Daily Market Update – JAN 15

unnamed Daily Market Update – JAN 15

Tata Group has laid out grand plans to invest in digital, high-end electronics and healthcare to position its business mix in terms of future growth areas and valuation driving pockets. Tatas will also place big bets on electric vehicles, renewable energy and battery storage. According to N Chandrasekharan, the post-pandemic world will be impacted substantially by technology. Currently, the Tatas are in the midst of launching an umbrella app enabling access to all its consumer businesses. It is also creating an online B2B platform. The valuation potential of futuristic technologies will drive the road ahead for Tatas.

The ongoing battle between Future Group and Amazon over the sale of the Futures Group business to Reliance Retail appears to be continuing. Now, Amazon has written to SEBI requesting not to issue NOC for the $3.4 billion Future Retail-Reliance Industries deal. According to Amazon, they already hold a stake in Future Coupons and they should have been given the right of first refusal, which was not done. Amazon has also urged SEBI to instruct the stock exchanges not to issue the NOC. Earlier, the Delhi HC approved the merger but allowed Amazon the freedom to challenge the merger in court. Amazon has also said that despite clear directions in the single judge order, Future Retail had tried to mislead the regulators. The next hearing on the matter is scheduled on 12-Feb and FRL needs to file its response.

It was not just retail CPI inflation, but even WPI inflation softened to a 4-month low of 1.22% in Dec-20 from 1.55% in Nov-20. Food was the driver of the fall in WPI inflation. Like in the case of CPI inflation, core inflation excluding food and fuel items, actually rose to a 2-year high of 4.2%. The core inflation was driven higher by metals and commodities. One of the main reasons for the sharp fall in WPI-Food inflation was vegetables reverting to negative price growth. Oil inflation was lower on YOY basis, but on a sequential basis it was up more than 320 bps. Manufacturing inflation shot up to 4.2% in Dec-20.

The stock of Dixon Technologies has risen by nearly 850% since its IPO and now it looks ripe for a stock split to bring the stock price into more popular range. Dixon is a contract manufacturer of electronic goods and has been a big beneficiary of Atma Nirbhar Bharat program. The board of Dixon will meet in early February to consider a stock split. Dixon will announce its quarterly results on 31 January. Stock splits are generally value neutral. However, when stocks get pricey, a stock split is useful in bringing the price to a more acceptable range. At the CMP of Rs.14,932, Dixon can surely do with a stock split.

Dec-20 does look like a positive month for auto sales. Domestic passenger car sales grew by 13.59% while two-wheeler sales were up 7.42% on a yoy basis. The total production of passenger vehicles grew by 24.17% to 315,838 units in Dec-20. However, exports dropped 13.49% to 57,050 units on weak global demand. Production of two-wheelers were up 9.08% at 15,29,242 units while exports grew 23.62%, large driven by Bajaj Auto. The three-wheeler segment clocked a sharp 58.87% fall in sales at just 22,126 units in Dec-20 as the plethora of public transport restrictions dented the demand for 3-wheelers.

Indigo Paints announced that its IPO will open on 20-Jan and close on 22-Jan. Indigo Paints has fixed the IPO price in the band of Rs.1488-1490 per share for its initial share-sale, which will open for public subscription on January 20. The IPO will comprise of a fresh issuance of Rs.300 crore and an offer for sale of Rs.870 crore. One of its early investors, Sequoia Capital, will also exit part of its stake in the OFS. The total size of the issue will be Rs.1170 crore at the upper price band. The anchor investor portion subscription will be open for a single day on 19-Jan. The company has reserved 35% of the issue for retail investors, 15% for HNIs and 50% for QIBs. Indigo will use the proceeds of the IPO for expansion of its existing facility in Tamil Nadu. Indigo Paints predominantly operates in decorative paints pan-India.

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