Daily Market Update Jan 19

unnamed Daily Market Update Jan 19

In one of the biggest deals in the alternate energy space, Total SA of France will acquire a 20% stake in Adani Green Energy. The stock of Adani Green Energy has been one of the star performers in the Indian stock market in the last one year. Total will pay $2.5 billion for the 20% stake valuing the full equity at $12.5 billion. However, this is a more interconnected transaction with other commitments given by Total to the Adani group covering LNG terminals, gas utilities and renewable assets across India. Adani Green Energy already boasts of the largest solar capacity in the world and is poised to grow rapidly.

According to the ISMA, India’s sugar output is up 31% at 14.27 million tonnes in the first three-and-half months of the current sugar cycle. The sugar cycle in India begins in October each year and extends all the way to September next year. For the full sugar cycle 2020-21, the Indian Sugar Mills Association or ISMA has projected total sugar output at 31 million tonnes. In the sugar cycle year 2019-20, India had produced 27.4 million tonnes of sugar. India is the world’s second largest producer of sugar after Brazil. In India, the state of Uttar Pradesh is the largest producer of sugar followed by Maharashtra. In the last few years, the government has consistently subsidized the export of sugar since Indian sugar costs are sharply higher compared to other major producers like Brazil and Thailand. This keeps prices buoyant.

According to data put out by the Chinese government, the Chinese economy grew by 2.3% in calendar year 2020. This is the lowest rate of growth for China in the last 44 years but it is commendable because China may end up being the only large economy to show positive growth in 2020. Most of the other large economies, including India, are likely to report negative GDP growth in CY2020. In the first quarter ending Mar-20, Chinese economy contracted by -6.8%. However, in the remaining quarters, China reported positive growth rates of 3.2%, 4.9% and 6.5% respectively. GDP crossed $15.4 trillion in 2020.

In a year when the government is likely to explore all possible sources of revenue, it is expected that import duties may be raised by 5% to 10%. The government is also likely to use this as an opportunity to indirectly boost the Atma Nirbhar program to hike duties on products like smart phones, electronic components and appliances. The government is also looking at raising an additional Rs.21,000 crore in the budget to fund the COVID program, including the all-India vaccination program. Even items like refrigerators and ACs may come in this list as India will try and give a big push to Make in India project.

Franklin Templeton investors have given the go ahead and voted overwhelmingly in favor of winding up the six funds where Templeton AMC had summarily stopped redemptions in April last year. The issue has been hanging for the last 9 months. Out of the Rs.26,000 payable, the fund has disclosed that it has collected close to Rs.13,400 crore. However, not all funds are cash-positive which means there must be borrowings still. If the net amount ends up at around Rs.9500 crore, the investors would still end up with a haircut of around 65%. The Court will not lay out the process for winding up the six funds of FT.

The Nifty and Sensex saw the second consecutive day of sharp correction with the Sensex losing 470 points on Monday and wiping out nearly  Rs.270,000 crore in market value. The Sensex has now lost 1050 points in just 2 days on the back of aggressive profit booking at higher levels. There have been some concerns ahead of the Union Budget on 01-Feb as it is likely to report a huge spurt in fiscal deficit. This led to a spike in the VIX which also pulled the markets down. However, FPIs continued to be net buyers in the equity markets. Steel was the big loser on fears of price cuts but heavy weights like HDFC Bank and Reliance held on at higher levels. There was also pressure on the upstream oil companies as crude prices dipped on pandemic resurgence worries. Tata Motors has been among the top losers.

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