From Sensex hitting the 60k mark for the first time to the global market sell-off after Evergrande’s crisis, it was an extremely volatile week for the Indian stock markets. Thankfully though, the markets managed to close with a fifth straight weekly gain, as both major indexes rose ~1.5 percent.
📈 Markets this week
- The S&P BSE Sensex jumped 1,032.58 points to settle at 60,048.47 (up 1.5%), during the week, while the Nifty 50 index surged 268.05 points or 1.3% to settle at 17,853.20.
- Monday was a day of heavy sell-off for the markets where, barring FMCG, practically all sectors ended in red, with metal and banks being the biggest losers. The Evergrande crisis badly affected the metal stocks with Tata Steel losing 10% in a single day. Tuesday was a comeback while Wednesday saw small losses after a volatile session. The US Fed’s decision to keep interest rates unchanged cheered the Indian stock markets, which ended the day on a positive note. The gains continued on Friday with Sensex touching the 60,000 mark for the first time ever, with IT stocks leading the rally followed by auto, banks and realty stocks.
- Performers and Losers of the week. Among the Nifty stocks, Bajaj Auto (+10%) was the top gainer followed by HCL Tech (7.51%) while Tata Steel saw heavy sell-off with the stock falling 8.21% during the week followed by BPCL that tanked 4.92%.
- Zee Entertainment Enterprises Limited stock surged by 31.72% on 22nd September, closing at ₹336 on BSE, following the announcement of its merger with Sony Pictures India Ltd.
🏗️ China’s Evergrande crisis rocks worldwide stock markets as the company fails to pay its bills; Sensex tanks by 525 points
Monday blues just got real this week when China’s second-largest real-estate company Evergrande said it doesn’t have money to pay back the $3000 billion loan it owes to banks, suppliers, investors, their own workers, and several others. Yes, you read that right, liabilities to the tune of $300 billion, which sent the stock markets worldwide into a tizzy and tanked the Indian Sensex by 525 points. It’s the biggest ever single-session drop in two months, reminding investors of the infamous ‘2008 Lehman Brothers crisis.’
The crisis at Evergrande:
The Real-estate developer rode high on the boom in demand for affordable housing and expanded to 280 cities in China within a short period until the crisis. It kept on constructing buildings and sold to people who never planned to live there, kept on loading itself with debt during China’s economic boom, which led to cash brunch, and one day when things got out of hands everything just got messy.
- 1.4 million buyers waiting for their pre-purchased apartments to be built
- 85% drop in Evergrande’s stock value in the last six months
- $8 billion amount raised by Evergrande raised this year, $292 billion short of its debt obligations
Two factors predominantly led to the present situation:
- Stringent government regulations on market borrowing and crackdown on select sectors such as housing, digital economy, and education.
- Slowdown in the country’s real estate market, with tapered demand for affordable housing and few takers of units in oversupply.
While the company tried to restructure its debts via equity and asset sale, the decision did not yield positive results. That marshaled an accrued debt of $300 billion, 800 unfinished buildings, unpaid vendors, undelivered projects to existing buyers, and a downgraded rating and decline in share value.
Why does a company defaulting in China affect us?
No doubt the announcement sent heartbeats of investors around the world racing! But why? How do 2BHK towers in China affect our stock markets and economy? Well, for the same reason a recession in the USA affects us. We are living in an inter-connected global world, and something going wrong in one important part of the world has a spiral effect everywhere. Sometimes literally and sometimes it’s just a sentiment.
Since three-quarters of China’s wealth is in real estate, Evergrande’s collapse could cause stock sell-offs across China’s real estate sector — or potentially a global sell-off. Why? Because it could affect its lenders and investors like BlackRock, UBS, HSBC big time.
What are the Chinese government and the real estate company doing to combat the crisis?
- The Chinese central bank injected 460 billion yuan into the banking system to blunt the economic impact, and soothe fears of imminent contagion
- Delayed the interest payments on bonds held by investors; by way of negotiations and discussions to avoid defaults.
While these measures indicate a pragmatic response, what needs to be seen are the next measures taken by the government and the company. Overall, while the global markets tanked on Monday, they showed signs of gradual recovery later in the week.
But is this the signal of the 2008-like crisis? Well, some say it is and worry Evergrande could default and affect the global economy. Some think the fall will be limited to China while others believe it’s a non-event that will soon be forgotten. Honestly, it’s hard to predict. But it doesn’t hurt to be cautious and it always pays well to ensure you are investing in fundamentally strong companies.
💡Snoop Dogg sings the crypto tune, claims to own cryptocurrency worth $17 million
‘Cryptocurrency’ is one of the most buzzed words these days and, it just found another taker in the famous rapper Snoop Dogg! The American singer is said to own non-fungible token (NFT) collectibles worth $17 million (₹125 crores) under the pseudonym ‘Cozomo de Medici’ which was confirmed by the rapper via a tweet on Sep 21, 2021.
