Mutual Fund

Daily Market Analysis – 21st May 2021 (Indian Auto Industry)

bySudhanva DharmadhikariMay 21, 2021

• Indian Auto Industry ended FY21 on a strong note, but what is in store for the next few Quarters?

Indian Auto Industry was facing a slowdown in FY20 amidst transitioning to Bharat VI norms and an economic slowdown in the country. Fears of a complete slump suddenly became real with the onset of the Covid-19 pandemic. Lockdown in the entire country meant that manufacturing came to a grinding halt. Demand for passenger and commercial vehicles fell drastically. All these factors adding up led to the Nifty Auto index to fall to levels close to 4700 points from about 8000 points at the beginning of Jan2020, almost a 40% drop. It was almost October before the index could recapture the 8000 points level. With the demand picking up in the festive season, ease in the lockdown restrictions and RBI providing liquidity relief to the manufacturing sector, the sector saw a positive momentum in the 3^rd and the 4^th quarters of FY 21. In PV segment, for 4 wheelers, companies like Tata motors and Maruti posted 106% and 32% revenue growth YOY, respectively. Hero MotoCorp shined bright in the 2-wheeler segment with a YOY revenue growth of nearly 39%. Strong comeback in the rural economy meant that Tractor sales were robust and escort motors posted a mammoth 60.7% revenue growth YOY for FY 21.

The second wave of surge in the Covid-19 cases in India has led to country-wide lockdown restrictions and the Auto industry is faced with a similar challenge faced a year ago in the same duration. Demand seems to be tapering in the PV segment and CV segment alike. However, this time the carmakers are predicting their estimated forecasts to be more accurate on the back of last year’s experience. Cost-cutting measures implemented last year will also help them navigate these turbulent times in a safer manner. With the Covid curve flattening in the last few weeks we can be hopeful of a faster recovery.

Also read: What is Risk Profiling? – Friday First Cut Episode 18 – Fintoo Blog

• The government has ordered a 31.4% cut in the Sugar Export subsidy for the season-ending 30 Sept 2021

The Ministry Of Consumer Affairs, Food And Public Distribution on 20th May announced a cut in the export subsidy in the Sugar industry to Rs.4000 per tonnes down from Rs.5833 per tonne. This cut comes after the fact that India may achieve its target of exporting 6 million tonnes of the sweetener by the end of June, three months before September. When the subsidy of Rs.5833 per tonne was announced late last year there was a flurry of export deals from overseas. With the increased export demand and deals for 5.7 million tonnes export already locked in, the industry has regained momentum which can be observed in the stock market prices of the sugar companies as well. There has been no reason cited by the ministry for this cut and the only rationale that can be inferred is the cut is imposed to avoid inflation in domestic sugar prices due to export.

• BPCL likely to announce a large dividend payout; trade volumes up by 27% on expectation

 BPCL share rose 2.1% as close to 99 lakh shares were traded on both the bourses on 20th May 2021. The company is expected to announce the decision on the final dividend on 26th May. BPCL recently sold the Numaligarh Refinery(NRL) in Assam for Rs.9876 cr. In two more deals, BPCL sold treasury shares worth Rs.5500 cr. and later acquired a stake in Bina refinery worth Rs.2400 cr. with estimated net cash of around Rs.13100 cr. after the three deals, if distributed entirely the dividend would work out to be Rs.55 per share.

• SFBs bid for Rs.400 cr during the RBI’s liquidity window

Out of the Rs.10,000 cr. allocated to help Small Finance Banks(SFBs) with liquidity, only Rs.400 cr. was bid on by the SFBs. RBI has mandated that the deployment of the Special Three-Year Long-Term Repo Operation (STLRO) funds within 30 day of raising which is hard due to the lockdowns and the low demand for the Loans. Moreover, SFBs have enough liquidity as the loan demands are muted. RBI will conduct the STLRO operation once every month till October with the unused portion of the Rs.10000 cr. from previous auctions.

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Daily Market Analysis – 20th May 2021

byRushabh KothariMay 20, 2021

Daily Market Analysis on Insurance, Indian Oil Corporation, Renewable energy, Goldman Sachs,

• Insurers to make Life, Health cover norms tougher 

On account of both the pandemic as well as the Insurance Regulatory and Development Authority (IRDA) new rules for health insurance on standardization of terms and conditions. Insurers will be making the purchase of life and health cover tougher for millions. In order to account for high payouts on the current ones in a covid affected nation, the insurance business is likely to underwrite strict norms for future policies.

