A Banking Mayhem | Indian Stock Market Weekly Update 11 March

A Banking Mayhem | Indian Stock Market Weekly Update 12 March

Grab your morning cuppa and let’s check out what happened during the week in the weekly stock market update.

Campa Cola is back!

India recorded its hottest February since 1901, temperatures have soared as much as 5 to 11 degrees above normal since February. During the Holi festivities last week, water fights gave us much-needed relief. An encore would be welcome on Rang Panchami.

With the mercury rising, so will the demand for summer goods like ACs, coolers, and refrigerators. Ice creams and beverages will also see a sharp pickup. Soft drink and juice makers’ sales have already gone up 30% to 35% YoY in February. Will the prices also rise up proportionately? Well, maybe not this year.

As if to revive a hero of the past to fight a deadly enemy, Reliance announced the relaunch of the Campa brand. Reliance expects this to be a bold step in expanding its FMCG business and we are sure it will leave no stones unturned in its launch of Campa Cola, Campa Lemon and Campa Orange. Is there another Jio moment around the corner? Will the inevitable price war save Indian consumers from harsh summer? Only time will tell.

Mayhem in the Valley

In the biggest banking shock since 2008, California-based Silicon Valley Bank was shuttered by US regulators. This closely followed the collapse of cryptocurrency-friendly Silvergate. The toppling of the two US lenders in a single workweek sent shockwaves across the globe. Global banking and financial stocks took a massive hit on Friday. While SVB was one of the primary sources of funding for tech and silicon valley startups, Silvergate had bet big on servicing the emerging crypto economy. While it shows that the innovative and forward-looking sectors of the economy may take a hit in the near term, what it also means for us investors is to stay cautious in uncertain times.

What Happened to SVB and Silvergate?

We will do our best to simplify for those who are keen to understand what happened. Ever since the Russia-Ukraine war, inflation has been roaring, and central banks all over the world have been hiking bank rates in an effort to tame it. As the cost of funds for banks grew, SVB’s main customers started lending less to high-risk silicon valley startups and withdrawing more to meet their liquidity requirements. To meet the demand for withdrawals, SVB had to sell off a $21B asset portfolio.

As a rude surprise, the portfolio, which consisted of treasury bonds held by the bank was valued lower due to the availability of new treasury bonds with higher yields (remember the rate hikes we mentioned earlier?) and the bank faced losses to the tune of $1.8 million. Now the company tried to bridge its losses by selling common equity and preferred stocks which caused investor panic and a huge sell-off in the shares.

Silvergate on the other hand was hugely exposed to crypto, and its liquidity crunch can be attributed to less-than-adequate risk management and relying on volatile short-term deposits while lending or investing at a longer duration.

Markets this Week

The Indian benchmark ended lower, tracking weak global cues. Asian markets tumbled and treasuries rallied as worries about the health of the U.S. banking system caused a sharp selloff in global markets. Banking and IT stocks such as HDFC Bank, HDFC, Axis Bank, ICICI Bank, SBI, Infosys and TCS. were dragging the index. Nifty ended 181 points down at the 17,413 level. Sensex was down by 1.13% and stood at 59,135.

What to expect from the markets

Mr Abhishek Jain, Head of Research at Arihant Capital

In US markets, we have seen financial stocks getting killed in markets with SVB and Silvergate talking about huge losses due to bond losses & cryptos.

We will advise you to avoid leverage during these uncertain times & add stocks in tranches. We await more clarity to ascertain if this can be a credit event.
One sector where impact can be seen is IT as we are not on the lower end of valuations.
March has been historically negative for markets, specially in the small-caps and the mid-caps segment. One can add these in tranches and keep some buffer for cash.
The rural theme has seen pick up and it may be a theme to play for the next few quarters.
Infrastructure & capital goods will also be interesting as India is going to be the next backyard of the world.

📈Market Outlook

–Mr. Ratnesh Goyal, Senior Research Analyst, Arihant Capital.

Nifty

On the daily chart, we are witnessing that the Nifty has marginally closed below the 200-day SMA of 17,434 and formed a downward gap area. The downward gap area is in the range of 17,573 to 17,324. Normally the downward gap area remains strong resistance for prices going forward.

For the current week, we are of the opinion that 17,300 remains a make-or-break level. As long as Nifty holds the mentioned level there is a high probability that Nifty may test the downward gap at 17,573 to 17,324 or even extend the gains to 17,664 which is the 20-day SMA. On the flip side if 17,300 is breached then the downside, 17,251 to 17,000 levels may act as support for the week.

