden is likely to propose $6 trillion spending for FY 2022 while total spending may rise to $8.2 trillion by 2031. Whereas Inflation fears are hovering over Biden’s spending plan, the White House has warned that anti-competitive practices have led to increase in construction cost, semi-conductor and shipping cost. Prices of lumber, steel, containers have spiralled upward causing inflation. Government is planning to tackle monopoly and supply shortage as price keeps on rising and hampering growth. The situation is still evolving, which need to be seen if the commodities prices would make a U-turn.
Crypto Exchange Survival at Stake in India
Crypto exchanges plan to approach the Supreme Court again to seek clarification that can RBI direct banks to stop dealing with them. Last month banks had stopped dealing with crypto exchanges on informal direction by RBI, while somehow they managed through payment processing companies. But recently, even the payment companies are shying away from dealing with the crypto-exchanges. High speculation and over leverage in crypto markets have led to wild swings in cryptocurrency, which is ultimately leading to client’s position being squared off, if additional premium is not provided. Situation is still evolving and some regulations do need to come to protect retail investors from highly speculative markets.
Government Stimulus Package for economy for the worst-hit sectors
The government is planning a stimulus package and direct relief for hospitality and MSME as they are the biggest employers and have been hit the worst amid second wave. ECLGS may be relaunched for MSME sector to avail loans without collateral. The discussion are at early stage and may be announced as state starts unwinding restrictions. The stimulus will give the economy necessary fire power to get back to growth after second wave, it will be a much needed boost for companies to kick start their business.
GST Council Meet Today
GST Council can consider zero rating or complete tax exemption on products crucially needed to fight against covid 19. Not only the products will be exempted but also inputs required to manufacture would also be exempted. This will lower the prices of life saving drugs and ventilators and oxygen cylinders, which will help overall population, decrease the death rate. The companies involved in the particular business will also benefit on increasing margin and sales.
Paytm Plans to file $3 Billion IPO
One97 communication may be planning to list Paytm this year around Diwali and targeting a valuation of $25-30 billion. Board meeting is scheduled today to approve then plan for IPO, the company has a high profile investor base like Softbank, Ant group, Berkshire Hathaway among others. Company is yet to make profit and last year’s cash burning was around 2500 crore. More details are awaited.
Trade war to start again?
The US Senate moved towards passage of a bill to confront china’s rise. This Bill would plow more than $100 billion into US R&D to foster semi-conductor manufacturing. Bill may include a wide array of measures directly targeting China on human rights and its influence in USA, which may not go well with china who has been importing millions of tons of agri products from USA under a trade agreement. Any retaliation is yet to be seen. If this thing affects the trade agreement and two world power again fighting on the economic front, then it could impact the world economy. This could be a key international trigger and needs to be followed closely.
Gold is still ‘relatively cheap’ and could surge back toward its all-time high
Gold is still a “relatively cheap” investment opportunity and could keep rising even if it soon topped $1,900 per troy ounce, one strategist said Thursday. TD Securities head of global strategy Richard Kelly told CNBC’s “Street Signs Europe” that “gold had a phenomenal run-up over the course of last year, and when that reversed, I think it scared a few investors off.” The spot gold price hit an all-time high of $2,063 per troy ounce in August last year. However, Refinitiv data shows it now stands at $1,877. Gold was under pressure in the first few months of 2021. This came amid a sharp jump in U.S. Treasury yields as traders started to bet that inflation would cause the Federal Reserve to hike interest rates and taper its accommodative monetary policy. Gold is traditionally seen as a hedge against inflation but any attempts by central banks to rein in inflation is usually bad for bullion.
