Daily Market Update DEC 21

unnamed Daily Market Update DEC 21

Foreign portfolio investors infused Rs.54,980 crore into Indian markets in the first 3 weeks of Dec-20 as global liquidity continued to remain buoyant. Hopes of the $900 billion US stimulus package also kept the Indian equity markets on the FPI radar. FPIs infused Rs.48,858 crore into equities and Rs.6,122 crore into debt. The positive flows into debt were the positive surprise. This comes on top of Rs.62,951 crore infused by FPIs into Indian markets in the month of Nov-20. Since the end of October, there has been a major risk-on trade that has diverted funds towards EMs. Vaccine hopes have also been a booster.

The proposed privatisation of Air India may spill over to fiscal 2021-22. Tata Group, erstwhile owners of Air India, and Interups Fund of the US have put in preliminary bids for Air India. In addition, 200 employees of Air India have also submitted an EOI for Air India in partnership with Interups Fund. The official transaction advisor will announce qualified bidders by 06-Jan. Subsequently, bidders get access to the virtual data room; post which the financial bids will be solicited. In fact the government expects numerous queries and clarifications as Air India has been in losses since its merger with Indian Airlines in 2007. The airline comes with 4400 domestic and 1800 international landing & parking slots at domestic airports plus 900 slots at overseas airports. It is still not clear how much debt will vest with the buyer.

SEBI has given certain relaxations to NRIs with respect to holding of depository receipts or DRs issued by companies listed in India. NRIs will now be allowed to hold DRs issued by companies under ESOS, bonus issues and rights issues. It may be recollected that in late 2019, SEBI had barred NRIs from buying DRs issued by India-listed companies. However, SEBI has clarified that with the exception of the above cases, NRIs shall not subscribe to further issue of DRs or buy DRs from the secondary market. It behoves on the listed company to identify such NRI holders issued DRs in terms ESOS, bonus or rights and inform SEBI.

With the Union Budget 2021 just over a month away, Indian economists urged the FM to relax fiscal deficit consolidation look to boost exports. The economists also called for raising spending on health and focusing on agriculture infrastructure. They suggested a return to FRBM framework after a few years. Ironically, the fiscal deficit had crossed the budget estimates by 20% by end of October. The final fiscal deficit is expected at 8% of GDP. Representatives of the industry bodies urged the FM to boost demand via lower personal income-tax rates as it would increase the tax base and also the tax-to-GDP ratio.

On the Nifty, 8 out of 10 most valuable companies added Rs.125,229 crore in market cap. Companies like HDFC, TCS and Bajaj Finance emerging the biggest gainers in the week. During the week, the Sensex had gained 862 points. The only two companies to see loss in market value were RIL and HUL. Among the gainers, HDFC gained Rs.32,993 crore; TCS Rs.29,700; Bajaj Finance Rs.24,643 crore; HDFC Bank Rs.15,997 crore and Infosys Rs.11,377 crore. Kotak, Bharti and ICICI Bank made smaller gains. Among the losers HUL saw its market cap erode by Rs.9,868 crore and Reliance Industries by Rs.8,463 for the week.

Despite being a pandemic year, 2020 saw Indian companies raise Rs.9.85 trillion via equity and debt. While buoyant capital markets and liquidity helped equities, bonds were helped by low borrowing costs. Out of the total Rs.9.85 trillion raised, Rs.7.35 trillion came from debt and Rs.2.50 trillion came from equities. Nearly, 98% of the debt funds were raised through private placement. The investment appetite was driven by a plethora of factors like quick economic recovery, positive cues on the vaccine program, ample liquidity in the system and a global appetite for EM paper. This is around 5% lower than the funds raised in 2019, which is commendable considering the challenges faced by Indian companies during the year. Funds were raised to create a war chest, for future expansion plans and to repay high cost debt.

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