The government has tweaked the income tax laws to make it easier for the new owners of loss-making public sector undertakings (PSUs) to carry forward the accumulated losses and set them off against future profits. This will result in significant tax savings for the new owners if they are able to turnaround operations of the ailing PSU within a few years. This will, in turn, boost the post-tax earnings and returns for the new owners.
The Adani group has the maximum number of companies in the trillion club at five, followed by the Tata group (four).
Domestic mutual funds (MFs) and foreign portfolio investors (FPIs) have been net buyers of stocks in August. Domestic fund houses have continued to invest in stocks, propelled by the success of various new fund offers (NFOs) and strong flows into equity funds. MFs had purchased stocks worth more than Rs 8,300 crore until August 23, according to the data provided on the Securities and Exchange Board of India (Sebi) website. Jimmy Patel, MD and CEO at Quantum AMC, says: "The surge in equity investments by MFs is because of two key reasons. One, equity NFOs are getting a strong response from investors, and fund houses need to deploy that money in the markets.
At least five companies looking to raise a cumulative Rs 6,595 crore could launch their initial public offerings (IPOs) next month after a busy August that saw eight IPOs. On Thursday, south-based diagnostic chain Vijaya Diagnostics announced its plans for a Rs 1,895-crore IPO. Ami Organics will announce its plans for a Rs 600-crore issue on Friday.
After the hit of the pandemic, India Inc is now worried about the adverse impact of inflation and higher commodity prices on their revenues and margins. The inflation scare is the strongest among manufacturers of consumer goods such as automobiles, consumer durables, and fast-moving capital goods (FMCG). Companies across sectors fear they will not be able to pass on the hike in input costs to their consumers due to weak demand, which, in turn, would lead to a hit on margins and profitability in the forthcoming quarters.
Its production declined for the third consecutive year in financial year 2020-21 (FY21) to an 11-year low, while sales volume contracted for the second year to the lowest since FY15. The company manufactured around 1.08 million vehicles last fiscal, a decline from 1.17 million the previous year, and a steeper fall from its all-time high tally of 1.62 million reported in FY18.
After outperforming the broader market and their public sector peers for the better part of the post-Lehman period, private sector banks - such as HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank - are now underperforming. Last week, the Nifty Private Bank index was up just 6 per cent year-to-date in the calendar year 2021, against nearly 13 per cent rally in the Bank Nifty and a 15 per cent rise in the benchmark Nifty50. Public sector (PSU) banks, such as State bank of India, Bank of Baroda, and Punjab National Bank, are now rally leaders and outperforming the broader market. The Nifty PSU Bank index was up 42 per cent since the beginning of this calendar year. But on a longer term, the Nifty Private Bank index is up 101 per cent since March 2016, against a 118 per cent rally in the Bank Nifty and just 2 per cent rise in the Nifty PSU Bank index in the period.
The relentless rally in small- and mid-cap stocks continues as large-caps show signs of fatigue. In July, the Nifty Smallcap 100 rose 8.1 per cent, extending its year-to-date (YTD) gains to 48.5 per cent, while the Nifty Midcap 100 added 3.1 per cent, taking its YTD rise to 33.5 per cent. On the other hand, the Nifty50 remained unchanged for the month, with YTD gains of 12.7 per cent.
Retail investors-those investing up to Rs 200,000-lapped up all the four initial public offerings (IPOs) that opened for subscription on Wednesday. This is the first time since 2007 that four IPOs have been launched on a single day, according to information provided by Prime Database. KFC and Pizza Hut franchisee Devyani International (size Rs 1,838 crore); Diagnostic chains Krsnaa Diagnostics (Rs 1,213 crore), pharmaceutical firm Windlas Biotech (Rs 401 crore) and vitrified tiles manufacturer Exxaro Tiles (Rs 161 crore) are the four companies whose IPOs opened on Wednesday.