Oil settles higher on stronger demand outlook as U.S inventories fall
Oil prices settled higher on Wednesday as a drop in U.S. crude stockpiles reinforced expectations of improving demand ahead of the peak summer driving season, offsetting worries that a possible return of Iranian supply would cause a glut. Brent settled up 16 cents, or 0.3%, to $68.87 a barrel and U.S. West Texas Intermediate (WTI) crude settled up 14 cents, or 0.2%, at $66.21 a barrel. Both benchmarks pared losses after government data showed U.S. crude stocks at the Cushing, Oklahoma, storage hub fell last week to the lowest since March 2020. Refiners ramped up utilization rates to pre-pandemic levels. Russia said the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, should consider a possible increase in Iranian output when assessing further steps. OPEC+ is bringing back 2.1 million barrels per day (BPD) of oil production through July, easing cuts to 5.8 million BPD. Their next meeting is set for June 1.
Mainland Chinese markets jump more than 2% as Asia stocks rise; investors watch regional tech shares
Mainland Chinese stocks led gains regionally, with the Shanghai composite rising 2.4% on the day to 3,581.34. Investors also monitored technology stocks in Asia-Pacific on Tuesday following gains for their counterparts overnight stateside. Singapore’s economy expanded by 1.3% year-on-year in the first quarter, official data released Tuesday showed. The country’s Ministry of Trade and Industry also announced Tuesday that it would maintain Singapore’s GDP growth forecast for 2021 at “4.0 to 6.0 percent.”
Indians invested ₹700 cr in U.S. markets via Stockal in FY 21
Global investing platform Stockal revealed that over 50,000 investors from India invested more than ₹700 crores in U.S. stock markets in companies like Tesla, Netflix, Apple, etc., in the last 12 months. “We saw more than ₹3,500 crores worth of transactions last year. There hasn’t been a better time to start investing abroad,” the company added.
Global property markets ready to soar this year on monetary, fiscal support
Average home selling prices have hit eye-watering levels in 2021 in some countries. That trend is expected to continue, driven by low mortgage rates, swift vaccine rollouts, and the easing of restrictions after deep pandemic-induced recessions last year. The global boom in property prices comes alongside soaring stock markets, which quickly bounced back from a slump on pandemic-driven economic damage and devastating job losses, to focus on unprecedented stimulus and the recovery at hand. Reuters polls of more than 100 property market experts taken May 11-24 showed big upgrades to house price forecasts for the United States, Britain, Canada, Australia, and Dubai compared with just three months back, outpacing expected GDP growth and consumer price inflation.
European stocks steady after Tuesday’s rout, eyes on U.S. inflation data
European stocks steadied on Wednesday after their worst selloff this year as strong earnings reports and signs of a speedy economic recovery offset concerns about a rapid rise in prices. The pan-European STOXX 600 index rose 0.2 percent after falling almost 2% on Tuesday as investors offloaded riskier assets on worries that rising U.S. inflation could lead to tighter monetary policy. European earnings are now expected to surge 90.2 percent in the first quarter, as per Refinitiv IBES data, up from a forecast of 83.1 percent growth last week. UK’s blue-chip FTSE 100 outperformed as data showed Britain’s economy grew by a stronger-than-expected 2.1 percent in March from February. Ample liquidity, a global semiconductor shortage and a recent rally in commodity prices are adding to fears of inflation as developed economies gradually reopen after lockdowns. All eyes will be on U.S. consumer price data for April that is due later in the day, with analysts expecting a 3.6 percent lift in year-on-year prices, boosted by last April’s low base.
Chinese bitcoin traders still wield ‘enormous influence’ despite Beijing’s 4-year crypto crackdown
Chinese bitcoin traders continue to thrive despite Beijing’s four-year crackdown on cryptocurrencies, experts told CNBC. China shut down local exchanges and banned initial coin offerings in 2017, but this year, there have been renewed fears of a harsher crackdown from authorities. Bitcoin’s price has been impacted by recent comments from industry bodies and regulators regarding cryptocurrency in China.
