Daily Market Update -Aug 17th

unnamed Daily Market Update   Aug 17th


Gold imports in the Apr-Jun period dipped sharply in the back of higher prices. While gold imports fell by 81% in this period on a YOY basis to $2.47 billion, silver imports fell by 56.5%. The sharp fall in the imports of gold and silver has helped India narrow its trade deficit, although the figure has gone up to $4.83 billion in the month of July. More importantly, the Indian government and the RBI can breathe easy that less forex reserves are being spent on unproductive assets like gold and silver. The fall was actually much sharper in gold imports during the months of March, April, May and June this year.

Foreign portfolio investors have infused Rs.28,203 crore into Indian markets in the first 2 weeks of August. According to the data put out by NSDL, the flows into equity were to the tune of Rs.26,147 crore in the first two weeks. While this was largely aided by the massive Bandhan Bank share placement, FPIs have shown consistent inflows on a daily basis. More interesting is that FPIs also infused Rs.2056 crore into debt and this is the first time in the last five months that FPIs have been net buyers in debt. Clearly, after the status quo in August and higher inflation, FPIs are betting on higher yields on Indian bonds.

It was a week of losses for the heavyweights during the week as 6 out of the 10 most valuable companies on the Nifty lost Rs.78,275 crore in market cap. During the week ended 14 August, Reliance lost Rs.20,666 crore in market cap while TCS lost Rs.19,700 crore. Bharti Airtel also tanked Rs.17,294 crore during the week. HUL, HDFC Bank and Kotak bank lost over Rs.21,000 crore between them. On the gaining side, HDFC managed to add Rs.12,610 crore in market value during the week. Other stocks like Infosys, ICICI Bank and ITC did add heft, but was marginal at best.

Nomura expects India to post a current account surplus of 0.4% of GDP during the calendar year 2020, despite the trade deficit widening to $4.83 billion. The strong accretion in dollar reserves is indicative of the fact that RBI hardly has to intervene in the dollar market. The 0.4% current account surplus contrasts with 1% current account deficit in the previous year. Low oil prices and weak gold demand will keep the current account favorable for India. Nomura estimates that, even though, imports and exports are expected to pick up in the coming months, private flows would still remain robust.

Tata could seriously consider selling its stake in JLR and in UK Steel, after its rescue talks with the UK government looked most likely to fail. Tata group may, most likely, look for a strategic partner for JLR and may look to exit British Steel entirely. The Tata Group has been unhappy with the European operations of the group as they have been bleeding the finances of the group. The Liberty Group of UK, owned by Sanjeev Gupta, had expressed interest to partner with Tata Steel for its Port Talbot projects. In the case of JLR, the company is becoming a white elephant and has already lost £1 billion in the first six months of calendar year 2020. Apparently, JLR has been valued at £9 billion and BMW had expressed interest in the company, although the reports have not yet been confirmed as of date.

In an ironic twist, it looks like Warren Buffett has heavily sold out of banks in the June quarter and has started taking bigger positions in gold. Buffett had traditionally been averse to gold as an asset class. During the quarter, Buffett substantially exited his positions in Wells Fargo, the US bank which Buffett had been holding in his portfolio for over 40 years. Rather than buying gold as a metal, Buffett has been accumulating Barrick Resources, a gold miner. It may be recollected that in its AGM, Buffett had also rued his investments in airlines and had almost entirely exited his positions in the aviation industry.

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