The institutional portion was subscribed 143 times, the wealthy investor portion by 360 times and the retail investor portion by 24.5 times.
The market's sensitivity to the US Fed's balance sheet changes makes it vulnerable to the possible tapering of the bond buying programme and the resulting stagnation or even shrinkage in the balance sheet.
Top companies have grabbed a bigger pie of their sectors in the pandemic period, leading to a further rise in market concentration in many industries as measured by the Herfindahl-Hirschman Index (HHI). The HHI score, which indicates competitive intensity in an industry (or a lack of it), reached a new high in FY21 as bigger firms raised their revenue market shares either organically or through mergers and acquisitions. A higher HHI score indicates a rise in market concentration in favour of a few firms while a lower score means that the industry's revenue is more evenly divided among many companies
For large start-ups the US market is considered to be a preferred destination, as Indian investors were seen as hesitant to pay the kind of valuation private equity investors or the US markets pay. However, Zomato's listing has quashed these notions.
Fresh capital raised by companies by way of initial public offerings (IPOs) is set to hit a 14-year high, thanks mainly to Zomato's maiden offering. India Inc has raised about Rs 19,300 crore in fresh capital by maiden offerings, including the Rs 9,000 crore the food delivery company will raise this week, so far in 2021. The best year in terms of fresh fund-raise was 2007, when companies had raised Rs 32,102 crore. With Paytm planning to issue fresh shares worth Rs 12,000 crore, the domestic market looks set to surpass that tally this year.
The rally in mid- and small-cap stocks has spilled over into the IT sector as well. Second and third-tier IT stocks, which historically traded at a discount to the big five IT companies, are now trading at nearly 25 per cent premium to their large-cap peers. The smaller IT companies have a price-to-earnings (P/E) multiple of nearly 38 times against the big five's current P/E multiple of around 31x.
Fintech firm MobiKwik on Monday filed a draft red herring prospectus (DRHP) with the markets regulator, Securities and Exchange Board of India (Sebi), for its initial public offering (IPO). According to its DRHP, the company plans to raise Rs 1,900 crore, which includes a fresh issue of Rs 1,500 crore and an offer for sale of Rs 400 crore. The selling shareholders include American Express Travel, Bajaj Finance, Cisco Systems and Sequoia Capital India, besides founder Bipin Preet Singh. MobiKwik is the latest among tech majors wanting to list on stock exchanges. Food delivery start-up Zomato will launch its IPO on Wednesday.
Mobile operators with the exception of Reliance Jio are in a much worse financial condition than expected earlier. The combined borrowing of the four incumbent operators - Bharti Airtel, Vodafone Idea, Bharat Sanchar Nigam (BSNL), and Mahanagar Telephone Nigam (MTNL) - reached an all-time high of Rs 3.85 trillion at the end of March this year. The companies' combined debt was up 22.4 per cent year-on-year last financial year against 8.3 per cent growth in their borrowing in the previous year. As a result, the incumbent operators' debt-equity ratio shot up to an unsustainably high level of 6.83X at the end of March this year from 2.3X at the end of March 2020. This was largely due to big losses reported by all these companies last financial year. The four incumbent operators racked up combined net losses of Rs 70,000 crore in FY21.
The strong response for the IPOs, however, has shifted liquidity away from the secondary markets, with the benchmark Sensex falling 1.3 per cent in the previous two trading sessions.
More than 90 per cent stocks in the NSE 500 universe are currently trading above their 200-day moving average (DMA). Experts say this is a sign that the market has become overheated and can lead to a correction or sideways movement for a long period. The 200-DMA is a key technical indicator used by traders to get a sense of market direction. A level, which is roughly a 40-week average, often acts as key support or resistance.
Brokerages are expanding the universe of stocks they cover amid a boom in the market. Several stocks in the mid-cap universe are now tracked by more analysts than they were a year ago. For instance, SBI Cards and Payment Services is now tracked by 17 brokerages, compared to just four a year ago.
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