Daily Market Update FEB 25

unnamed Daily Market Update FEB 25

On 24 February, NSE suspended trading in cash and derivative segments for several hours, jeopardizing the positions of lakhs of market participants. The exchange cited issues with its telecom service providers as the reason for the glitch. However, it is hard to understand why the communication was only made after one hour and why the redundancy facilities were not automatically called upon. This trading shutdown is all the more disconcerting as NSE dominates the F&O space and this happened just 1 day ahead of the F&O expiry for Feb-21. Finance Ministry and SEBI have sought detailed report from NSE on the event.

The Cabinet has approved the PLI Scheme worth Rs.15,000 for high value pharma products and Rs.7350 crore for IT hardware products as part of the Atma Nirbhar plan. In the pharma sector, this PLI scheme will lead to incremental sales of Rs.294,000 crore and incremental exports of Rs.196,000 crore over next 6 years and create 20,000 direct and 80,000 indirect jobs. In the IT hardware segment, the PLI scheme will result in an increase in the domestic component from 5% to 25% over the next five years. The PLI scheme will result in additional output in the IT hardware segment to the tune of Rs.326,000 crore out of which nearly Rs.245,000 worth of sales will be by way of exports. This is part of the overall product linked incentive for import substitutable sectors with an allocation to the tune of Rs.146,000 crore.

It has been confirmed that Axis Securities and IIFL Securities, two of the leading full-service brokerages in India, have won bids to acquire the trading and demat accounts of Karvy Stock Broking, which has been debarred from all the stock exchanges. Axis Securities emerges as the successful bidder for the trading accounts held by Karvy with the NSE and BSE and will increase the number of trading accounts with Axis from 25 lakhs to 36 lakhs. IIFL Securities emerged the successful bidder for demat accounts of Karvy and it will add 11.06 lakh demat accounts consisting of 3.82 lakh CDSL and 7.23 lakhs NSDL accounts.

The Subject Expert Committee of CDSCO has asked Reddy Labs to present more data of immunogenicity while evaluating its application for Emergency Use Authorisation of the Russian COVID vaccine, Sputnik V in India. In the meanwhile, the SEC has also asked the Hyderabad-based Bharat Biotech to submit efficacy data of COVAXIN before seeking its trial on children. COVAXIN is the only COVID drug that is entirely developed indigenously. Reddy Labs, it may be recollected, had partnered with RDIF of Russia in Sep-20 to conduct clinical trials of Sputnik V and distribution rights in India. It is currently in Phase 3 clinical trials.

Zuari Agro approved the sale of its fertilizer plant in Goa to its JV, Paradeep Phosphates, for a sum of $280 million or Rs.2028 crore. The sale has been approved as a going concern business on slump sale basis. Paradeep Phosphates will fund the acquisition with a combination of equity, debt and internal accruals. Zuari Agro will use the proceeds to defray part of its long-term debt. The Goa unit already has a negative net worth of Rs.650 crore. The Goa unit manufactures urea, DAP and various grades of NPK fertilizers. Deal will be through by Feb-21. PPL is a joint venture between Zuari Agro and Morocco-based OCP Group.

BOFA Securities expects that higher oil prices may push the RBI to hold repo rates in FY22, but there could be a 100-basis points rate hike FY23. According to the report, an increase of $10/bbl in Brent Crude could reduce consumption by 0.4% but spike inflation by 0.23%. Currently the benchmark repo rate is at 4%. However, BOFA expects that some amount of fiscal policy support could rein in oil inflation via cuts in excise duties on oil, which are among the highest in the world. While the oil tax cut would reduce oil prices by Rs,10/litre, it will also expand the fiscal deficit by 0.6% of GDP, when it already estimated at 6.5% in the Union Budget. BOFA believes that this fiscal deficit would be funded by OMOs as higher oil import bill will cut forex intervention costs for the RBI. High forex reserves limit rupee impact of oil prices.

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