• 25-30% Hike in Term Insurance Prices

Companies have been instructed to conduct physical medical examinations of applicants — a departure from the telemedical assessment. Those with serious ailments or comorbidities will find it harder to get their applications approved. Furthermore, prospective policyholders who are self-employed, students, frontline workers prone to accidents or are thought to be more exposed to potential infection, applicants with annual income less than Rs 5 lakh or those without college degrees can face higher rejection rates. Tighter norms come on top of a 25-30% hike in term prices being quoted by most life insurers.

• Stringent Underwriting Process on Health insurance Side

Patients with long-term illness history can expect more strict application norms as IRDA rules no longer allow for exclusions on pre-existing conditions. Existing mental health ailments could face an even higher rejection rate as the Supreme Court has made it mandatory for insurers to cover costs of mental health treatments as well. For those recovering from Covid, an unofficial cooling-off period of 45-90 days after a Covid-negative report has been mandated before a policyholder can be eligible for either a health or term life cover. This, because “mid-term effects of coronavirus are yet unknown to the medical community”, according to an industry executive. According to Sources India could be headed towards a persona-based risk pricing model. This means, other things being equal, those who are deemed less likely to be in a claims situation would have to pay a lesser premium.

According to latest industry data compiled by the General Insurance Council (GIC), health insurers have received over 14 lakh Covid claims worth over Rs 22,000 crore as on May 14. Life insurers on the other hand have settled death claims worth over Rs 2,000 crore in FY21 on account of the pandemic as per data compiled by IRDA.

Also read: Complete Guide for buying Health Insurance Plans – Fintoo Blog

• The government hiked subsidy on DAP fertilizer by 140%.

Last year, the actual price of DAP (Di-ammonium Phosphate) was Rs.1700 per bag. Where the central government has provided a subsidy of Rs.500 per bag. Due to the recent price surge of Phosphoric acid, ammonia, etc in the international market. The price of the DAP bag is now Rs.2400. So at Wednesday Meeting chaired by the Prime Minister, the central government has decided to increase the subsidy to Rs.1200 per bag, which is an increase of 140% to ensure that farmers do not have to face the brunt of price rise.

• India climbs to 3rd spot on EY index on impressive show by solar PV segment

Due to exceptional performance on the solar photovoltaic (PV) front. India has moved at the third spot on EY’s Renewable Energy Country Attractiveness Index(RECAI). As per EY’s statement, India’s solar sector is expected to grow significantly post the pandemic, with generation from solar PV forecast to exceed coal before 2040. This change is due to the Indian government’s policy ambitions, which have led solar PV to be the most cost-competitive source of power in the region and improving further. India also committed to setting up 450 GW for renewable energy power capacity by 2030 in the recent climate summit hosted by the US. This will likely increase the share of renewable energy in the overall power generation installed capacity to 54 percent, in comparison to the share in an overall gross generation to 36 percent. In 2020, global renewable energy capacity investments grew 2 percent to USD 303.5 billion. RECAI 57 estimates that future development to achieve net-zero will require a further investment of USD 5.2 trillion.

• Adani Green shares hit 5% upper circuit on the acquisition of SB Energy’s renewable portfolio

Adani Green Energy will acquire 5 GW of renewable power portfolio from SB Energy India for a fully completed enterprise evaluation (EV) of $3.5 billion (approx Rs 26,000 crore). SB Energy has a total renewable portfolio of 4,954 MW in four states. This is the largest acquisition in India’s renewable space. The share purchase agreement was signed on May 19 for the acquisition of 100 percent interest in SB Energy from SoftBank Group and Bharti Group, which held 80 percent and 20 percent stake, respectively. The deal is expected to enable Adani Green Energy to achieve its target renewable portfolio of 25 GW, four years ahead of the timeline, and takes the company’s present total renewable capacity to 24.3 GW and operating renewable capacity of 4.9 GW.

• Goldman Sachs set to buy 33% stake in GVK Bio at Rs 7,300-crore valuation

Goldman Sachs is all set to acquire about 33% minority stake in Aragon Life Sciences, formerly known as GVK Biosciences. The deal will value Aragon, co-promoted by the GVK Group and DS Brar, the former CEO & managing director of Ranbaxy Laboratories, at Rs 7300 crore ($1 bn). Existing shareholder Chryscapital will sell its 17% stake along with promoters who will dilute about 16% stake. Aragen is a leading provider of outsourced discovery, development, and manufacturing services across both large and small molecule platforms. The company serves a worldwide customer base that spans the United States, Europe, and Japan.