Bitcoin crash opens door to a tax loophole for investors
Bitcoin, ethereum, dogecoin and other cryptocurrencies have seen prices plunge in recent weeks. These investors can leverage those losses in a way that a typical stock or mutual fund investor can’t. That’s because the so-called wash sale rules don’t apply to crypto, according to financial advisors. But there are important caveats. Crypto investors may be shellshocked by a recent plunge in prices. But that sell-off has a silver lining: It opens the door to a money-saving tax strategy. Popular cryptocurrencies like bitcoin and ethereum shed more than half their value in volatile trading over the past month or so. A bitcoin investor who bought at the mid-April peak (around $65,000) and sold low on Wednesday (near $30,000) would have lost 54%, but crypto losses are treated differently than those of stocks and mutual funds. That’s because so-called wash sale rules don’t apply, according to financial advisors. This offers two benefits to crypto investors: They can sell crypto for a loss, and then use that loss to reduce or eliminate capital gains tax on winning investments. Then, they can quickly buy back the crypto they sold so as not to miss out on a subsequent rebound in price.
Japan can be an another good option for Diversification
Investing in international markets comes with various benefits. Investors benefit from diversification across different geographies, thereby spreading the investment risk across different economies. With value investing back in fashion, Japan can emerge as the next hotspot. The Bank of Japan has been one of the largest investors in Japanese stocks through exchange-traded funds. With nearly 30 trillion yen incremental investments (around $50 billion per year) since 2016, its presence can add another pillar of strength to the Japanese markets. While domestic institutional investors have not been favouring equities due to unpleasant experiences in the past, the recent run-up in global yields may push them to realign their investment portfolios from debt to equity. This can be another trigger for the next set of inflows into the Japanese markets. Japan has been a diversified market, with the financial sector, insurance companies, auto industries, manufacturing, and trading companies having a fair representation.
HDFC to raise up to ₹7,000 crore by issuing bonds
HDFC is looking to raise up to ₹7,000 crores by issuing secured redeemable non-convertible debentures (NCDs) with a base size of ₹5,000 crores and an option to retain oversubscription of up to ₹2,000 crores. The issue of the bonds opens on May 28, 2021, and will close on the same day. The mortgage lender will offer a coupon rate of 6% p.a and is offering a tenor of almost 5 years with its redemption date set as May 29, 2026.
The objective of this issue arranged by Axis Bank is to augment the long-term resources of the Corporation. The proceeds of the present issue would be utilized for financing/refinancing the housing finance business requirements of the Corporation.
PharmEasy eyes IPO, acquires Medlife to become India’s largest e-pharma company
API Holdings, the parent entity of the online pharmacy chain Pharmeasy, has begun talks for a potential public market listing, aiming to raise around ₹3,000-₹3,700 crores. The initial public offering to be held at the end of this year is likely to value the company at around ₹21,800 crores.
Medlife was acquired with the shareholders receiving a 19.59% stake and its customers absorbed, making Pharmeasy the largest healthcare delivery platform across the country. Online pharmacies are among the few verticals in e-commerce to have grown during the second Covid-19 wave and the Indian e-health sector is expected to grow at a CAGR of 68% by FY 2025.
WhatsApp files case in Delhi High Court, seeking to block new IT rules
The new IT rules require the appointment of a resident grievance officer, chief compliance officer and nodal contact person, to publish details of executives on their website, along with a physical contact address. The case was filed on 25 May 2021, after new rules required significant social media intermediaries to trace the origin of particular messages breaking the end-to-end encryption messages, which WhatsApp believes is an end to privacy, among other rules. Social media platforms run the risk of losing their status as intermediaries and may become liable for criminal action if they do not comply with the revised regulations.
Strong Q4 performance boosts the consolidated net profit of KNR Constructions to 23.5%
The company reported strong Q4 performance with revenue growth of 39% you and an EBITDA growth of 24% you with net profit rising 15% YoY with a little lower margin amid the significant rise in operating expenses and increasing commodity prices.
However, it is believed that the margin challenges will diminish by FY22 end and spillover of existing order book execution will add to FY23 growth and is also working and improving on debt reductions.
The company said it completed widening to 4/6 lanes and strengthened the existing two-lane carriageway of NH-5 with a total contract value of ₹231 crores and with its current order book receiving two new NHAI projects and an EPC project taking the total order book to ₹11,400 crores.
