Daily Market Update JAN 18

unnamed Daily Market Update JAN 18

Two major IPOs open in the next week. IRFC will be an Rs.4633 crore IPO in which the government will look to reduce its stake. The IPO opens on 18 January. The other IPO is of Indigo Paints which opens for subscription on 20 January. The Indigo IPO will be an Rs.1170 crore IPO which will include a fresh issue of Rs.300 crore and an offer for sale of Rs.870 crore in which one of the early investors, Sequoia Capital, will also be taking a partial exit. Both the IPOs put together will be raising close to Rs.5800 crore via the IPO market this week and the Indigo Paints stock is already quoting at 50% premium in the grey market.

Excise duty collections have jumped sharply in the Apr-Nov 2020 period by 48% but that is largely led by a spike in excise collections on petrol and diesel. It may be recollected that in 2017 the government had subsumed excise duty into GST for all products except for a handful products and petrol and diesel are among the products which continued in the erstwhile excise duty regime. Excise duty during this 8 months period stood at Rs.196,342 crore compared to collections of Rs.132,899 crore in corresponding period last fiscal year. This is despite that in the 8 months of this fiscal only 44.9 MT of diesel were sold compared to 55.4 MT last year. Petrol consumption was also lower by 15%. During this year excise duty was raised by Rs.13/litre on petrol and Rs.16/litre on diesel. This hike was done in two tranches.

The Committee of Creditors or COC voted overwhelmingly in favor of Piramal Enterprises to take over Dewan Housing. Piramal Enterprises has committed close to Rs.38,000 crore of which over Rs.12,000 crore will be paid upfront. The COC have given a much higher weightage to upfront cash payment. In addition, Piramal Enterprises also committed to infuse capital into Dewan Housing to turn around the company and would also take over the insurance business of DHFL. The COC found the Oaktree offer fairly confusing and it also lost out on the much lower upfront payment and future cash infusion.

According to RBI data, bank credit grew by 3.2% at Rs.107 trillion in the first 9 months of FY21. This is better than the 2.7% credit growth achieved last year. Bank deposits rose by a whopping 8.5% at Rs.147 trillion in the same period, sharply reducing the credit deposit ratio of the banking system overall. The sharp spike in liquidity and risk aversion in the post COVID scenario led to a sharp spike in bank deposits. ICRA in its report has noted that while credit growth is visible, lenders are being a lot more conservative and selective about credit decisions. RBI warned that GNPA could spike from 7.5% to 13.5% by Sep-21.

The government confirmed that it had completed 8,169 KM of national highways since Apr-20 and was all set to surpass the full year target of 11,000 KM. Till the end of December, the highway construction was 8% higher than last year. That adds up to over 28.16 KM per day which is way above the average that India was clocking in the past. Highway construction has strong externalities and has a big positive impact on economic growth. This is despite the fact that April and May months were lost due to the lockdown and monsoons are normally a lean period. The pace is expected to increase further by March.

Six out of the top-10 most valuable companies on the Nifty added Rs.113,019 crore in market cap during the week ended 15-Jan. TCS continued to be the star value creator adding Rs.42,496 crore during the week taking its market cap to Rs.12,13,371 crore. Among the other big gainers in the week, accretion came from Bharti Airtel Rs.33,961 crore, HDFC Bank Rs.19,002 crore, Infosys Rs.14,184 crore and RIL added Rs.2884 crore. Kotak Bank was the big loser giving away Rs.21,171 crore during the week. Among others, Bajaj Finance lost Rs.12,001 crore, HUL Rs.9,034 crore and HDFC Rs.3,864 crore. HDFC Bank weight on Nifty has crossed RIL. The markets were supported by Rs.18,490 crore of FPI flows into equity in Jan-21 while they pulled out Rs.3,624 crore from debt. FPIs have been the big drivers of large caps.

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