Bank Nifty

On the daily chart, Bank Nifty has closed below the 20-day SMA of 41,019 and formed a downward gap area in the range of 41,368 to 41,050 level. Normally downward gaps do act as resistance. At present, if you compare Bank Nifty with benchmark indices then it is clearly showing higher relative strength.

Hence, for the current week, 40,500 remains a crucial support level if breached then the next support for Bank Nifty is at 40,280 to 39,982. However, if Bank Nifty holds the mentioned level of 40,500 then it may test the downward gap area 41,368 to 41,050 where it may test strong resistance.

Quick Bites

Global

Xi Jinping secures third term as China’s president

Economy

Unemployment rose to 7.45% in Feb 2023 vs 7.14% in Jan 2023. There are a total of 3.3 cr unemployed people in the country according to CMIE.
Jan industrial output up 5.2% on manufacturing boost, IIP growth second highest since July 2022.

Automobile

Vehicle sales rose by 16% year-on-year in Feb 2023: FADA
Jaguar Land Rover (owned by Tata) sales rose 33% in the UK market.
Indian auto companies shipped nearly 2.92 lakh passenger vehicles, the highest ever recorded for the month of Feb: SIAM.

IT and Telecommunications

Airtel’s subsidiary OneWeb launched 40 satellites in a SpaceX rocket.
HFCL has partnered with Microsoft to launch private 5G solutions for companies.
Sonata Software announces global partnership with Sinequa.

Banking and Finance

Bank of Baroda approved a 49% stake sale in BOB Financial Solutions.
SBI raised ₹3,717 cr via bonds.
CAMS acquired a majority stake in Think Analytics.

Energy and Infrastructure

Indraprastha Gas announced a JV with Genesis Gas Solutions to set up a smart meter manufacturing plant for ₹110 crores.
NBCC wins multiple orders for ₹541 crores including an order from IIFT worth Rs 229.81 cr.
KNR Constructions secures new order worth ₹650 crores for the construction of a four-lane highway in Karnataka.
HAL will supply 70 HTT-40 Basic Trainer Aircraft to India’s defence ministry for ₹6,800 cr.
ONGC signed a memorandum of understanding with major French TotalEnergies for the exploration of deep-water blocks.
NTPC recorded a 12% growth in electricity generation in the April-Feb period.

Other

Sequent Scientific calls off the acquisition of a 100% stake in Tineta Pharma.
Sun Pharma completes acquisition of US-based Concert Pharmaceuticals for $576 million.
Natco Pharma approved ₹210 cr-share buyback. Ajanta Pharma’s board has given approval for ₹315 cr buyback.
Bajaj Electricals got orders worth ₹565 cr from the South Bihar Power Distribution Company.
Alembic Pharma got the USFDA nod to the market generic antidepressant drug.
Bajaj Electricals has bagged an EPC contract worth ₹565 crores from South Bihar Power Distribution Company Ltd (SBPDCL).
Godrej Agrovet plans to set up an edible oil unit for ₹100 crores with a refining capacity of 400 tonnes per day.

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🚀IPO Corner

Global Surfaces Limited IPO will open from 13 to 15th Mar 2023. The issue is priced at ₹133 to ₹140 per share.
Tata Technologies filed papers with the market regulator SEBI for an initial public offering (IPO). Tata Motors plans to sell around 23.6% of its stake.

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🔌Sustainability Corner

EV sales in India charge past 100,000 units for the fifth month in a row in February & also clocked a million-plus unit in the first 11 months of FY2023.
Hero MotoCorp to collaborate with US-based Zero Motorcycles on premium electric bikes
Hyundai reveals second-gen Kona Electric with 490km range
Ola Electric rolled out special discount offers on its S1 series electric scooters on the occasion of Holi.
BBMP proposes the purchase of 270 electric bikes to combat air pollution.
Olectra secures new order worth around ₹1,000 crores to supply 550 electric buses to Telangana State Transport.
Tata Power will set up 100 EV charging stations in Goa.
Thermax to enter green hydrogen space.
Statiq expands the EV charging network with new stations.
Goyal Aluminium to enter the Indian EV market.
Honda Cars India launches new City e: HEV.
UP government to exempt road tax and registration fees for EVs.