• Indian Oil Corporation Q4 results: Rs 8,781-cr net profit beats estimates on inventory gains

Indian Oil Corporation Ltd on Wednesday reported a fourth-quarter profit that beat analysts’ estimates by a huge margin as higher crude prices boosted the inventory value of the country’s biggest refiner. It reported a net profit of Rs 8,781 crore for the quarter ended March 31, compared with a loss of Rs 5,185 crore a year ago. Inventory gains are booked when oil prices rise by the time a company processes oil into fuel. Brent crude prices jumped about 23% during the March quarter. Revenue rose 18% to Rs 1.64 trillion. From April to March 2021 average gross refining margin – the difference between the cost of crude oil processed and the selling price of refined products – jumped to $5.64 per barrel against $0.08 a barrel a year ago.

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Daily Market Analysis – 17th May 2021 (IPO)

byNilofer ShaikhMay 17, 2021

Upcoming IPO

Supriya Lifescience IPO

Supriya Lifescience has filed for preliminary papers with SEBI to raise 120 Crore through IPO. It is one of India’s key manufacturers and suppliers of API with its focus on research and development. The IPO is said to issue fresh equity shares worth Rs200 Cr and an offer for sale of up to Rs 1,000 Crore by its promoter Satish Waman Wagh. The proceeds from the IPO will be utilized for the Capex requirements, repayment of the debt, and general corporate purpose. Supriya Lifescience has product offerings of 39 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, and anesthetic, vitamin, anti-asthmatic and anti-allergic.

CarTrade IPO

CarTrade has filed with SEBI to raise Rs2000 Cr through IPO. There is no fresh issue of shares, the IPO consists of a pure OFS or offers for sale of 12,354,811 equity shares. The IPO will facilitate a partial exit for CarTrade investors like Warburg Pincus, Temasek, JP Morgan, March Capital, and other parties who are the selling shareholders. CarTrade.com is an online auto marketplace providing buyers and sellers a structured platform for transacting in new and used vehicles. The firm competes with the likes of Droom, Cars24, Quikr, Olx, and Mahindra First Choice Wheels.

Devyani International IPO

Devyani International files to raise Rs 1400 Cr IPO. It is the largest franchise operator of global restaurant chains like Pizza Hut, KFC, and Costa Coffee. It is the third Quick service Restaurant filing for an IPO this year after Burger King and Barbecue Nation. Devyani International is an arm of conglomerate RJ Corp, the largest bottler for Pepsi Co in India and it currently operates 692 stores of global restaurant chain Yum Brands owned KFC and Pizza Hut, British Café Costa Coffee, and its own brand including Vangoo and Food Street. Devyani International is currently operating in 155 cities of India besides Nepal and Nigeria.

More People willing to make a will

Legal firms and lawyers are witnessing an increase in the consultation on Will and Estate Planning. According to Will Jini, it has witnessed a 400% increase in the number of queries at over 58000 queries in FY21 as compared to 15600 queries in FY20. The cities with major inquiries about will and estate planning are coming from Mumbai, Bengaluru, Delhi, Pune, Gurgaon, Hyderabad, Chennai, Ahmedabad, Kolkata, and Chandigarh.

Also read: Realising the importance of having a WILL during this Pandemic. All about wills. – Fintoo Blog

Shrink in Oil Demands due to Covid Restrictions

The demand for oil in India has worsened as the country is witnessing strict lockdown and curfews in various states. Road transport fuels dropped by a fifth during May 1-15 as compared to the previous month and 28% as compared to the year 2019. A sharp drop in the consumption of oil from the third biggest crude oil consumer will weigh on sentiment on oil prices and damp expectations for a strong global demand rebound in the summer. 

