Move of Federal Reserve to not hike rates in 2019 likely to be positive for Indian equities
The US Federal Reserve recently announced that it will not make any changes in its policy rates in 2019 due to muted inflationary pressures and global economic concerns. This is an indication that the rites will not be hiked in the current year and by September, there will be a halt in the balance sheet unwinding. According to Chairman Jerome Powel, the policy rates are already at a level wherein no restrains or stimulations are felt in the economic growth. The decision of the Federal Reserve in this matter may turn out to be positive for the Indian equity market.
Earlier, in November 2018, the Federal Reserve had signaled an alteration in the stance on the policy of interest rate tightening when there was a prediction of a surge in flows that would favor the emerging market equities. In the meantime, the European Central Bank had indicated that there will be no raise made by it in its ultra-low negative 0.4% policy rate this year. On the other hand, the Reserve Bank of India (RBI) has slashed down its interest rates which will translate to an elevation in liquidity levels. At the moment, the total assets of all the major central banks account for 23% of the global GDP.
22 March 2019
SEBI approves request of Vodafone Idea for more than 75% shareholding
The Securities and Exchange Board of India (SEBI) have given a nod to Vodafone Idea to exceed 75% shareholding with a condition that it brings down the level within a year. The firm had sought the market regulator’s approval to protect against a probability of a shortfall in the participation by minority shareholders. SEBI has approved this request of Vodafone Idea but with a condition that the latter will bring down the shareholding of the promoters back below 75% in 12 months time. In the meantime, Vodafone Idea has issued a statement that shareholders will be able to purchase 87 shares for every 38 shares at an issue price of Rs.12.50 a piece. This is a discount of about 60% on the existing share prices.
India’s largest telecom operator, Vodafone Idea plans on raising up to Rs.25,000 crore via this rights issue which will be open from 10 April to 24 April 2019. The Aditya Birla Group and Vodafone Group, who are the promoter shareholders, have confirmed the participation of up to Rs.7,250 crore and Rs.11,000 crore respectively. The board of the company has approved the issuance of 2,000 crore fully paid-up equity shares at a face value of Rs.10 each. Recently, the government had approved the company’s proposal of FDI (Foreign Direct Investment) of more than Rs.5,000 crore which can go up to Rs.25,000 crore.
21 March 2019
Midcap index may rally by over 30% in March
As per market experts, the midcap index is likely to gain another 30% after a gain of 12% from the lows on technical factors in February. Earlier, the NSE’s midcap index witnessed three major corrections that attained maturity in 14 months followed by average gains of a minimum of 40% in the subsequent year. Since the current rally is at the premature stage of a major uptrend, no challenge in the February lows is foreseen in the midcap and small cap indices. Bouts of volatility are expected to persist in the wake of the upcoming general elections. Experts are of the opinion that market volatility can be capitalised as a progressive buying opportunity. Over the next six months, 5 mid cap stocks are expected to outperform. These stocks are of NBCC, Bank of India, IPCA laboratories, Kansai Nerolac, and Lux Industries.
In the meantime, the other stocks that are in news are of Centrum Capital, DLF, Muthoot Capital, Fortis and Newgen Software. Centrum Capital has sold its complete equity holding in its wholly-owned subsidiary, Centrum Capital Holding LLC and Centrum Securities LLC. DLF intends to make investments worth Rs.1,900 crore for the development of 2.9 million square feet in Gurugram, with Hines. Securitisation worth Rs.236.36 crore was completed by Muthoot Capital. Fortis Healthcare has appointed a new MD&CEO in the form of Dr. Ashutosh Raghuvanshi. Newgen Software has added another patent in its name for its invention – Integrated and Automatic Generation of Carbon Credits.
20 March 2019
Stocks of PSU banks witness gains dragged by PNB; ONGC, GAIL, top gainers in Nifty
The Nifty 50 index gained 10 points in the early trading hours of 19 March, to trade at 11,472 while the Sensex was trading at 38,144 after gaining 49 points. Led by Punjab National Bank, the Nifty PSU Bank index was up by 1%. The other banks that contributed to the gain are Bank of India, State Bank of India, Union Bank, OBC, and Bank of Baroda. In the pharma segment, the top gainers were Lupin, Sun Pharma, Piramal Enterprises, Aurobindo Pharma, and Divis Labs. The other stocks that were buzzing were the real estate stocks of Oberoi Realty, Sobha, and Godrej Properties.
