Daily Market Update FEB 22

unnamed Daily Market Update FEB 22

As committed in the Union Budget, the government is planning to privatize Oriental Insurance or United India Insurance since their financial health has shown improvement after capital infusions. The state is also planning to infuse Rs.3,000 crore into general insurance companies. Both the above have shown an improvement in financials and could attract interest from buyers. The government is apparently also open to the idea of further divesting its stake in New India Assurance, where it holds 85.44%. The total budgeted divestment target is Rs.175,000 crore in FY22. It is open to merging state general insurers too.

Nifty earnings are expected to grow at a CAGR of 24.2% over FY21-23, according to a report by ICICI Direct. The report assigns a valuation of 16,300 for the Nifty at P/E of 22X on forward FY23 earnings. The corresponding target for Sensex is at 54,300. Corporate earnings gained momentum during the third quarter of FY21 due to a rebound in economic activity. During the quarter, most Indian companies have benefited from lower raw material costs and leaner cost structures. The two sectors that saw negative growth in top line were financials and hydrocarbons. If these two sectors are excluded, the sales growth would be closer to 10% on a yoy basis. While capital goods picked up sequentially, the FMCG space has seen strong growth momentum, largely led by rural growth staying robust.

The job market in 2021 will be driven by venture capital funded start-ups in Ed-tech, logistics and the gig economy. Companies are likely to pay a premium for new-age digital skills like artificial intelligence, machine learning, data science etc. Hiring in the technology sector is expected to revert to pre-COVID levels by March 2021. According to the survey, the most demanded roles will be of software developers, data scientists, web, and mobile application developers. The survey also points out that there will be a hiring mix between remote talent and workplace model. More women will enter the tech sector.

Foreign portfolio investors infused a sum of Rs.24,965 crore in Indian markets in the first 3 weeks of February 2020 after better-than-expected quarterly results and a reformist Union Budget boosted investor sentiments. Overall, FPIs pumped Rs.24,204 crore into equities and Rs.761 crore into debt. This compares favorably with the FPI infusion of Rs.14,649 crore in Jan-20. The sentiments turned positive after the IMF estimated that India would be the fastest growing large economy in CY 2021. The big triggers have come in the form of a pro-growth budget and helped by the MSCI rebalancing of weights.

The holders of Tier-II bonds in Lakshmi Vilas Bank, which were written down to zero, have initiated legal action against DBS. It may be recollected that DBS had acquired LVB last year to rescue the bank from a liquidity crisis. DBS Bank of Singapore has confirmed that it was facing legal hurdles in various courts in India against the decision to write down the Tier-II bonds fully. However, DBS has confirmed that it does not have any incremental unprovided risks on these lawsuits. This was the first time that the RBI had turned to a foreign lender to bail out a local bank. The merger was approved by RBI and the MOF.

With the indices correcting sharply during the week, it was hardly surprising that 8 out of the top-10 most-valuable companies witnessed erosion of Rs.123,670 crore in market value with banks coming under immense pressure during the week. There were only two gainers during the week with Reliance adding Rs.24,914 crore and State Bank of India adding Rs.5,489 crore. Among the 8 other losers, the biggest laggard was TCS which saw its market value fall by Rs.44,672 crore during the week. Among the other market cap losers, ICICI Bank lost Rs.16,146 crore, Hindustan Unilever Rs.14,274 crore, HDFC Rs.9,408 while Infosys dropped Rs.7,735. There were small losses of Rs.4,667 crore in Bajaj Finance and Rs.2,803 crore in Kotak Bank. The pressure was clearly visible in banks with SBI being the sole exception.

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