Daily Market Update FEB 19

unnamed Daily Market Update FEB 19

India’s domestic air passenger traffic for Jan-21 was down by 40% at 77.34 lakhs on a YOY basis. The data released by the DGCA clearly showed that the lag effect of the pandemic and the continued levels of social distancing took its toll on the aviation business. The passenger load factor, equivalent to factory capacity utilization, also declined over December 2020 as the tourist season began to taper. Indigo again dominated the skies with a 54.3% market share followed by Vistara cornering 12.8% market share. In a tough month, the metro airports recorded the highest level of on-time performance at 93.7%.

Brent Crude oil scaled above $65/bbl. and that can be largely attributed to the Arctic Blast in Texas. Now, the state of Texas accounts for a total output of 4 million bpd or nearly 40% of the total output of the United States. The Arctic Blast has resulted in most of the waterways used to transport oil from the Texan fields getting blocked. That is creating a serious shortage in the global market. The OPEC led by Saudi Arabia appears to be playing its cards close to its chest and prefers to wait out the impact of the cold wave before taking any decision on supply. As a result, the global oil market is awfully under-supplied and that is resulting in higher crude prices. The sooner the Texan oil output goes online and gets on stream, the oil prices are likely to fall. It looks like a supply shock that is driving oil prices higher.

Piramal Enterprises, whose bid for Dewan Housing was found the most lucrative by the committee of creditors, has also secured permission from the RBI to go ahead with the acquisition of stake in DHFL. While lenders will still have to take a hefty haircut, it would be positive in the sense that creditors will be able to, at least, monetize part of their funds locked in. Dewan Housing had posted a net loss of Rs.13,095 crore for the Dec-20 quarter. Dewan Housing had been referred to NCLT as a special case by the RBI considering its systemic importance to the financial markets. Now, the NCLT approval is awaited.

The buyback offer of GAIL India will open on 25 February and will be available to all shareholders whose names appeared in the register o 28 January. GAIL will buy back up to 6.97 crore equity shares at a tender offer price of Rs.150/share. The buyback shares represent 1.55% of the outstanding paid up equity of GAIL. At the tender offer price, the size of the buyback will be to the tune of Rs.1046 crore. The buyback will close on the 10th of March and GAIL has confirmed that the buyback will be entirely done through internally generated resources. This has been one of the ways of pay outs by PSUs.

Shares of oil and gas companies rallied sharply in the last two days after the government committed to spend Rs.750,000 crore into related infrastructure. Stocks like Gujarat Gas, ONGC, Gujarat State Petronet have all rallied sharply on this news. The investment in domestic oil and gas infrastructure assumes importance because India currently depends on importance for 85% of its oil needs and 53% of its gas needs. This money will be spent by the government over the next five years. More than the issue of infrastructure, the primary strategy will be having a proper policy framework for pricing oil and gas.

Two stocks that have rarely shown firm positive movement, New India Assurance and GIC Re, were locked in 20% upper circuit on Thursday. There were reports that the government would soon take up full privatization of state-owned general insurance companies. New India Assurance and GIC Re are the only two listed state general insurers while the other 3 state general insurers are yet to be listed. GIC Re is the largest reinsurer in India and only does aircraft insurance directly. The government had divested its stake in these two general insurers in 2017 and it currently holds 85.78% in GIC RE and 85.44% in New India Assurance. The Union Budget had set a divestment target of Rs.175,000 crore for the year and that includes two additional general insurers and two PSU banks. These will be strategic decisions

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