Daily Market Update JAN 11

unnamed Daily Market Update JAN 11

India’s merchandise exports in the first week of January were up 16.22% on a YOY basis at $6.21 billion as per data from customs. Growth in exports was driven by pharmaceuticals and engineering sectors. During the first week of Jan-21, imports were up marginally by 1.07% at $8.7 billion. Non petroleum imports were up by 6.56%. This data is important as total imports in December 2020 had grown by 7.6% to $42.6 billion. Trade deficit for Dec-20 is estimated to have widened to $15.7 billion and hence a smaller merchandise trade deficit in Jan-21 will be critical to build on the current account surplus.

Most leading FMCG companies are expected to hike the selling prices of goods to offset the sharp inflationary impact on key raw material inputs. In fact, some of the FMCG players like Marico have already gone for price hikes, while others like Dabur, Parle and Patanjali could be upping their prices soon. The cost of some of the key inputs like coconut oil, edible oil, tea, copra and palm oil have been on an uptrend due to demand-supply mismatches. FMCG companies did attempt to absorb this cost up to a point but that is unlikely to happen going ahead. According to market sources, the price hike is expected to be in the range of 4-5%. However, in the FMCG space, competitive pressures have played a key role in pricing decisions. Most FMCG players will look to first explore the other cost levers to cushion OPMs.

Foreign portfolio investors or FPIs pumped in Rs.5156 crore into Indian markets in the first 6 sessions amid expectations of a very strong third-quarter performance and a highly growth-oriented budget. FPIs infused Rs.4819 crore into equities and Rs.337 crore into bonds in the first 6 days of Jan-21.  In addition, the low number of COVID cases in India compared to other countries has also helped sentiments. India has seen the largest quantum of FPI inflows in 2020 among emerging markets. While India has been emerging as an attractive investment destination, the focus has largely been on banks and IT stocks.

RBI has expressed concerns over zero-coupon bonds or ZCBs used for PSU bank recapitalization. In 2017, the government had embarked on recapitalization with coupon-based bonds. However, subsequently the government resorted to ZCBs to reduce the fiscal pressure on the government. These special securities were issued with tenure of 10-15 years; non-interest bearing and were valued at par. RBI raised objections to the calculation of effective capital infusion in case of ZCBs. These ZCBs eased the financial burden as government had already paid Rs.22,087 crore as interest on recap bonds in 2 years.

For the week ended 08-Jan, 7 out of top 10 most valuable Indian companies added Rs.137,397. For the week, TCS emerged as the biggest gainer. The big gainers in value for the week included TCS Rs.72,102 crore, Infosys Rs.21,894 crore, HDFC Rs.15,077 crore, Bharti Airtel Rs.13,721 crore, ICICI Bank Rs.10,055 crore with HDFC Bank & HUL adding Rs.4600 crore jointly. Among the big losers for the week, Reliance Industries lost Rs.34,297 crore due to the ongoing insider trading case. The other major loser during the week was Bajaj Finance which saw value depletion of Rs.12,025 crore. Kotak Bank lost Rs.4662 crore.

The delisting bid by Anil Agarwal for Vedanta Ltd may have failed, but the promoter group continues to chip away gradually at the stock. Recently, it had acquired a little below 5% through an open offer raising the stake of Vedanta Resources in the Indian subsidiary from 50.14% to 55.04%. Now, Vedanta Resources has announced an open offer to buy up to 10% of the equity. Vedanta Resources has made an open offer to buy 37.20 crore shares of Vedanta Ltd at Rs.160 per share. However, this represents an effective 12% discount to its closing price on Friday. The open offer will be managed by the Indian unit of J.P. Morgan Chase and will be a voluntary open offer with no commitments on the minimum level of acceptance by Vedanta. If the entire 10% open offer gets accepted, it will cost Vedanta Rs.5,948 crore.

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