Daily Market News – Aug 10th

unnamed Daily Market News   Aug 10th

 

In a major step towards Atma Nirbhar or self-reliant India, the defence minister Rajnath Singh announce the list of 101 defence items in which imports will be banned. Hence, the Indian defence establishment will be required to buy this equipment only from Indian suppliers. This is an opportunity for the defence research laboratories to undertake the domestic design and manufacture of such items in the negative import list. This embargo will be progressively implemented between 2020 and 2024. Some of these items include, towed artillery guns, rocket launchers, bulletproof jackets, helmets, warships etc.

The Asian Development Bank or the ADB has estimated that the impact of the COVID-19 will compress foreign remittances into Asia by nearly $55 billion this year. That will be a huge impact as India gets a lot of its inflows in the form of remittances from abroad, especially the Middle East. However, the slowdown in most countries has led to loss of jobs and purchasing power and that has resulted in lower earnings for most expat employees working abroad. For India, this has larger repercussions as it depends heavily on these foreign remittances to bridge the current account gap.

Foreign portfolio investors or FPIs remained net buyers in the first week of August. They infused Rs.8327 crore into India in the first week, which included Rs.7842 crore into equities and Rs.485 crore into debt. The equity flows were largely driven by the bulk share placement of Bandhan Bank as the promoters wound up promoter holdings in line with the RBI stipulations. That accounted for a bulk of the inflows and hence may not be too representative. On the debt side, the pressure has sustained as negative real rates continues to be a major risk-off factor forcing FPIs to move money out of Indian debt.

India’s 10 most valuable companies managed to add Rs.74,240 crore in market cap in a week when the overall markets did not show too much of directional movement. Reliance Industries, TCS, HDFC Bank, Bharti Airtel, ITC and ICICI Bank managed to log gains during the week. However, Hindustan Unilever, HDFC, Kotak Bank and Infosys logged losses during the week. The big driver, as usual, was Reliance Industries which saw its valuations get an Rs.50,600 crore boost after hints that the retail business too may get a very fancy valuation. On the downside, Infosys lost nearly Rs.6700 crore in market cap.

According to a report published by BOFA Securities, Reliance Industries may be embarking on a 15-year plan to convert itself into a new energy company. In the last few years, it is the Jio and the retail business that has contributed immensely to its valuation with the oil business in the rut due to weak crude oil prices and tepid gross refining margins. However, the model may be about to shift. RIL will continue to remain a major consumer of oil for its refining business. However, RIL is also positioning itself as a company that aims to recycle CO2 to create value from plastic waste with an optimal mix of clean and affordable energy. It appears from the report that RIL sees new energy as the future of its O2C business. This will coincide with the company becoming net zero carbon company by the year 2035.

Even as Trump has threatened to ban Tik-Tok in the US and Microsoft has been trying to make a bid for the US operations of Tik-Tok, it is reported that even Twitter has been in talks. However, there are some serious apprehensions if Twitter will have the deep pockets to bankroll an acquisition of such a size. Twitter has a market cap of $30 billion against $1.6 trillion for Microsoft, so pockets will be a big issue for Twitter. Meanwhile, Tik-Tok will be filing a Federal lawsuit challenging Trump’s executive order banning Tik-Tok from the US. Tik-Tok has called this decision by Trump totally unconstitutional.

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