Daily Market Update – Dec 17th 2020

unnamed Daily Market Update   Dec 17th 2020

The US Treasury Department declared Switzerland and Vietnam as “Currency Manipulators” and put 3 countries including India on the watch list. The watch list normally includes countries that the US suspects are trying to devalue their currencies to promote exports. Trump had pointed that the central banks of Switzerland and Vietnam had heavily intervened in currency markets. Switzerland has dismissed the currency manipulator charge. This tag is only assigned to countries that run trade surplus in excess of $20 billion with the US. Apart from India, Thailand and Taiwan were also added to the list.

It was a case of blow-hot and blow-cold for SEBI. The regulator paved the way for Fintech companies and other start-ups to set up AMCs in India. At the same time, SEBI tightened the shareholding norms for companies re-listing after undergoing corporate insolvency resolution. However, the condition of minimum net worth has been doubled to Rs.100 crore for AMCs. This move is expected to encourage some of the high profile Fintech outfits like Paytm, PhonePe and Mobikwik to set up mutual fund businesses. In the last few months, a number of Fintech firms had shown interest in the domestic mutual fund space. While the AMC space has over 40 players, the top 10 funds account for 85% of the total AUM. That needs to change. It is also hoped that Fintechs would catalyze a wider customer base.

The Cabinet is currently considering a proposal to provide export subsidy worth Rs.3,600 crore to sugar mills for 2020-21. Sugar companies follow the standard sugar annual cycle stretching from October to September. The Rs.3600 crore subsidies will be for export of 6 million tons of sugar during 2020-21. In the sugar cycle year 2019-20, the government had provided a lump-sum export subsidy of Rs.10,448 per tonne and the same had cost the government Rs.6200 crore. In 2019-20, sugar mills exported 5.7 MT of sugar as compared to mandatory quote of 6 MT. India needs to desperately reduce sugar inventories.

Hero Motocorp will increase prices of all its vehicles by up to a maximum of Rs.1,500 effective from 01 Jan 2021. The hike in price was intended to offset the impact of rising input costs; which had gone up sharply in the last one year. Most commodity prices including steel, aluminium and ore have become more expensive. Hero Moto has confirmed that the price hike will vary across different models. Hero Moto is not alone. Other auto manufacturers like Maruti Suzuki, Ford India and Mahindra and Mahindra have already declared their intent to hike prices. This will partially offset the impact of rising input costs.

Vedanta will raise $8 billion through a mix of debt and equity to fund the acquisition of the 52.98% stake of the Indian government in BPCL. Vedanta initiated talks with a consortium of banks to tie up the funds. The stake sale in BPCL is part of India’s aggressive divestment program; supposed to collect Rs.105,000 crore in fiscal 2021; excluding the LIC IPO. This sale of BPCL will fetch the government Rs.45,000 crore. The company that is finally shortlisted will be required to make an open offer to acquire an additional 26% stake from the public. BPCL will be a forward integration for Vedanta’s oil extraction business.

Oil marketing companies in India or OMCs have been in the spotlight for the last few weeks. In fact, from the lows of September and October this year, the stocks of HPCL and IOCL are up nearly 40%. IOCL derives a significant portion of its revenue from the refining business and the higher crude oil prices are helping these companies with better gross refining markets as well as higher inventory valuations. Also, the volume recovery has taken refinery utilization rates for IOCL close to 100% as compared to just 80% in the previous year. The downstream companies are already enjoying the benefits of higher marketing margins more than doubling to Rs.6.6/litre. Macquarie has already projected HPCL earnings to double in the next couple of years. There is also a valuation case as IOCL and HPCL trade at 5X forward earnings.

Related Post

Add a Comment

Your email address will not be published.