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Inflation’s Wrath, Market Crash, Wheat Exports on Hold | Weekly Newsletter | 15 May 2022 

Inflation’s Wrath, Market Crash, Wheat Exports on Hold | Weekly Newsletter | 15 May 2022 

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In this article


The world economy reels under the impact of the Russia-Ukraine crisis and the rising cases in China. Inflation becomes a key concern in most economies, with Sri Lanka and Argentina bearing the brunt. Countries struggle with high inflation and food crisis due to the choking commodity supply chains. The governments responded by tightening the money supply and sending the stock markets plunging. The wheat shortage created due to the war also led to a rise in wheat exports from India (crossing a record_million tons) 

The Indian government also decided to stop wheat exports with immediate effect to curb rising prices in view of high export demand, and low output due to the heatwave. 

The benchmark indices fell due to negative momentum every day of the week. Investors have lost close to ₹28 lakh crores this month alone. Sensex ended the week 2,042 points in the red at 52,793 while Nifty and Bank Nifty were down 629 and 1,470 points ending the week at 15,782 and 33,121 respectively.  

No sector was immune to the market crash. Among the sectoral indices, Nifty Metal was the biggest laggard losing 12.41%, followed by PSU Bank (8.78%) and Consumer Durables (5.82%).  

In other news, PAN and Aadhaar are now mandatory for cash deposits and withdrawals above ₹20 Lakhs in one financial year in banks and post offices. 


📊What to Expect from the Markets

-Mr. Abhishek Jain, Research Head, Arihant Capital

Indian markets closed with negative momentum for the sixth day as well as the fifth week. Dragged by Nifty Metal and PSU Banks falling the most.   

On the sectoral front, all the sectoral indices ended on a negative note for the week ending 6th May. Nifty Metals led the fall with 12.41% on slowdown fears. 

On the global front, valuations are attractive after a long period of time. Some of the Nasdaq & Chinese stocks look interesting with a decent margin of safety.  

In some pockets of the Indian markets, valuation looks interesting at current levels. We believe there is a high probability of a 40-50 bps hike in the June monetary policy committee meeting if the current scenario prevails.


📈Market Outlook

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

Nifty

The daily chart of Nifty formed a “Bearish” pattern formation and on the weekly front, it shows a breakdown of the “Triangle” pattern. We believe the market will continue to show supply from this level and investors need to be cautious. If Nifty crosses the 15,880 level to see a bounce towards 15,980 and 16,100 levels. On the downside support, if it crosses below 15,600 then it can test 15,350 and 15,100 levels.

Bank Nifty

The daily chart of Bank Nifty forms a “Bearish” candle formation, and the weekly chart gives a breakdown of the lower trend line. The technical chart of Bank Nifty looks weaker and investors need to be cautious from a higher level. This week Bank Nifty futures closed at 33,083 levels. In the coming trading session if it holds below 32,700 then weakness could take it to 32,400 and 32,200 whereas minor resistance on the upside is capped around 33,650-33,800 levels. 


💰Stock Picks

From the Fundamental Desk

-Mr. Abhishek Jain, Research Head, Arihant Capital

Our interaction with rural dealers suggests a sharp recovery in April & May.  One can add Kaveri Seeds at current levels with the price objective of ₹700. We are expecting higher cotton prices to boost acreage for the company. 

In case you missed our last newsletter, you can check out last week’s fundamental stock picks here.  

From the Technical Desk

-Ms. Kavita Jain, Head Learning and Senior Research Analyst, Arihant Capital


🏷️Option Hub

-Ms. Kavita Jain, Head Learning and Senior Research Analyst, Arihant Capital


📝Key Results

  • Tata Power reported a 31.4% YoY increase in profit at ₹632.4 crores. Tata Motors reported a net loss of ₹1,032.84 cr for Q4’22, the revenue fell 11.5% YoY.  
  • SBI’s net profit jumped 41% YoY to ₹9,113 crores; it announced a dividend of ₹7.10.   
  • Vodafone Idea posted revenue of ₹10,271.8 crores – an increase of 6.47% YoY. The net loss stood at ₹6,563.1 crore.  
  • Asian Paints posted a YoY increase of 18.66% in revenue for Q4’22. The net profit stood at ₹874.05 crores. It announced a final dividend of ₹15.50 per equity share.  
  • Reliance Industries reported a 20.2% YoY rise in its consolidated profit for Q4 at ₹18,021 crores. Revenue for the quarter increased 35% YoY to ₹2,32,539 crores.  
  • L&T reported a 10% YoY increase in its consolidated net profit at ₹3,620.69 crores for Q4’22. It announced a final dividend of ₹22 per equity share. 