Shilpa Medicare to tie-up with Dr. Reddy’s for production of Sputnik V vaccine

Shilpa Medicare Limited has tied up with Dr. Reddy’s Laboratories Limited for the production of the Sputnik V vaccine. The company on Monday announced that its wholly-owned subsidiary Shilpa Biologicals has entered into a 3-year definitive agreement with Dr. Reddy’s for production supply for Sputnik V vaccine from its integrated biologics R&D cum manufacturing center at Dharwad, Karnataka. DRL has partnered with HVI/RDIF for the clinical development of the vaccine and has distribution rights in geographies including India. Under the agreement, SBPL will be responsible for the manufacture of the vaccine, while DRL is responsible for the distribution/marketing of the vaccine in its marketing territories. The companies are also exploring the option to manufacture Sputnik Light, a single-dose version of the vaccine in the near future.

McDonald’s plans ₹100 crore investment to open 30 outlets this fiscal

Westlife Development, which operates McDonald’s restaurants in the southern and western region in India, plans to invest Rs 100 crore to open up to 30 outlets of the quick-service restaurant brand in the current financial year. In the last quarter of 2020-21, 55-60 percent of the company’s sales came from convenience channels and 40-45 percent from in-store business. Vice President Amit Jatia said that he is bullish about FY 22 leaving out the next 2-3 months

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Daily Market Analysis – 11th May 2021 (Industry)

byArpita MundharaMay 11, 2021

Sugar Industry

India’s sugar production is forecast to grow 17% to 33.7 million tonnes in the year ended September 2021. Indian sugar mills may achieve their target of exporting 6 million tonnes of the sweetener by the end of June, three months before September 

The surge in exports is mainly due to firm global prices and subsidy, which have made the overseas markets lucrative.

The government is also encouraging sugar mills to divert excess sugar and sugarcane for the production of ethanol, which is blended with petrol. This is a step towards improving the liquidity position of sugar mills, which are grappling with a cash crunch.

Steel & Iron Ore Industry

China is the world’s top steel producer and biggest consumer of iron ore, the key steelmaking ingredient. A recent spike in prices for the material, partly fuelled by supply concerns, continued with a 10% limit-up surge on Monday. 

China announced a series of measures on Friday to tighten controls on steel capacity, in an effort to curb pollution in key areas as well as reduce “blind investments and disorderly constructions”. The commodity exchanges on Monday moved to raise trading limits and margin requirements for some iron ore contracts and reinstated fees on steel futures as a blistering rally in the ferrous metals complex showed no signs of stopping

Exports-Imports

India’s exports grew by 80 percent to $7.04 billion during the first week of this month. Imports too rose by 80.7 percent to $8.86 billion during May 1-7, 2021 as against $4.91 billion in the same period last year

Major export commodities which are recording healthy growth include gems and jewellery, jute, carpet, handicrafts, leather, electronic goods, oil meals, cashew, engineering, petroleum products, marine products and chemicals.

Also read: The government announced PRODUCTION LINKED INCENTIVE schemes (fintoo.in)

Aviation Limited

The board of directors of InterGlobe Aviation Limited, which operates the country’s largest domestic airline IndiGo has approved raising up to  ₹3,000 crores through a Qualified Institutions Placement (QIP) process.

QIPs are a way to issue shares to the public without going through standard regulatory compliance.

The latest decision by IndiGo’s board of directors comes at a time when airlines are struggling with a declining passenger demand due to an unabated rise in fresh covid cases across the country. 

Automobile Industry

The second wave of Covid-19 is spreading beyond urban areas to rural belts, resulting in automobile registrations across the country.

Automobile registrations across the country dropped by 32 percent last month as compared to April 2019 with passenger vehicles showing a decline of over 11 percent.

Commercial vehicles witnessed a downswing of 34.58 per cent to 51,436 registrations versus 78,630 in the same period.

Two-wheeler registrations totaled 8.65 lakh last month compared to 13.38 lakh in April 2019, marking a downturn of 35.35 percent. Passenger vehicle registrations edged lower by 11.56 percent to 2.08 lakh from 2.36 lakh in the two-year-ago period.

However, tractor registrations rose by 3.52 percent to 38,285 last month compared to 36,984 in April 2019. That took overall vehicle registrations to 11.85 lakh in April 2021, down 31.83 percent from 17.38 lakh in April 2019.

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Invest to save tax now! Best handpicked ELSS schemes

byfintooMarch 24, 2021

What are ELSS Funds?

Equity Linked Saving Schemes (ELSS), popularly known as tax saving mutual funds, are equity-oriented mutual funds. As per the SEBI regulations, ELSS funds have to invest at least 80% of their corpus in equity or equity-related instruments.

