Previous Day Market Update
Sensex closed at 59,299.32 Up by 533.74 points
Nifty closed at 17,691.25 Up by 159.20 points
In a move that was long overdue, the RBI superseded the boards of SREI Infrastructure Finance and SREI Equipment Finance. It has already appointed an administrator to run the entities till NCLT process starts. SREI will be the second NBFC to be specifically referred to the NCLT for liquidation under instructions from the RBI after Dewan Housing. With outstanding loans of Rs.28,000 crore owed to banks and creditors, SREI surely poses a systemic risk to the financial system. NCLT will now invite interested buyers for SREI.
Adani Green Energy, one of the blue-chip companies of the Adani group, announced the acquisition of SB Energy India for a consideration of $3.5 billion. Adani confirmed that it was an all-cash deal. SB Energy was formerly 80:20 owned by Softbank of Japan and Bharti group and is now a 100% subsidiary of Adani Green Power. This marks one of the biggest inorganic deals till date in the renewable energy space. This is part of the Adani group’s larger plan of investing $20 billion in renewable energy over the next 10 years.
For the month of Sep-21, India’s gold imports surged by 658% to $5.1 billion from a low level of $600 million in September last year. India is the world’s second largest bullion consumer after China. Its import of gold stood at a total of 91 tonnes in Sep-21 and to 288 tonnes for the Sep-21 quarter. Amidst low prices, jewellery retailers have stocked up heavily on gold ahead of the festive season. The RBI normally has a problem with a surge in gold imports as it leads to the use of precious forex for unproductive gold buying.
With Zee refusing to convene the EGM at the behest of Invesco Fund and approaching the courts to strike down the NCLT order, the battle gets grimmer. Now Invesco has moved the NCLT to pass a mandatory order directing Zee to call for an EGM. They have also called for the EGM to be chaired by a retired High Court judge. Zee has firmly held on to the view that any management changes at Zee needs the prior approval of I&B Ministry under Uplinking Rules. The matter will be now heard by NCLT on 05th October.
Divi’s Laboratories touched a record high of Rs.5,314 on the BE after positive news flows on the stock. The US based Merck and Ridgeback Biotherapeutics announced that their oral antiviral medicine Molnupiravir had significantly reduced the risk of hospitalization for mild-to-moderate COVID-19 patients. This bodes well for Divi’s as it is the authorized manufacturer of Molnupiravir API. Divi’s is already among the top-3 API manufacturers in the world. Brokers have upgraded the stock price target of Divi to Rs.5,800-Rs.6,000.
Sugar stocks like Balrampur Chini, Triveni Engineering and Dalmia Bharat gained over 5% on Monday after India reported 20% rise in sugar exports for the 2020-21 sugar year to 7.1 million tonnes. There was better global demand for Indian sugar and also helped by price subsidies given by the Indian government. In the previous sugar cycle year, sugar exports stood at 5.9 MT. Meanwhile sugar companies are enhancing their distillery capacity between 2X and 3X to make the best of the ethanol opportunity and improve profits.
As per S&P’s latest SPIVA India scorecard, most active funds had underperformed the index. For the year ending Jun-21, 86% of the large cap funds, 57% of the small & mid cap funds and 54% of the ELSS funds had done worse than the index benchmarks. This report is compiled every 6 months. It is not just the short term. Even over a 5-year period, 82.7% of large cap funds, 76.2% of mid-cap funds and 69.6% of ELSS funds underperformed the benchmark indices. Bond funds also deeply underperformed the bond indices.
The IT sector appears to be driving the demand for office space in most major cities. For Sep-21 quarter, according to Knight Frank, 12.5 million SFT of office space was absorbed across major cities, representing a growth of 168% yoy. Chennai, Bengaluru and NCR recorded the highest recovery in the Sep-21 quarter, doubling from their pre-COVID median levels. IT sector absorbed nearly 34% of the space transacted. Corporates are planning to get back to working from office and that bodes well for fresh office demand.
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