Daily Market Update – Sep 21st

unnamed Daily Market Update   Sep 21st

The latest report from the OECD has some room for hope and a word of caution too. The global economy is not likely to shrink as badly as originally anticipated. However, at -4.5% it still shows that the recovery has been slower than what many thought it would be. This is partly due to the supply chain disruptions and partly due to the recurrence of COVID-19 cases. While the growth for the US and the EU economies is also likely to be better, China may be the only large economy to actually show a positive growth in a demanding year. OECD expects a 6-8% bounce in 2021, but that will be at a later date.

One way to judge the attractiveness of the IPOs is by checking the grey market premium of these stocks ahead of the IPO. Of the 3 IPOs slated next week, Chemcon is trading at a grey market premium of 93%. At the same time, CAMS commands a grey market premium of 28% while Angel Broking commands a premium of just about 16%. The premium on Angel Broking has fallen from 25% to 16%, largely because the broking industry fails to really attract the investors the way digital or specialty chemicals manage. It remains to be seen if the IPO gravy train goes further and sustains the momentum of last few weeks when the IPOs of Happiest Minds and Route Mobile got heavily oversubscribed. In fact, Happiest Minds also justified the euphoria by listing at a 111% premium to the issue price last week.

There finally appears to be an acceptable model for the Tik Tok Story. According to the proposed model approved by Trump, Oracle will have the right to buy 12.5% stake while Wal-Mart will have the right to buy 7.5% stake in Tik Tok Global, which will house the US operations of Tik Tok. The valuation is yet to be decided upon but Bytedance is expecting an overall valuation of $60 billion, which means, Oracle and Wal-Mart will have to shell out close to $12 billion for their stake in Tik Tok Global. However, Oracle is yet to accept these valuations and China is yet to accept the deal as the final approving authority.

It was a tough week for the markets with seven out of the ten most valuable companies in the Nifty losing value to the tune of Rs.59,260 crore. Among the big losers during the week were Hindustan Unilever losing Rs.14,321 crore, HDFC Bank losing Rs.11,612 crore and Kotak Bank losing Rs.10,205 crore. Among others, Reliance saw market cap wane by Rs.9027 crore and HDFC by Rs.8145 crore. The gains came principally from the technology stocks. While TCS gained Rs.28,912 crore during the week, Infosys managed to add Rs.24,342 crore. Sensex closed the week flat; just about 0.02% lower.

Government owned, MTNL, has submitted a list of its owned assets for monetization to the government of India. Essentially, MTNL will look to monetize some of its real estate properties so as to raise funds to reduce the debt burden of the company. These assets include land parcels in Mumbai, staff quarters and a host of telephone exchanges across prime properties in Mumbai. The Minister confirmed that global property consultants had been enlisted to find buyers. MTNL had already offered a massive VRS scheme to cut down its employee costs. Its next step to being profitable is monetization of its assets.

Net direct tax collections of the Indian government for the Apr-Aug period fell by 31% to Rs.192,000 crore compared to the corresponding period last year. The sharp fall in direct taxes was due to virtual stagnation of economic activity in the months of April and May, which took its toll on the collection numbers. The impact of the lockdown was not just felt on direct taxes but on indirect taxes too. For example, the net indirect tax collections for the first five months of the fiscal were also 11.2% lower at Rs.342,591 crore. If you just look at the GST collections, then it stands at Rs.181,000 crore for the first five months. This is against a target of Rs.690,500 crore for the full year, implying that India may end up with a huge shortfall in tax collections for the year, forcing the RBI to monetize the deficit.

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