Daily Market Update – Nov 12th 2020

unnamed Daily Market Update   Nov 12th 2020

The price of Brent Crude has rallied by over 10% in the last few days to cross the $45/bbl mark. While the immediate trigger has been the hopes of vaccine discovery based on the signals emanating from Pfizer, there also expectations that US stockpiles could reduce and global oil producers could rein in supply. All these factors have taken the price of crude higher. However, there are still downside risks to oil prices like the resurgence of COVID cases in Europe and the return of Libyan supplies to the global oil market. Oil analysts are projecting $60/bbl by mid 2021, but that would largely depend on growth.

The government is going aggressive on its plan to make India a manufacturing hub for the world. It has agreed to extend the product linked incentives or PLI scheme to 10 industries to encourage global players to set up manufacturing units in India and export to world markets from here. The PLI scheme will offer incentives for a period of five years to manufacturers of advanced chemistry cell batteries, electronics, automobiles, auto ancillaries, pharmaceuticals, telecom & networking products, textiles, solar modules, food products white goods and specialty steel. The government has already approved an outlay of Rs.145,000 crore towards this PLI scheme. Additional benefits will include lower income tax rates for new units, state specific incentives and customs duty benefits to make India story attractive.

The ongoing spat between Amazon and the Future group over the sale of the retail and wholesale business to Reliance has already taken twists and turns. Now, Amazon has accused Future Group of indulging in insider trading in these stocks ahead of the Reliance deal announcement. It may be recollected that Amazon had sought a stay on the RRVL/FEL deal through an order from a Singapore arbitration court. While Future group denies any deal with Amazon, the bigger area of interest would be to see to what extent the Indian courts, government and corporates respect global arbitration orders.

Indian government may be planning a fresh $20 billion round of stimulus, now that the growth traction is more visible in the second quarter and the macro numbers. This will be over and above the PLI scheme that the government has already announced and could be a mix of monetary and fiscal incentives for businesses and for households. The focus will be largely on stressed sectors and will be directed at generating employment. The last few rounds of stimulus had left out sectors like tourism, hospitality and aviation, which are among the worst affected. The afflictions are also under control.

The Gland Pharma IPO got oversubscribed 1.88 times at the end of the third and final day of subscription. The response had been fairly tepid on the first two days. As against the 3.02 crore shares on offer, the IPO got subscription for 5.69 crore shares in all. The IPO has been priced in the band of Rs.1490-Rs.1500. The company had raised Rs.1944 crore from marquee anchor investors including GIC of Singapore and Goldman Sachs a day ahead of the IPO. Gland Pharma was set up in 1978 and is not only the largest pharma IPO but the first IPO of an Indian pharma company with a Chinese parent.

In the last few days, news of progress on the COVID vaccine jointly by Pfizer and Biontech has spawned a different stock market opportunity altogether. And, it has nothing to do with any formulation. Many of the refrigeration companies around the world from Daihan of Korea to Hoshizaki of Japan have suddenly started to surge in price. It has to do with vaccine logistics. The Pfizer RNA based shot has to be stored at -74 degrees Celsius. Globally, logistics firms do run cold chains but the temperatures are nowhere close to that. For most private air conditioning and refrigeration companies, that kind of temperature definitions don’t exist and setting up fresh capacity may not justify the costs. One solution could be freezer boxes using helium based technology and they can transport vaccines with the help of dry ice.

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