Daily Market Update DEC 22

unnamed Daily Market Update DEC 22

It was a virtual carnage on Dalal Street on 21-Dec as the Sensex dropped as much as 2037 points at one time before closing 1,407 points lower. In the process, nearly Rs.660,000 crore of market cap was wiped out in a day. Panic profit booking was visible as there was a global rout in Asian and European stocks. Nifty even touched an intraday low of 13,131 on Monday before recovering. All the 30 Sensex stocks were down with ONGC losing 9%, IndusInd Bank 7.1%, M&M 7% and SBI 6%. With fresh travel curbs imposed, aviation stocks tanked 10%. PSU Banks index fell 7% as stocks were battered across Europe.

According to a recent study by CRISIL, corporate profits rose 15% in Sep-20 quarter to scale an all-time high level. This was largely driven by widening margins on the back of softer input costs and better levels of capacity utilization. Overall EBITDA was at Rs.1.60 trillion in Sep-20 quarter compared to just Rs.1.02 trillion in the Jun-20 quarter. This analysis was based on a review of 800 listed companies comprising 85% of the Nifty market cap. The good news was that OPM gained 100 bps but what would be disheartening for economists is that employee costs were down 400 bps. One thing that emerged is that the “feel good” factor was more prominent among large companies than smaller ones. Growth was prominent in consumption and commodity linked sectors while textile exporters faced deep pain.

On a day when there was virtual carnage in markets, the Nifty Pharma index hit a record high of 12,836. Cipla, Cadila, Lupin, Sun Pharmaceutical and Aurobindo were among the major gainers. Even smaller healthcare companies like Suven, Indoco, Glenmark, Dr. Lal PathLabs, RPG Life, Strides and Laurus Labs  all gained 2-5%. There were specific stories. Laurus rallied after it acquired 73% in Richcore Lifesciences. Glenmark got FDA approval for generic Praxada capsules while Lupin got FDA approval for generic version of Colesevelam Hydrochloride tablets for reducing low-density lipoprotein cholesterol (LDL-C).

GMR Infra has received approval from stock exchanges for its proposed restructuring. This entails demerger of its non-airport vertical business. GMR had filed an application with BSE and NSE for composite scheme of amalgamation among GMR Power Infra, GMR Infra and their respective shareholders. The company will file the scheme with the NCLT within 6 months. The idea of the entire exercise is to simplify the corporate holding structure. GMR group also believes that it will create infra pure plays, which would make it easier to attract sector-specific global investors and unlock value.

Delhi High Court upheld the proposed merger of Future Retail Limited with Reliance Retail Ventures but allowed Amazon to oppose the merger in legal forums. The HC observed in its ruling that the board sanctioned merger was not in violation of any statutory legal provisions. The CCI has already cleared the transaction. Amazon challenged the deal on the grounds that as 49% shareholder in Future Coupons, the deal cannot happen without Amazon’s approval and before giving them right of first refusal. The Rs.24,713 crore merger was intended to expand RRVL’s footprint and save Future Group from default.

The race for DHFL appears to be hotting up as top bidders Oaktree Capital and Piramal Group have offered to sweeten their bids. Piramal had bid Rs.32,250 crore for the complete book of DHFL but has now agreed to invest an additional Rs.5,000 crore in DHFL if it wins the bid. Oaktree had bid Rs.32,700 for full book of DHFL. Oaktree also sweetened its bid by reducing the hold for insurance contingencies. In the meanwhile, COC has asked for more specific on conditions and also on the time-table of upfront payment to the lenders. COC has also asked Piramal to clarify how the credit rating of the merged entity can be enhanced for further fund raising. In the case of Future Generali Insurance, Oaktree cannot own more than 49% and that is already owned by Prudential. Adani does not appear to be in the final race.

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