Daily Market Update – JAN 14

unnamed Daily Market Update – JAN 14

Indian Railway Finance Corporation or IRFC has set a price band of Rs.25-Rs.26 for its proposed Rs.4600 crore IPO. Out of the 178.2 crore shares on issue, 118.8 crore shares will represent a fresh issue while the balance 59.4 crore shares will be an OFS by the government. The government is expected to raise a sum of Rs.1544 crore through this OFS at the upper band. The anchor book will be open on 15 January while the actual IPO will be open between 18 January and 20 January. Bids for the IPO can be made in multiples of 575 shares. The fresh IPO portion will enhance capital for future asset book expansion.

It was a day on which two bellwether IT companies; Infosys and Wipro declared their results for the Dec-20 quarter. Like in the case of TCS, which announced results on 08 January, both Infosys and Wipro also did better than street estimates on top line, bottom line, operating margins and also on future guidance. Wipro profits were up by 21% and they also scaled a 22-quarter high as the company made a big thrust into the digital space. Wipro guided revenue growth of 1.5% to 3.5% for the March 2021 quarter. OPMs at Wipro also scaled above 21%. Infosys reported 12.3% growth in top line revenues and 16.6% spike in net profits. Its OPMs scaled above 25.5% narrowing its OPM gap with TCS substantially. Infosys also guided for sharply higher growth in Mar-21 quarter. Overall, it was a stellar performance by IT stocks.

It appears to be the season for divesting as the government is still lagging behind on its FY21 divestment targets by a huge margin. The government now plans to also raise up to Rs.2600 core by hiving off part of its stake in SAIL. The stock has been in the midst of a rally in the last few months ever since steel stocks were upgraded by global brokers. The proposed OFS will consist of 20.65 crore shares at an indicative OFS price of Rs.64 representing 5% of the outstanding equity of SAIL. The government will also retain the right to sell an additional 5% based on investor appetite taking total size to Rs.2600 crore.

The RBI has formed a working committee to review and regulate digital lending more closely. In the last few months a number of complaints pertaining to frauds and strong arm tactics in digital lending have come to the fore. Both online lenders and mobile lenders will come under the ambit of digital lending regulations. The committee consists of four internal RBI persons and two persons from outside. The group will also assess risks posed by unregulated digital lending on financial stability. Apart from regulation, there will be a Fair Practices Code, for in sourced and outsourced digital lending businesses.

Coal India plans to increase its capital expenditure for the current year by 30% to Rs.13,000 crore. The central government had given a directive to all PSUs to front-end their capex plans as it would be largely instrumental in giving a boost to economic activity. Interestingly, the revised capex of CIL will make it one of the biggest PSU investors in the current fiscal year. Some of the key areas of capex during the year will include land acquisition, procurement of heavy earth moving machinery, upgrading rail evacuation infrastructure and mine development. On a YOY basis, the capex is up by almost 166%.

Reliance may still be the most valuable company in the Indian market by market cap but it is no longer the company with the highest weightage in the Nifty. That mantle has now shifted from Reliance to HDFC Bank. The weight of RIL in the Nifty slipped to 9.82% while the weight of HDFC Bank has now scaled up to 10.08%. In the last few months, RIL has corrected nearly 20% from its recent peak while HDFC Bank has rallied more than 50% in the last few months. It must be remembered that the Nifty is a free float weighted index and that tends to work against Reliance as the promoters hold 50% in the company, thus automatically reducing its weight in the Nifty. RIL’s weightage had touched a peak of 15%. HDFC has the third highest market cap after RIL and TCS, but TCS also has 76% promoter holding.

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