These results have boosted the confidence of the street and are bullish about long-term prospects. The stock is up more than 7% in two trading sessions post results.
India’s market cap hits $3 trillion
The Indian stock market has avoided the economic setbacks due to the pandemic and surged to a market capitalization that crossed $3 trillion for the first time and ranked eighth on the table of most-valued equity markets. India joined UK, France, and Canada in the $3-trillion m-cap club on Monday, ahead of Germany even with the performance of the largest companies listed on the Frankfurt stock exchange being up 13% this year outperforming the Sensex which is up 6%.
This marks a stellar run for India from the bottom of the crash last year. Looking ahead with listing of LIC among others could add another $200 billion and the bull case scenario sees Sensex at 61,000 by the end of this year, taking the market capitalization ahead of even Canada and France.
Term Life Insurance Cover seeking higher premiums
Many Indian businesses are finding it difficult to renew or buy fresh term-life covers for their employees due to a significant increase in premiums. There is also an unwillingness to extend mortality benefits by several private-sector life insurers who have set stricter norms for the underwriting process and increasing the scrutiny. This could be due to high mortality risks caused by the pandemic and thus these insurers prefer businesses to buy individual term plans instead of group insurance for the staff as it can be priced differently based on individual risks.
SBI’s corp loan book hints at a change in market growth dynamics-
India’s largest lender, State Bank of India, posted a total corporate credit growth of 2.6% in FY21, including loans and debt investments such as bonds and commercial papers; however, if only loans are considered, SBI’s corporate book contracted 3%. Indian banks are realizing that to be able to see any sustainable growth in corporate credit, they also need to invest in debt securities of their borrowers, signaling a shift from their loan-driven growth strategy. The bank’s chairman Dinesh Khara pointed out that working capital utilization for large corporates is even below 70%, and the bank is looking to support them in raising money from the debt market.
After Jio, Airtel plans to add airwaves in eight key markets-
Airtel is set to add airwaves in the 900 MHz band in Gujarat, UP-East, Kerala, Bihar, Odisha and Jharkhand to boost high-speed data capacity, a senior company executive told ET. Both Telcos aim to boost 4G broadband coverage as vast swathes of India’s corporate workforce operate from home amid lockdowns during the Covid second wave. The two operators are leveraging recent spectrum purchases to attract new data subscribers and users from Vodafone Idea.
India: Westbridge Capital-backed Star Health set to file for IPO-
Health insurer Star Health and Allied Insurance Co Ltd, owned by a consortium of investors including Rakesh Jhunjhunwala and Westbridge Capital, is planning a public share sale to raise at least ₹2,000 crores. The initial public offering (IPO) is likely to be a mix of primary and secondary share sales by the company and the investors, he added. “Around 10-12 investment banks are working on this IPO including Kotak Mahindra Capital, Citibank, Credit Suisse and Bank of America,” the second person said. Emails sent to Rakesh Jhunjunwala, Westbridge Capital, and Star Health remained unanswered. The investor consortium, which also includes Madison Capital, had in August 2018 agreed to acquire over 90% stake in Star Health from existing investors Star Health Investments Pvt. Ltd and private equity funds managed by ICICI Venture, Tata Capital and Apis Partners. The consortium had acquired the insurer at a valuation of close to ₹6,000 crores. Star Health has underwritten a gross written premium of ₹6,865 crores during 2019-20 and had a net worth of ₹1,889 crores as on 31 March 2020. It has over 12,800 employees and over 640 branch offices across India.
COVID-19 impact: FPIs net sellers of Indian equities worth Rs. 4,444 cr in May so far-
Foreign investors pulled Rs 4,444 crore from Indian stock markets in May so far in the wake of concerns over the second wave of the COVID-19 pandemic and its likely impact on the Indian economy. FPIs withdrew Rs 6,370 crore from equities but infused Rs 1,926 crore in the debt segment between May 1-21, as per depositories data, taking the overall net outflow to Rs 4,444 crore. The total net outflow from the Indian capital markets was at Rs 9,435 crore in April. FPI outflows are a temporary phenomenon as per Harsh Jain, co-founder and COO at Groww.