On the other hand, the Nifty Auto index dipped by 1% dragged by Hero MotoCorp, Eicher Motors, TVS Motor Company, and Maruti Suzuki. The stocks of ADAG rallied post the clearing of dues by Reliance Communications to Ericsson India. The stocks of Reliance Communications, in turn, jumped by 10% while 3% to 4% gains were witnessed by Reliance Infra, and Reliance Power. The top gainers in the Nifty index were Bharti Airtel, ONGC, Sun Pharma, GAIL, and Bharti Infratel while the top losers were stocks of Bajaj Auto, Eicher Motors, JSW Steel, Hero Moto, and Larsen & Toubro.
19 March 2019
Experts suggest retail investors stay invested in the market despite the overvaluation
The last few days saw an overvaluation in the capital market and as per history, many retail investors join the rally when the market is high and booked their profits. There are also cases where they closed positions when the time came to add positions. However, market experts suggest that investors who have plans to stay in the market for a long term should stay invested as efficient portfolio allocation can lead to wealth generation. The Nifty and Sensex index reclaimed their lost glory in March when both managed to remain above their crucial resistance levels. There was a rally of 2,157 points in the S&P BSE Sensex which was a gain of around 6%. In the meantime, the Nifty 50 posted a vertical climb of 634 points or 5.8%.
The rally has been fueled by a host of domestic as well as global factors leading to the strong sentiment towards equities. The major factor, however, is the infusion of Rs.19,000 crore from foreign institutional investors. The weakening US dollar was also one of the reasons behind the improvement in the market sentiments. Experts suggest that investors should balance their portfolio by investing across asset classes. They also suggest that 30% to 40% of assets should be made in debt securities with short to medium maturity papers and around 10% in gold or gold funds. 20% should be invested in bond markets and 10% in monthly recurring schemes.
18 March 2019
Bajaj Finance witnesses growth of around 60% in 1 year
One of the biggest players in the Indian consumer finance space, Bajaj Finance witnessed a rally of more than 60% in its stocks in the last one year. The stocks were offered coverage of a buy rating at a 12-month target price of Rs.3,370 which is equivalent to gains of another 20% from Rs.2,808, which was the rate at which it closed on 14 March. With a well-diversified credit portfolio, Bajaj Finance has its focus on customer acquisition, cross-selling, expansion in delivery channels, and distribution of products through these channels. These factors should be able to sustain the strong growth in the AUM (Assets Under Management) of the firm. Besides consumer finance, the firm also has significant business penetration in rural, commercial, and SME lending.
Bajaj Finance has also been able to gain traction in mortgages through its housing arm. The firm offers a broad range of loan products ranging from digital product loans, 2 and 3-wheeler loans, consumer durable loans, working capital loans, commercial loans, home loans, gold loans, etc. The firm is expanding its customer cross-sell franchise by 25% to 30% every year. The AUM of Bajaj Finance grew by more than 40% CAGR in the last 4 years at Rs.80,444 crore as on FY2018. The net profit also increased at a robust pace of 40% CAGR to Rs.2,646 crore. A 54% growth was reported by the firm in its net profit to Rs.1,059 crore in the December quarter results.
15 March 2019
February sees the lowest inflows by equity schemes in the last 2 years
Around Rs.565 crore worth of shares were sold by domestic institutional investors (DII) in February. In the meantime, the inflows into equity mutual funds slipped against the previous months but despite that, a positive trend has been noticed. The net infusion by investors in equity schemes was recorded at Rs.478 crore. The impending Lok Sabha elections and the negative returns delivered by mutual funds in the previous year were cited as the reasons behind the industry slowdown. The AUM (Assets Under Management) of the mutual funds industry also dipped marginally to Rs.23.4 lakh crore each in January and February. The maximum stake bought by fund managers belonged to the large cap basket which includes the stocks of Steel Authority of India (SAIL), Godrej Consumer Products, Kotak Mahindra Bank, Hero MotoCorp, Axis Bank, JSW Steel, Avenue Supermarts, and United Breweries. The largecap stocks that witnessed the highest sale by fund houses were of Adani Ports, Piramal Enterprises, Berger Paints, Bajaj Auto, Indiabulls Housing Finance, Bandhan Bank, UPL, Godrej Industries, Bajaj Holdings, and L&T Finance.