These funds come with a lock-in period of 3 years and qualify for tax deduction under Section 80C. Investments in ELSS of up to Rs 1.5 lakh per financial year can be claimed as tax deduction under this Section.

Why invest in ELSS funds for saving tax?

ELSS schemes have superior product features than other tax saving investment options under Section 80C like PPF, ULIP, NSC and tax-saving bank FDs.

Higher returns: Even though equities as an asset class can be very volatile in the short term, they usually beat other asset classes including the fixed income asset class by a wide margin over the long term. Hence, being invested in equities, ELSS funds have the potential to generate higher returns other Section 80C instruments like Public Provident Fund (PPF), National Savings Certificate (NSC) and tax-saving bank fixed deposits over the long term.

Shortest lock-in period: The lock-in period of ELSS funds is just 3 years, the lowest among all tax saving investment options eligible for Section 80C deduction. Among other Section 80C options, NSC and  tax-saving fixed deposits has a lock-in period of 5 years. The lock-in period of PPF is also 15 years whereas the lock-in period in the case of ULIPs is 5 years. Thus, ELSS funds offer the highest form of liquidity among all tax saving investment options.

As ELSS funds offer the greatest potential of creating wealth over the long term, these can be an excellent tool for achieving long term financial goals like children’s education fund and post-retirement corpus with contributions lower than its fixed-income alternatives.

The 3-year lock-in period in ELSS funds also reduces the redemption pressure for their fund managers during volatile markets. This allows their fund managers greater flexibility to take a more long-term view while dealing with market volatility with respect to other open-ended funds.

Best ELSS funds for tax saving in 2020-2021

1. Mirae Asset Tax Saver Fund

• Aims at building a diversified portfolio of strong growth companies at a reasonable price across market capitalization, themes and investment styles
• Uses a bottom-up approach for stock selection driven by value investing in growth-oriented businesses
• Investment decisions are based on broad analyses of the macroeconomy, business cycles and industry trends
• Prefers companies with high return ratios, robust business models and sustainable competitive advantages over their competitors
• Aims to invest in a large base of stocks to avoid concentration risk
• Monitors the trading volumes of identified stocks before investment to avoid liquidity risk

2. Aditya Birla Sun Life Tax Relief 96

• Uses a combination of bottom-up and top-down approach for stock selection
• The top-down approach helps in analyzing changing economic trends, key policy changes, macroeconomic factors, infrastructure spending, etc
• The bottom-up approach is used to identify companies with a strong competitive position in good businesses and stable management focused on long term fundamental growth

3. Kotak Tax Saver

• Uses a bottom-up approach for stock selection across market capitalization
• Invests in stocks priced at a material discount to their intrinsic value
• Prefers companies with strong financials, reputed management and relatively less susceptible to recession or business cycles
• Also prefers companies with strategies to build strong brands and franchises

Related article: How ELSS is better than any other Tax saving scheme?

4. Axis Long Term Equity Fund

• Invests in quality businesses with a long-term approach
• Uses a bottom-up approach for stock picking
• Can invest across market capitalization, usually in a mix of large caps (around 50-100%) and select midcaps (up to 50%)
• Quality and long-term earnings growth prospects are also used for stock selection
• Uses a research process based on fundamentals to analyze the growth potential of stocks having strong business models and sustainable competitive advantages over their competitors

5. Motilal Oswal Long Term Equity

• Follows an investment style and philosophy based on the ‘Buy Right: Sit Tight’ principle
• ‘Buy Right’ refers to buying quality stocks at a reasonable price
• ‘Sit Tight’ refers to remain invested for a longer time to realize the maximum growth potential
• Follows bottom-up approach for stock selection
• Uses a benchmark agnostic approach to build a portfolio consisting of high conviction stock ideas and low portfolio churns
• Believes inadequate diversification with a smaller number of stocks

Important points to select the best ELSS funds:

• Compare the past performance of 3-, 5- and 7-year periods while making fund-selection. While no one guarantees past performance in future, comparing their past returns can help in depicting how they coped with various market conditions.
• Don’t wait for the last quarter or month of the financial year for investing in ELSS. High valuations in the equity market at that time, if any, would cost you more for the ELSS fund units. Instead, opt for the SIP option to spread your investments across the year and benefit from cost averaging during a market correction, if any, in the interim.
• Don’t opt for the dividend option. Instead, opt for the growth option to benefit from the power of compounding. Dividends are also taxable at the hands of investors as per their tax slab.

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