The number of covid cases in the country is falling and vaccination rates are slowly climbing; and as the economy reopens, FPI investments will “dramatically climb,” he said.
NBFC: NBFCs stop lending on fear of rising defaults-
Hit with a drop in installment collections due to the Covid-induced lockdowns across the country, non-bank lenders are slowing fresh disbursements and even halting them for unsecured loans.
From an average default rate in collection efficiency at 2-3% in pre-Covid times, non-banking finance companies (NBFCs) are now seeing 6-8% of borrowers missing their payment schedules during the second wave of the pandemic. IIFL Finance has halted fresh disbursements for unsecured loans for micro-businesses & personal loans.
It has also tightened scrutiny and disbursements for secured loans like loans against property, housing loan, and gold loan. According to chief risk officer Sanjeev Srivastav, even in secured advances like loans against property, the company has reduced the loan-to-value ratio to 50-40% from 70% earlier.
US: Manufacturing and Services PMIs reach new series highs in May-
The business activity in the US manufacturing sector continued to expand at a robust pace in May with the IHS Markit’s manufacturing PMI rising to a new series high of 61.5 from 60.5 in April. This reading came in better than the market expectation of 60.2.
Further details of the publication revealed that the Employment Index edged lower to 53.3, the lowest level since December, from 55.7 in April. On a negative note, “input costs rose in May at a pace not seen since July 2008,” the IHS Markit noted.
The US Dollar Index gained traction after this report and was last seen gaining 0.3% on the day at 90.01.
Manufacturing could return to China, as Covid cases spike in India and Vietnam-
Previously, the U.S.-China trade war caused companies to move their supply chains out of China. As a result, countries like Vietnam and India benefited as companies set up shop there. But the situation is changing, and supply chains could pivot back to China as cases spike in India and Vietnam, according to Zhang Zhiwei, the chief economist at Pinpoint Asset Management. “Before the pandemic, we saw factories moving out of China — Samsung, Foxconn these big-name companies — setting up factories in Vietnam, India,” he told CNBC’s “Street Signs Asia” on Monday.
DHFL lenders challenge NCLT order on considering Wadhawan’s offer-
The committee of creditors of DHFL has challenged the National Company Law Tribunal (NCLT) order directing the lenders to consider the offer by the debt-ridden mortgage firm’s erstwhile promoter Kapil Wadhawan.
An appeal challenging the NCLT Mumbai bench’s order has been filed before the National Company Law Appellate Tribunal (NCLAT) and is scheduled for hearing on Tuesday.
The matter will be heard by a vacation bench of NCLAT comprising Acting Chairman Justice A I S Cheema and Member Technical V P Singh.
The petition has been filed by the Union Bank of India on behalf of the Committee of Creditors (CoC) of Dewan Housing Finance Corporation Ltd (DHFCL). According to sources, lenders in their petition have requested the appellate tribunal to stay the NCLT order
DHFL had gone bankrupt with more than Rs 90,000 crore in debt to various lenders, including banks, mutual funds and individual investors who kept fixed deposits with the company.
Centre discusses with stakeholders abnormal rise in edible oil prices, asks for steps to soften rates-
Amid concerns over up to 62 percent spike in domestic edible oil prices, Food Secretary Sudhanshu Pandey on Monday discussed in detail the reasons for the “abnormal rise” in local prices, and asked the states and industry stakeholders to take measures to soften the prices.
Pandey also said in the meeting that suggestions offered by stakeholders would help the government to arrive at “wholesome solutions” to ensure edible oils are available at reasonable rates to consumers.
