Daily Market Update – Dec 18th 2020

unnamed Daily Market Update – Dec 18th 2020

Defence Ministry approved the purchase of weapons and military equipment worth Rs.28,000 crore. The quick approval assumes significance as the border stand-off with China continues. The good news for the Indian defence companies is that out of this total allocation, Rs.27,000 crore will be allocated to acquiring equipment and weapons locally. This will be a boost for the Atma Nirbhar plan laid out by the government last year. These include Airborne Early Warning Systems by DRDO for the Indian Air Force, next generation offshore patrol vessels for the Indian Navy and modular bridges for the Indian Army.

Mrs Bectors Foods IPO closed on 17 December garnering over 199 times oversubscription for the issue. This is the best oversubscription performance for the year, beating the 157 times oversubscription that Burger King received. At the close of the last day of the IPO, Bectors Foods had received applications for shares worth Rs.75,486 crore against the issue size of just Rs.379 crore. Mrs Bectors Foods is one of the leading domestic players in bakery and biscuits and among the largest suppliers of bakery products to Burger King and other QSRs. The QIB portion of the IPO was subscribed 178 times while retail portion was subscribed 29.5 times. The real icing on the cake was from non-institutional HNI segment which got oversubscribed 625 times; largely supported by funded IPOs. The upper end of the price band is Rs.288.

Brent crude prices touched a 9-month high of $51.22/bbl on 17 December. During the trading session, the price of Brent Crude had scaled a high of $51.90/bbl before tempering towards the end. Oil prices have been on a roll in the last 2 months from the level of $36/bbl, which is a gain of over 45% in less than two months. While the Brent prices celebrated an imminent US fiscal stimulus package, oil prices also gained from buoyant demand from Asia. Apart from the demand side, supply side got constrained by the continuation of OPEC supply cuts. Biden is also seen as averse to shale fracking on Federal lands.

Foreign portfolio investments into India crossed Rs.100,000 crore in 33 trading sessions flat. This began with the new Samvat year and since the beginning of November 2020 the markets have seen more than Rs.1 trillion being infused into Indian equities by FPIs. While these flows were largely driven by increased weightage for India in the MSCI EM Index, other factors like a Biden victory in the US elections, a sharp turnaround in growth impulses in India and a 150% growth in net profits of Indian companies in Sep-20 quarter played a big part. An assurance of sustained monetary accommodation has also been helpful.

Dharmendra Pradhan has announced that the government would be investing up to $60 billion (Rs.450,000 crore) between now and 2024 to bolster gas infrastructure in India. In the process, the government expects that the share of gas in the energy mix will go up from 6% today to 15% by the year 2030. The total investment will be spread across gas pipelines, LNG infrastructure and city gas distribution (CGD) networks. The government during the current year managed to fill up its entire petroleum reserves of 5.33 MT. This storage is spread across Visakhapatnam, Mangalore and Padur.

In order to encourage more start-ups to the IPO market, SEBI has proposed relaxing some of the norms for such start-up IPOs. These relaxations will include easier norms, reduced holding period for per-issue capital and allowing discretionary allotment to eligible investors. Start-ups will also get a bigger boost for their IPO plans as the proposed changes also envisages differential voting rights or DVR for the promoters and also allowing institutional investors to hold superior voting rights. SEBI has also suggested reducing the period of holding of 25% of the capital from the existing two years to just one year. SEBI may allow allocation of 60% of the total issue on discretionary basis prior to opening up of the issue. Another proposal is to exempt AIF Category-2 investors from post-issue lock-in requirements.

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