🔎Quick Bites

Global

  • Finland moves toward joining NATO amid Russian threats. 
  • Elon Musk tweets that the $44-billion Twitter buyout deal is temporarily on hold. Apple was dethroned as the world’s most valuable company by Saudi oil giant Aramco.

The impact of war

  • The diamond trade suffers under the weight of Russian sanctions. 
  • UK GDP shrank by 0.1% in March. 
  • US inflation (CPI) stood at 8.3% in April, a decrease from 8.5% in March. 
  • India exported a record 1.4 million tonnes of wheat in April, then declared that it will stop exports due to high domestic prices.
  • Argentina’s inflation is likely to reach 60% in 2022. 

Economy

Inflation surges to an 8-year high (CPI at 7.79% in April – the highest since September 2014.

  • Morgan Stanley cut India’s growth forecast to 7.6% for FY-23 and 6.7% for FY-24. 
  • Shrinkflation: Domestic consumer goods companies Unilever, Britannia, and Dabur have moved toward lighter loads in their cheapest packages.  
  • Consumer electronics and appliance prices also rise amid high inflation and a weaker rupee. 

  • Exports up 30.7% to $40.19 bn in April; trade deficit widens to $20.11 bn. Forex reserves fall by $28.05 billion to $607.31 billion in September 2021-March 2022 period.  
  • RBI took calibrated interventions via futures and NDF to salvage Rupee from record lows. 
  • Index of Industrial Production, a measure of factory output in the country, rose by 1.9% in March. 
  • The labor force in India increased by 8.8 million from March to 437.2 million in April 2022. 
  • FPIs in exit mode, the equity holding of FPIs in the BSE 500 companies dropped by 49 bps to an eight-year low of 18.9% in the March 2022 quarter. 

Banking and Finance

  • SBI to raise up to $2 billion via overseas bond sales.
  • ICICI Bank partners with Santander UK for the India-UK corridor’s corporate customers. 
  • Axis Mutual Fund suspends two equity fund managers due to alleged unethical trading practices. 
  • RBI has approved the amalgamation between Equitas Holdings and Equitas Small Finance Bank. 

Energy and Infrastructure

  • Oil marketing companies including BPCL, IOCL, and HPCL have entered into a long-term purchase agreement for the upcoming dedicated ethanol plants across India. 
  • NTPC has invited bids for raising term-loan of up to ₹5,000 crores. 
  • India has eased environment approvals for coal mine expansions to boost output amid fuel shortages that have triggered hours-long blackouts. 
  • Coal production in India increased by 29% YoY in April to 66.58 MT. 
  • Adani Airport Holdings Ltd raises ₹1,950 crores of overseas debt for the development of 6 airports. 
  • Vedanta outbids JSPL for Athena Chhattisgarh Power Ltd, Vedanta’s offer stood at ₹565 crores. 

IT and Telecommunications

  • Government to hold 33% stake in Vi post equity conversion. The promoters, UK’s Vodafone Plc and India’s Aditya Birla Group (ABG)—will collectively hold 50% of the company.  
  • Vodafone Idea adds active users in March for the first time since the merger. 
  • Wipro extended its IT transformation deal with France-based the corporate and investment bank Crédit Agricole. 
  • HCL Tech to acquire Bengaluru-based Quest Informatics in an all-cash deal worth ₹15 crores. 
  • L&T partners with VMware Inc, a global multi-cloud services provider to accelerate digital infra-adoption across verticals. 
  • HCL Tech’s UK-based subsidiary has acquired Confinale AG, a digital banking and wealth management consulting specialist. 
  • “Return to Work? I’ll pass!” Over 800 employees of WhiteHat Jr resign when asked to ‘work from office’.