Pandey further said that the suggestions presented in the meeting would help in arriving at wholesome solutions to address the issue of edible oil prices and achieve growth in the domestic oilseeds sector. Besides Pandey, Union Agriculture and Consumer affairs Secretaries and senior officials from Gujarat, Maharashtra, Madhya Pradesh and Tamil Nadu governments were present. According to the government data, retail prices of palm oil rose by 62.35 percent to Rs 138/kg on Monday from Rs 85/kg in the year-ago period.
RBI surplus to Centre likely to impact economy markets and banks
RBI’s decision to transfer ₹991 bn to the government, while higher than expected, is still within the realms of keeping the contingency risk buffer at 5.5% of the RBI’s Balance Sheet. RBI has ensured that the additional liquidity that it’s bringing into the system through the government’s balance sheet is coming at a time when inflation is low. This is a huge positive for the Economy, as it gives levers for the government to front-end spending especially towards infrastructure growth, post addressing the spending on Covid. The additional amount would help the government offset the impact of lower tax collection due to on-going restrictions, and support the divestment program which slowed down due to Covid.
How big has the fall in Investments been in FY21
The poor figure of investments can be primarily attached to the lockdown imposed early in the pandemic to curb the spread of cases. New project announcements in India for the financial year 2020-21 to the lowest in at least 17 years. India saw new projects worth ₹5.18 Lakh Crore, the lowest since FY05. CARE said that for a revival of investments to take pace, there would need to be a surge in demand as factories are still not running at full capacity. This year, too, a recovery in investments is unlikely as many states have imposed lockdowns as deadly second wave ravage the country.
Japan Exports Surge as Global Trades show signs of rebounds
Japanese exports jumped again, climbing in April by more than a third from last year’s levels. Surging car and auto parts shipments helped power a 38% rise in Japan’s exports from a year earlier. Although the data give an inflated view of the strength of exports because they are based on a comparison with 2020’s low figures, the report still shows trade bouncing back. Shipments climbed almost 8% compared with 2019.
- Last month’s trade increase showed a broad-based recovery in the world economy. Shipments to the U.S. and Asia rose the most since 2010, while those to the EU climbed the most since 1980.
- Demand itself is very strong led by the U.S. and Chinese exports.
- A drop in the yen’s value gives Japan’s exporters another tailwind. The currency has fallen roughly 6% versus the dollar so far this year, increasing the value of repatriated profits for companies from Toyota to Hitachi.
Banks Likely to transfer about 80 Large NPA accounts to NARCL
National Asset Reconstruction Company (NARCL) is the name coined for the bad bank announced in the Budget 2021-22. Banks are likely to transfer about 80 large NPA accounts for the resolution which is expected to be operational by next month. The size of each of these NPAs accounts is over ₹500 crore and the banks have identified about 70-80 such accounts to be transferred to the proposed bank. It will then manage and dispose of the assets to alternate investment funds and other potential investors for eventual value realization. NARCL will pay up to 15% of the agreed value for the loans in cash and the remaining 85% would be government-guaranteed security receipts.
Inflation and its impact on an overall economy
Retail Inflation in April is 4.3% which is well within the range of RBI. Inflation is measured by the CPI and the wholesale price index (WPI). The CPI measures changes in prices of essential commodities at the consumer level, while the WPI notes changes at the producer level.
The commodities considered for measuring the WPI are manufactured products (63.75% weightage), primary articles such as food (20.02%), and fuel and power (14.23%).
For the CPI, the commodities are food and products (45.86%), housing (10.07%), clothing (6.53%), and fuel among others. Inflation is indicative of the decreasing purchasing power of the country’s currency and vice versa.
Inflation is indicative of decreasing purchase power of the country’s currency and vise versa.
It is basically the cost of production which is passed on to the consumers.
In the Monetary Policy Committee meeting of February 2021, Government specified that for the next 5 years they will not be focusing on maintaining the inflation rate. There is a possibility in the near future for the inflation rate to go higher.
In increasing inflationary conditions, the RBI adopts a contractionary monetary policy. In case of a slow-down, it adopts an expansionary monetary policy, which leads to the increased money supply, lower interest rates, lower borrowing costs, and increasing aggregate demand thereby giving a boost to the economy.
