Daily Market Update – Jan 1st 2021

unnamed Daily Market Update   Jan 1st 2021

For the first 8 months ending November 2020, India’s fiscal deficit shot up to 135% of the full-year Budget target of Rs.800,000 crore for FY21. Ironically, revenue deficit also touched 140% of the full year targets by November. The biggest casualty was government spending with only 58.5% of the capital expenditure budget and 62.7% of the overall budgeted expenditure was spent by November. Experts are already pegging fiscal deficit to scale 7.5% GDP this year. The higher fiscal deficit can be explained better by falling revenues than by rising expenditure. Tax and non-tax revenues were way down in FY21.

India’s core sector output contracted by -2.6% for November 2020. The core sector is a basket of 8 infrastructure sectors with a 40.27% weight in the IIP. Coal, fertilisers and electricity were the sectors to record positive growth on a YOY basis, but even here the growth was sharply lower compared to the month of October. The good news came from crude oil and refinery products where the core sector contraction was limited to just about -4.5%. The disappointment was the cement sector which recorded a sharp 7.5% fall compared to growth in Oct-20. Overall core sector for Apr-Nov stood at -11.4%. The good news came from the revised numbers which upgraded Aug-20 core sector contraction from -7.3% to -6.9% and Oct-20 growth from -2.5% to -0.9%. This basket of core sector has strong externalities.

FDI equity inflows into India grew by 21% to $35.33 billion in the first 7 months of the fiscal ending October 2020. This is sharply higher than the $29.31 billion FDI flows reported by the DPIIIT in the corresponding period last year. Of course, this sharp spike in FDI flows during the current year can be largely attributed to the mega private placements of equity done by Reliance Jio and Reliance Retail. If you consider the total FDI, including reinvested earnings, then the figure was 10% higher YOY at $46.82 billion. Software, hardware, services, trading, chemicals and automobiles attracted maximum FDI.

As a memorable year came to an end, the Sensex registered overall gains of 15.7% on the back of massive buying by FPIs who infused more than $23 billion during the year. Equity investors got richer by Rs.32,49,000 crore in 2020 despite the roller-coaster ride due to the COVID pandemic. The Nifty had touched a low of 7511 in March 2020 but bounced over 85% from these levels to close on the brink of 14,000 levels. Volatility index of VIX went from a low of around 10 in the early part of the year to as high as 87 at the peak of the COVID crisis. The indices gained in 7 months and lost value in 5 months

Even as the farmers have continued to agitate for over a month on the outskirts of Delhi, it has now been estimated by the PHD Chamber of Commerce that the economic loss in the month of December alone would be Rs.70,000 crore. This would be largely due to supply chain disruptions across Punjab, Haryana and the borders of Delhi. Parleys between the government and the farmers have been deadlocked over the contentious issue of repeal of 3 farm laws and a legal guarantee for MSP. This strike is estimated to have badly hit the 25 lakh MSMEs in Punjab and Haryana that account for GSDP of Rs.400,000 crore.

63 Moons Technologies has moved the NCLT to ensure that the recovery from DHFL is distributed equitably among all creditors, including NCD holders. 63 Moons holds over Rs.200 crore worth NCDs issued by DHFL. NCLT has adjourned the application by 63 Moons for hearing on January 13. The COC or the Committee of Creditors have opposed the application as bank lenders have recourse to personal guarantees of the DHFL promoters but NCD holders do not have such recourse. Currently, Oaktree Capital, Piramal Enterprises and Adani Group have submitted final bids and the final decision will be taken post evaluation on 14 January. Both Piramal and Oaktree have offered up to Rs.38,000 crore as a one-time settlement. Non bank creditors could get the flak, as has happened in most NCLT cases.

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