Daily Market Update Dec 16

unnamed Daily Market Update Dec 16

In the midst of the ongoing battle between the Tatas and the Mistry family, the latter has now demanded that Tata Sons apply to NCLT for approval to convert into private limited company. Mistry counsel, C A Sundaram, argued that this was mandatory under the new Companies Act 2013. Tata Sons had applied to the ROC to convert into a private limited company. As a result of this conversion, Tatas had managed to block the recent proposal by Mistry family to pledge their stake in Tata Sons. The hearing will continue in the court on 16 December, and there appears to be no easy solution in sight.

There is good news on the growth front. S&P Global Ratings raised India’s growth projection for the current fiscal to -7.7% from -9%. This upgrade comes on the back of rising demand, improving output and falling COVID infection rates. S&P has also highlighted that the agency’s revision reflects the faster-than-expected recovery in the quarter through September. For the year 2021, S&P Global has projected India’s growth to rebound to 10%. It may be recollected that in the Sep-20 quarter, India’s GDP fell by 7.5%; much better than the 23.9% contraction seen in the Jun-20 quarter. S&P also pointed out that India was following the path of most Asian economies in a faster-than-expected economic recovery and in manufacturing. S&P has also lauded the resilience of supply chains of majority of Indian companies.

Bajaj Finance is the latest Indian company to enter the exclusive club of Indian companies with market cap in excess of Rs.300,000 crore. The stock has gotten close to Rs.5000 in a short span of time. What has been gratifying about Bajaj Finance’s performance is that it has come in the midst of flat and even falling market conditions. Bajaj Finance market cap stood at Rs.3 trillion. There are currently 9 companies in India with a market cap of Rs.300,000 crore. Bajaj Finance has benefited from higher than expected operating profit and stable asset quality. Bajaj Finance adopted a leaner model in tough times.

It was a phenomenal bounce from lower levels by the Sensex on 14 December. After staying in negative territory for most part of the day, the indices almost closed flat. In the process the Sensex recouped nearly 430 points from lower levels. There was aggressive buying in select financials and in IT stocks. The Sensex ended the day at 46,263; up 10 points. Some of the stock that bounced sharply from lower levels on 14 December included HDFC Twins, Bajaj Finance, Bajaj Finserv and HCL Tech. The recovery was also supported by the Volatility index or ended marginally lower at 19.3 levels, hinting at limited downsides.

The latest to enter the fray for Air India is the Tata Group, which once owned the national carrier. There are two known suitors for Air India. While one is the Tata Group, another possible suitor is consortium of Air India employees; who are also bidding for Air India. With the Tatas already present in aviation via Air Asia and Vistaara, this also gives hopes of consolidation in the aviation industry. If Air India falls into the lap of the Tatas, then Air India, Air Asia and Vistaara will encompass domestic market share of 23%. This will make it the second biggest after Indigo. Currently, Indigo enjoys 55% market share in India.

Indian companies have been asking the government for tweaks in the production-linked incentive or PLI scheme that is intended to encourage FDI into India. Indian companies have demanded a level-playing field for local manufacturers. Under the PLI, the government will support such new ventures to the tune of $26 billion. The main aim of the PLI scheme is to attract FDI, helping local manufacturers achieve scale and give a boost to Indian exports. For example, the telecom players have been lobbying with the government for incentives to local value addition beyond just assembly operations. Indian businesses have also demanded a relatively simpler incentive disbursement process. Major outsources like Dixon have pointed that the PLI tilts more toward new companies entering India compared to incumbents.

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