RBI has increased Gsec buying in the past 2 weeks
The central bank of India net purchased Rs. 34,175 crore of sovereign papers between April 22 and May 4 from the secondary market to ensure lower borrowing cost in the second wave that would derail the economic recovery.
The usual efforts through Open market Operation and Government Security Acquisition Program is a corrective measure that the government has been taking to control the rise in bond yields and lower the borrowing cost. The Government principal money manager is said to have bought T bills and long-term papers in 7 tranches in the past two weeks.
Due to the following action, the bond yields have reduced to 0.03 basis points to 6.02%.
Tata Motors Posts $1 billion loss as Jaguar Costs hot bottom line
Tata Motors announced a ₹ 7,600 crore ($1 billion) loss on Tuesday despite a strong performance in the first quarter of 2021 as restructuring costs related to its British luxury car brand Jaguar Land Rover (JLR) hit the automaker’s bottom line.
The company reported losses for three consecutive quarters last year, as the pandemic hammered demand in domestic and international markets.
The standalone business including joint operations reported profit at Rs 1,645.69 crore in Q4FY21 against a loss of Rs 4,871.05 crore in the year-ago quarter and clocked a massive 106 percent year-on-year growth in revenue at Rs 20,045.9 crore during the quarter, driven by strong passenger vehicle demand and recovery in commercial vehicle demand.
The commercial vehicle business consistently posted sequential quarter-on-quarter growth on the back of improved consumer sentiments, buoyancy in e-business, firming freight rates, and higher infrastructure demand including road construction and mining.
WFH promotes tier 2 cities as talent hub and Unemployment in Rural India
Due to work from home policy tier, 2 cities like Kochi, Guwahati, Jaipur, Indore, and Mysore are said to have emerged as talent hubs.
According to Talent500, there has been a 30-40% increase in demand for workforce in tier-2 cities within tech teams across sectors.
Covid has made us all work remotely. In a post-pandemic world, remote won’t just be the new normal, but instead, be a strategic advantage for companies as they build out their teams.
On the other hand, we see rural unemployment has nearly doubled in a week as lockdowns and surging covid infections in villages brought economic activity to a halt. Rural unemployment shot up to 14.34%. The MSMEs (micro, small and medium enterprises) are in bad shape, and the informal jobs market, as well as self-employment in rural India. The situation may get worsened over the next few weeks if we don’t manage to tackle the pandemic in rural India.
Competition Commission of India (CCI) agreed to the proposal of acquisition of an additional 25% stake of Adani Krishnapatnam Port Ltd By Adani Port SEZ
Adani Port SEZ holds 75% shareholding; the proposed combination will lead to acquiring 100% shareholding and complete control.
In April, Adani Ports and Special Economic Zone had said it had acquired a 25 percent stake of Vishwa Samudra Holdings in Krishnapatnam Port for Rs 2,800 crore. Krishnapatnam Port, located on the east coast of India in the Nellore district of Andhra Pradesh, is an all-weather, deep water port with a multi-cargo facility with a current capacity of 64 million tonnes per annum.
12 Drugmakers and Healthcare companies are planning IPO in 2021
Covid-19 has increased investor demand for promising companies in sectors like Pharmaceuticals, healthcare, and related businesses that are beneficiaries of the pandemic.
In the past five years, only seven companies involved in the sector have hit the IPO
Companies like Glenmark Lifesciences, Supriya Lifesciences, Krsnaa Diagnostics, Krishna Institute of Medical Sciences KIMS, Tatva Chintan Pharma, Sigachi Industries Windlass Biotech have already filed their draft paper switch SEBI.
The four companies i.e Emcure Pharma, Wellness Forever, Vijaya Diagnostic, and Star Health Insurance have initiated the process for filing IPO.
It looks like there will be a massive change in the Indian Healthcare system because of covid -19 and demand for drugs, vaccines, diagnostic medical equipment, hospital, and other related services will increase over the period.