Weekly Capsule (Jul 27 – Jul 31)

weekly cap 1 Weekly Capsule (Jul 27 – Jul 31)

News Announcement

Impact Analysis

  • Core sector output for the month of Jun-20 shrinks by (-15%)
  • There has certainly been an improvement with the contraction abating in the last three months
  • Like in May, seven core sectors reported contraction in June with only fertilizers reporting positive growth
  • June mutual fund inflows up almost four-fold at Rs.700 crore
  • The overall flows may look a bit magnified as the base of May 2020 was extremely tepid in terms of MF flows
  • However, the big trend appears to be that the flows have been skewed towards passive ETFs rather than active funds
  • Mukesh Ambani calls for scrapping 2G telecom in totality
  • Ambani opined that with the telecom moving towards 5G, there was no justification for continuing with 2G
  • He was of the view that nearly 300 crore people in India were kept out of internet reach since 2G did not support data
  • Stalemate on in Rajasthan as the status of the government remains uncertain
  • The governor has called the session of the state assembly only on 14 August, keeping things in suspended animation
  • The Pilot camp has rebelled against the Gehlot government and the final call will be taken on the floor of the house
  • Sensex and Nifty gain 16% in just 2 months, the best gain since 2009
  • While private banks and PSBs contributed big time to the gains in May, June was dominated by IT stocks
  • In both the months, the major single stock contributor to the rally was undoubtedly Reliance Industries
  • India’s fiscal deficit touches 83% of full year target in Jun-20 quarter
  • The fiscal deficit has shot up sharply due to the $300 billion stimulus announced to combat COVID-19
  • While the budget estimates of fiscal deficit are at around 3.5%, experts believe it could get closer to 8% of GDP
  • Tata Capital invests Rs.225 crore for a 0.85% stake in Biocon Biologics
  • This company is a subsidiary of Biocon and specializes in manufacture of bio-similars at the higher end of the chain
  • This stake values the subsidiary at Rs.26,500 crore and could form a benchmark ahead of its proposed IPO
  • US economy contracts by 32.9%, EU zone by 12%
  • The US economy contraction was driven by weak output and also by weak consumption demand due to trade war
  • With the US and EU showing deep cuts in the Jun-20 quarter, one can expect a sharp contraction in world output overall
  • Sovereign gold bond Series V will remain open from August 03 to 07
  • The latest issue of gold bonds will be priced at Rs.5334/gram and marks the most expensive issue till date
  • These bonds are exempt from capital gains tax if held for the full 8 years and also carry 2.5% interest per year
  • Edelweiss withdraws from the role of advisor to the LIC IPO
  • According to Edelweiss, this move was necessitated as its presence in insurance would create conflict of interest
  • Citigroup, Credit Suisse and SBI Caps are the other names shortlisted and government will take a final call
  • Reliance Industries reports 42% fall in revenues for the Jun-20 quarter
  • The top line de-growth was driven by weak prices of crude oil but net profits were up by 31% for the quarter
  • The spurt in profits was largely driven by Rs.4966 crore of extraordinary gains from sale of marketing JV stake to BP
  • Digital revenues continued to dominate RIL results for Jun-20 quarter
  • Digital business of RIL saw its EBITDA rising by 55% on the back of better market share and improved ARPUs
  • During the quarter, petchem EBITDA fell by 49.6% while oil refining EBITDA fell by 25.8% on lower crude oil prices
  • SBI reports sharp improvement in net profits and operating profits for Q1
  • The net profit of SBI included a one-time gain of Rs.1540 crore from the sale of SBI Life Insurance
  • Gross NPAs as a percentage of loans came down from 6.15% to 5.44% with sharp improvement in NIMs to 3.24%
  • Sun Pharma reported a net loss of Rs.1656 crore for the Jun-20 quarter
  • Sun Pharma reported a one-time loss of Rs.1449 crore towards Taro’s settlement with the US Department of Justice
  • Operational performance improved in the Jun-20 quarter as EBITDA margin improved from 24.3% to 27%
  • Tata Motors reported a massive loss of Rs.8444 crore in Jun-20 quarter
  • The huge loss was driven by a sharp fall in sales of Jaguar Land Rover (JLR) which fell 42% on a YOY basis
  • While TAMO expects a gradual improvement in the business outlook, their primary focus will be to deleverage
  • Bharti Airtel reports a net loss of Rs.15,933 crore in Jun-20 quarter
  • This loss was largely driven by Rs.11,746 crore provision made towards potential AGR payouts to the government
  • Total revenues were up 15.4% on the back of improved voice and data volumes as well as improved ARPUs
  • Mindspace REITs IPO gets a bumper response in the market
  • By the close of the issue on 29 July, the issue had been oversubscribed by nearly 13 times overall
  • While the institutional portion was subscribed 10.7 times, the non-institutional portion saw 15.7 times oversubscription
  • HDFC reports fall in profits despite extraordinary gains in Jun-20 quarter
  • Net profit fell by 4.7% to Rs.3051 crore despite booking Rs.1241 crore gain from sale of stake in HDFC Life
  • Markets were disappointed by the fact that the NIMs of HDFC had fallen by 20 basis points to 3.1%
  • Reliance’s proposed acquisition of Future group hangs in the balance
  • There were reports of RIL bidding Rs.27,000 crore for Future Group but clearly there is no agreement on valuations
  • Future group needs funds urgently to prevent further defaults and RIL is looking to expand its retail franchise
  • FPIs pull out Rs.100,000 crore from debt in calendar year 2020 so far
  • The negative real rates have been a major reason for this outflow as yields have fallen and inflation is up
  • In addition, the sovereign ratings are just above speculative grade and that is also not making investors comfortable
  • Maruti reports net loss of Rs.249 crore in Jun-20 quarter due to disruption
  • This marks the first loss reported by Maruti in the last 70 quarters since the stock got listed on the stock exchange
  • The real reason was the 80% fall in sales, although the control on expenses did help profits a bit, along the way

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