14 March 2019
AMFI’s request to do away with mutual funds disclosure norms turned down by SEBI
The request made by the Association of Mutual Funds in India (AMFI) to the Securities and Exchange Board of India (SEBI) to do away with the disclosure of daily AUM (Assets Under Management) has been turned down. The market regulator has mandated mutual fund schemes to disclose their AUMs on a daily basis along with the product labelling and additional benchmark. SEBI has stated in the clarification letter sent to AMFI that all schemes, with the exception of liquid schemes, must disclose their AUM on the website of the AMFI on a daily basis. The market regulator has further stated that liquid schemes have to disclose the AUM of the previous month and the closing AUM on AMFI’s website on a daily basis.
In cases where the AUM movement of mutual fund schemes is more than 10% from the AUM that was previously disclosed, the AUM of that day will have to be disclosed by the fund houses. The AMFI had asked SEBI to do away with the disclosure requirement on a daily basis as it may result in unhealthy competition among the fund houses and also because the AUM figures face extensive media glare which may lead to unnecessary pressure on mutual fund schemes. A clarification was also given by the SEBI that the fund houses need to disclose AUM of both direct and regular plans of the growth option. In the same clarification letter, SEBI also revealed that the formula of computing the TER (Total Expense Ratio) has been modified.
8 March 2019
Mirae Asset MF positive on pharmaceutical sector but is underweight on PSBs and real estate
Senior Fund Manager of Mirae Asset Mutual Fund, Mr. Gaurav Misra is of the opinion that the equity market is on a wait-and-watch mode where volatility is expected to persist until May, ahead of the Lok Sabha elections. He further believes that the market may not be impacted by the medium-term outlook except for likely electoral swings and that by the end of 2020 fiscal the market may experience an upward bias. By the end of February, Nifty had shed 7.6% while Sensex fell by 8.5%. In the meantime, there was a gain of 45.08% in the India Volatility Index which simply means that the investors are predicting the market to change by 45.08%.
Mr. Misra further believes that among the big emerging markets, India is the forerunner as the fastest-growing economy due to its steady macro environment. He stated that if the domestic market experiences any downside, the attractive valuations will see an improvement in the allocations. On the investment side, Misra has revealed that the equity market experienced strong inflows from FIIs (Foreign Institutional Investors) and DIIs (Domestic Institutional Investors) in February. Sector-wise, he has a positive outlook in the pharmaceutical sector but is underweight on real estate, Public Sector Banks (PSBs), consumer staples, and infrastructure/construction.
7 March 2019
Bal Bhavishya Yojna of Aditya Birla Sun Life Mutual Fund collects Rs.100 crore
Aditya Birla Sun Life Mutual Fund has managed to garner around Rs.100 crore from the new fund offer (NFO) of the Aditya Birla Sun Life Mutual Bal Bhavishya Yojna. The scheme received 44,661 applications out of which around 50% were through SIPs (Systematic Investment Plans). The scheme was open for subscription from 22 January 2019 to 5 February 2019. The scheme was able to attract investors from 244 locations across India and around 55% of applications were received from B30 cities. At the moment, only two asset management firms offer children’s funds which are ICICI Prudential Child Care Plan and HDFC Children Gift Fund.
The Aditya Birla Sun Life Mutual Bal Bhavishya Yojna intends to help investors fulfill the future financial requirements for a child, be it higher education, marriage, etc., and is ideal for investors with long term investment horizon. The scheme is open-ended and will come with a lock-in period of minimum 5 years or till the child attains majority age (whichever is earlier). The scheme will be available in two plans – Savings and Wealth. The scheme will be benchmarked against CRISIL Hybrid 85%+ Conservative Index 15% and the minimum application amount will be Rs.1,000. The fund managers of the scheme are Mr. Pranay Sinha and Mr. Ajay Garg.
6 March 2019