Snoop Dogg’s wallet contains 9 Cryptopunks- that are among the oldest and most desired NFTs in the world. In addition to this, he also owns 10 Meebits NFTs which are unique 3D characters created by a custom generated algorithm along with NFTs from Art Blocks and Tom Sach’s Rocket Factory as per online reports.
What are NFTs?
In simple terms, non-fungible tokens, popularly known as NFTs, are blockchain-based digital assets that represent real-world objects like art, music, games, GIFs, videos, etc. You might purchase an NFT at a certain price, but because it’s non-fungible, which means it can’t be swapped for something of completely equal value, its market value is likely to fluctuate.
Apart from Snoop Dogg, Jake Paul, Steve Harvey, and Stephen Curry are other notable NFT enthusiasts.
📺 Quick Bites
- The Organization for Economic Co-operation and Development (OECD) cut India’s growth projection numbers for FY22 by 20 bps to 9.7%. For FY23, OECD has projected India’s growth rate to be 7.9% Overall, India is the worst-hit economy in the world due to the pandemic, with its GDP numbers much lower than its original forecast.
- IDFC shareholders reject Vinod Rai’s re-election to IDFC First’s Board.
- Godrej Properties sells flats worth ₹ Rs 575 crore in a single day; at the launch of the second phase of its residential property Godrej Woods in Noida
- Tata Motors has announced a price hike of 1% for its commercial vehicles from October 1st due to rising manufacturing costs.
- Bharti Airtel announced its rights issue will open on Tuesday, 5 October and close on 21 October 2021. A total of upto 39,22,87,662 shares will be offered as part of the rights issue.
- Axis Bank pledges ₹30,000 crores for lending until FY 25-26, under its sustainable financing framework.
- India’s crude oil production fell by 2.3% last month to 2.51 million tonnes; while natural gas production rose by a fifth due to increased supply from Reliance- BP fields.
- Accenture reported revenues of $13.4 billion in Q4, which was at the upper end of its guidance. For FY22, the IT company foresees revenue growth of 12-15%.
🔌EV and Sustainability Corner: Key Sustainability News from India Inc
- Ultratech Cement plans to meet 100% of its electricity requirement through renewables sources by 2050. It has committed to Climate Group’s RE100 initiative at Climate Week NYC 2021.
- Chennai-based TVS Motor Company has earmarked an investment of ₹1,000 crore on its electric vehicles (EV) business and plans to launch a complete range of electric two- and three-wheelers. Its electric 2 and 3 wheelers, in n both passenger and cargo segments, will come with a power output ranging from 5 to 25 kilowatts in the next two years as it seeks to play a leading role in the country’s emerging electric vehicle space.
- Pune-based EV charging infra start-up goEgoNetwork has installed world’s largest electric vehicle charging facility in Himachal Pradesh’s Kaza. goEgo has collaborated with TVS Motor Company to promote EV infrastructure in Himachal Pradesh.
- Tata Motors achieves cumulative EV sales mark of 10,000 units. The company had entered the electric vehicle space with Tigor EV as a fleet offering, and expanded to the personal segment with the launch of Nexon EV in January 2020.
- Hero Electric has joined hands with EV start-up Massive Mobility to set up 10,000 charging stations in India in the next one year to help drive and encourage adoption of electric mobility.
- Hindustan Unilever (HUL), in association with Banyan Nation, launches recyclable bottles for Surf Excel Matic Liquid. The company said Surf Excel has transitioned to recyclable bottles made from 50% post-consumer recycled plastic while using 100% biodegradable actives in its formulation.
- India’s third largest private sector lender, Axis Bank said it will provide ₹30,000 crore lending till fiscal year 2025-26 under its sustainable financing framework (SFF) to increase its portfolio of green lending. The bank will also scale down its exposure to carbon- intensive sectors in its wholesale banking business portfolio.
- In a bid to be more sustainable, Spicejet (under the aegis of World Economic Forum) has committed to take its global sustainable aviation fuel (SAF) supply and use to 10% by 2030.
- Paras Defence becomes the most subscribed IPO in Indian capital market’s history, after it was oversubscribed 304 times. In total, the company raised upto ₹171 crores at an implied market cap of ₹683 crores at the upper end of the price band.
- Shares of Sansera Engineering made a debut on the stock markets with a listing gain of 9.05% at ₹811.35 on Friday, against its issue price of ₹744 per share, before closing the day at a 10% gain.
- Freshworks Inc., the first Indian SaaS company to get listed on Nasdaq, made its debut with 21% gain over its IPO price, valuing the company at $12.2 billion on Wednesday. It started operations in Chennai with only six members in 2010, and turned over 500 of its Indian employees crorepatis after US IPO listing.
|IPO Name||Issue Type||Offer Price/Range||Opening Date||Closing Date||Issue Size|
|Aditya Birla Sun Life AMC||OFS||₹695-712||29 Sept||01 Oct||₹2,702.16 – ₹2,768 crores|