Industry

  • ArcelorMittal and the Ruias of Essar are likely to resolve their dispute over a captive port in Hazira and adjoining power assets. 
  • Ester Industries sold its engineering plastic business to Radici Plastics, for ₹289.33 crores. 
  • Coromandel International to acquire a 45% equity stake in Baobab Mining and Chemicals Corporation (BMCC), a rock phosphate mining company of Africa for ₹225 crores. 
  • Adani Group acquires franchise in UAE T20 League. 

Other

  • E-commerce majors Flipkart, and Amazon could join India’s Open Network for Digital Commerce (ONDC). 
  • Future Enterprises has defaulted on the payment of principal and interest of non-convertible debentures (NCDs) of about ₹26 crores. 
  • The Holcim Group is negotiating a deal with the Adani Group and the JSW Group for the $10-billion sale of Ambuja Cement and ACC. Aditya Birla group will also bid for the cement companies, after obtaining the necessary legal opinion and regulatory precedence under the Competition Act. 
  • PVR plans to open 125 new screens across India this fiscal. 
  • Jet Airways attains security clearance from the government to resume flight operations. 
  • Swiggy buys Dineout from Times Internet in a $120 million all-stock deal 
  • Zydus Lifesciences launches a drug for treating bad cholesterol.

🚀IPO Corner

  • Prudent Corporate Advisory got 1.22 times and Delhivery gets 1.31 times subscription on the last day. Venus Pipes & Tubes IPO got 10.75 times subscription on the last day. 
  • Campus Activewear shares list at a 23% premium over the issue price. 
  • Rainbow Children’s Medicare makes a muted debut, lists at ₹510 per share 9% discount on the bourses. 
  • Paradeep Phosphates Limited IPO is open from 17 May to 19 May at a price band of ₹39-42. The issue size is ₹1,501 crores. 
  • Ethos Limited IPO is open from 18 May to 20 May at a price band of ₹836-878, the total issue size is ₹472 crores. 
  • eMudhra Limited IPO is open from 20 May to 24 May. The price band is ₹243-256 and the issue size is ₹412 crores. 


🔌Sustainability Corner

  • EV company, Ather Energy raises $128 million led by the Indian government’s sovereign fund and Hero MotoCorp. 
  • PMI Electro Mobility plans to invest ₹300 crores to operationalize an electric commercial vehicle manufacturing facility in Pune. 
  • Ford has dropped plans to manufacture EVs in India for the global markets. 
  • Adani Green to issue 2 crores shares worth ₹3,850 cr to Green Energy Investment Holding. 
  • Hindalco’s Novelis to invest $2.5 billion to build a new low-carbon recycling and rolling plant in the USA. 
  • Borosil Renewables Ltd plans to invest ₹1,500 cr over the next 2 years to expand its capacity by nearly 2.5 times and supply 15 GW of solar modules by FY 2025. 
  • Ashok Leyland’s arm Switch Mobility to invest ₹1,000 crores in an electric vehicle plant. 
  • SUN Mobility partners with Greaves Electric Mobility for the swappable battery. 
  • Mahindra Electric establishes a new hub in Bengaluru for its EV Technology Centre. 
  • Hero Electric partners with ReadyAssist for AMC and service support to its B2B customers. 
  • Green mobility on the fast track: 20-25 EV models expected by 2025-27 in the mass-market segment. EV sales grew by a hefty 257.18% in FY22 over FY21, and their market share tripled—from 0.21% in FY21 to 0.65% in FY22. 
  • CG Power and Industrial Solutions, part of Murugappa Group, is looking at entering the electric vehicle (EV) mobility space. 
  • WardWizard plans to set up a Li-ion advance cells manufacturing unit in Gujarat. 
  • Tata Motors’ ₹32,000 cr CAPEX plan aims to go big on EVs across all businesses. 
  • Macrotech Developers has entered a partnership worth $1 billion with Bain Capital and Ivanhoé Cambridge to develop a next-gen green digital infrastructure platform. 
  • GACL & GAIL partner to set up a Bioethanol plant of 500 KLD capacity in Gujarat with an estimated investment of ₹1,000 cr. Brookfield-backed PIL and GAIL sign initial pact for hydrogen collaboration. 

That’s all for now folks! See you next week!

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