Daily Market Update JAN 20

unnamed Daily Market Update JAN 20

The government plans to sell its total stake in Tata Communications to the tune of 26.12% in the current fiscal via offer for sale. It may be recollected that VSNL had been divested in 2002 to Panatone which later became Tata Communications. It is estimated that the sale of 26.12% in Tata Communication at the current market price will fetch the government close to Rs.8,400 crore. Currently, the promoters hold 74.99% of which Panatone holds 34.8%; government holds 26.12% while Tata Sons holds 14.07%. The remaining 25.01% is held by the general public. This will help boost divestment revenues this year.

Government is now seeking to tweak FDI rules in ecommerce to give a big boost to the high growth potential of this sector. This will specifically refer to ecommerce units that already have FDI holding in them. As per the current rules, 100% FDI is permitted in marketplace e-commerce that is agnostic in nature. However, FDI is prohibited in any inventory based activities. This announcement assumes special significance because the confederation of Indian Traders (CAIT) has already made representations to the Enforcement Directorate about such FEMA violations by the likes of Amazon and Wal-Mart. FDI in retail has always been a sensitive topic since the retail sector in India is still largely unorganized and is one of the biggest employment providers in India. Any loosening of FDI rules is likely to meet a lot of resistance.

A day ahead of the opening of its IPO, Indigo Paints has managed to mop up a sum of Rs.348 crore from anchor investors. Indigo Paints is backed by Sequoia Capital and the IPO is to be open from 20 Jan to 22 Jan. A total of 23.35 lakh shares were allotted to 25 anchor investors at the upper end of the price band of Rs.1490 per share. Some of the marquee anchor investors included GIC Singapore, Fidelity, Goldman Sachs, Nomura, Government Pension Fund, HSBC, SBI MF, HDFC MF, ICICI Pru MF etc. The Rs.1170 crore IPO will consist of fresh issue of shares worth Rs.300 crore and an offer for sale worth Rs.870 crore.

Mumbai based affordable home financer, Home First Finance Corporation, has announced that its IPO will open for subscription on 21-Jan. The company had got IPO approval back in March but had held back due to the pandemic. The total issue size will be Rs.1154 crore consisting of fresh issue of Rs.265 crore and an offer for sale of Rs.889 crore. Home First will be the third IPO this calendar year after IRFC and Indigo Paints. There are a total of 6 IPOs that are slated to hit the market in Jan-2021. The company has generated interest due to the highly lucrative affordable home segment being a high growth area.

On a day when DCM Shriram announced stellar results with profits growing 44% on a yoy basis, there were also some interesting announcements on the growth and expansion front. DCM Shriram has now committed to invest Rs.1000 crore into its chemicals business. The funds will be raised from the internal cash flows of the company so there will not be any debt or equity dilution. The investment pertains to its facility in Bharuch in Gujarat. With the fresh investment, the plant will produce 150 tons of hydrogen peroxide per day, 150 tons of ECH per day and enhance aluminium chloride output from 60 to 150 tpd.

After losing over 1000 points between Friday and Monday, the Sensex recovered 834 points on Tuesday, almost erasing the losses of the last two days. The sharp bounce in the market was led by stocks like Bajaj Finance, Bajaj Finserv, HDFC, ICICI Bank, L&T and Reliance. Many of these results are expected during this week and there was a clear rush to cover short positions in these counters. Interestingly, the mid cap index outperformed the large cap Nifty, gaining close to 3% giving hints of a broad-based rally. The gratifying factor was also the sharp fall of 6% in the VIX. The positive sentiments came from Asia after China reported GDP growth of 2.3% for CY2020. This may be the lowest rate of growth for China in 44 years but in a year when all large economies are contracting, that is surely a commendable show.

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