September continued its upmove in the Indian stock markets with some big bang reforms by the government. Here’s a look at all key events of the week and our weekly special – EV and sustainability corner.
📈 Markets this week
From Nifty hitting new peaks, without Elon Musk tweeting about it 😉, and Bank Nifty soaring following ‘bad banks’ policy announcement to telecom relief packages, this was an actioned-packed week for the markets.
The markets were positive three of the five trading sessions this week with Sensex closing at 59,015.89 and Nifty at 17585.15, recording weekly gains of 1.22% and 1.24% respectively. Interestingly, Sensex moved from 58k to 59k levels in just 9 trading sessions.
- Bank Nifty scaled new heights and consolidated its position after 7 months, following the announcement of the ‘Bad Banks’ policy.
- Performer of the week IndusInd (13.1%) and Kotak Mahindra Bank (10.5%) were among the top gainers during the week. BPCL on the other hand was the top loser, down 11.2% followed by Tata Steel that fell 4.22%.
- Zee Entertainment surged 40% on Tuesday after a buzz about change in its management and broad recast.
- Markets this week (Nifty).
The Power of Musk 💪: And how does Elon Musk figure in all of this? Well, his single tweet sharing a picture of his new pet puppy with the caption: ‘Floki has arrived’ sent the crypto market soaring. This tweet led to a record surge of 958.09% of the Japanese cryptocurrency named Shiba Floki in 24 hours.
🏦 The ‘Bad banks’ policy explained and how it will boost the banking sector
Just when the banking sector was drowning under the weight of bad loans (Rs 8.35 lakh crore NPA as of March 2021), the Union Cabinet came to its aid like a knight in shining armour with its ‘bad bank policy’
Finance Minister Nirmala Sitharaman, on Thursday, announced the formation of India’s first-ever “bad bank”. She said the Centre will provide ₹30,600 crores in guarantees to National Asset Reconstruction Company Ltd. (NARCL) to buy bad loans from banks. This will de-stress the balance sheets of the banks, giving them a breather to start fresh.
Does it mean those who defaulted on loans can walk free? Not at all. The money owed by borrowers will definitely be recovered but by NARCL and IDRCL. The bad bank will purchase the non-performing assets (NPAs) from the banks, and help the banks get rid of their liabilities to the tune of ₹2lakh crores. Thereafter the India Debt Resolution Company Ltd (IDRCL) will work on recovering the money that is owed to the banks.
The NARCL will pay the bank 15% of the asset’s value in cash, and the rest will be given as security receipts. Once the asset is sold, the balance amount of 85% held as security receipts would be given to the banks.
This one-time transfer of assets outside of the bank’s balance sheets will enable the banks to focus solely on lending activities while the bad bank deals with recovering dues via liquidation, restructuring of assets or any other means – a positive for the economy.
Overall, this is a welcome policy and will help in the revival of the banking sector.
📞 Union government calls in new telecom reforms leading to a rally in telecom stocks
We all know how stressed the Indian Telecom sector has been in recent years be it in terms of government policies, tax issues, or the entry of a new player. The union government recently unveiled new policies which benefit the Indian telecom industry.
- The government permits delayed payment of dues, including statutory, spectrum and adjusted gross revenue (AGR), for up to 4 years thereby offering much relief to telecom companies.
- New provision through which telecom service providers can pay the interest amount by way of equity, under which they will offering the government part ownership in the company.
- Non-telecom revenues will not be included in AGR definition.
- 100 percent FDI in telecom approved.
- Interest on the spectrum usage charges (SUC) will now be compounded annually instead of monthly earlier, and interest rate lowered.
- Penalty and interest on penalty stand removed.
The policy factors in cash constraints faced by telecom giants such as Vodafone India and Bharti Airtel and lets them generate additional revenue via spectrum sharing, which will not be charged henceforth, and reduced lock-in period for spectrum ownership.
Naturally, the telecom sector stocks cheered on this news. Vodaphone Idea clocked 37.95% returns during this week and closed at ₹11.45 while Bharti Airtel jumped 6.15% and closed the week at ₹729.50.
These policies will bring significant benefits to India’s plaguing telecom sector. But will it help companies like Vodaphone Idea who are grappling with a host of problems including pile loads of debt, dwindling subscribers, and not enough revenue generation? Let’s see if the 4 years window and other reforms will help them make a profitable comeback.
🚬ITC surges 8.34%, breaks out consolidation after touching 7-month high
ITC stock surged near to its 52-week high of ₹239 this week, shooting up over 8 percent to ₹233.50 apiece intraday on Thursday and closed the week at ₹231.15. The stock had the Twiterratis on a roll, with stock memes doing rounds everywhere.
ITC observed consolidation break out on Thursday, 16th September with more than three times average daily volume after hovering between ₹198-218 zone for a long time. Is this the beginning of a rally in ITC, especially considering the festive season is around the corner, which is expected to boost consumption and demand? Our senior analyst shares her technical overview of the stock here.
🔌 EV and Sustainability Corner
- The future of Electric Vehicles in India looks bright as the government is getting serious about adoption of cleaner energy. Union Government approves a ₹26,058 crores product-linked incentive (PLI) scheme over five years and incentives of up to 18 percent for the auto, auto component, and drone industries on Wednesday to push manufacturing of electric vehicles and hydrogen fuel vehicles. The scheme aims to incentivize the emergence of advanced automotive technologies and enhance exports. Overall, the scheme is an add-on to the existing Advanced Chemistry Cell (₹18,100 crore) and the ₹10,000 crore Faster Adaption of Manufacturing of Electric Vehicles (FAME) scheme and will enable India to leapfrog from traditional fossil fuel-based system to environmentally cleaner, sustainable, advanced, and more efficient EV based system. It will also help India in reducing its oil imports.
- Ola Electric sells scooters worth ₹1,100 crores in 2 days through 55lakh bookings of the company’s latest offering of S1 and S1 pro scooters. This puts them on the list of the fastest sold scooters in the two-wheeler industry. Additionally, the ride- hailing company is seeking to go public early next year, with an IPO to raise funds anywhere $1.5- 2 billion.
- Tata Motors signed a deal with Tata Power to install and run a 3MW solar rooftop plant at its manufacturing facility in Pune; the company claims this will reduce carbon emissions up to 3538 tonnes annually.
- BHEL announced the commissioning of a 25 MV floating solar plant in Andhra Pradesh; the plant is said to be the largest floating plant with an area coverage up to 100 acres.
- TVS Motor Company buys majority stake in Swiss electric bicycles maker EGO Movement for ₹132 crores.
- JSW Steel has raised $1 billion by issuing sustainability-linked bonds (SLBs) in the offshore market. The bond issue consisted of two tranches of 5.5 years and 10.5 years, for an amount of $500 million each.
- Kotak Mahindra Bank: Kotak Mahindra Group has acquired the vehicle loan portfolio of Volkswagen Group’s Volkswagen Finance Pvt Ltd.
- Tata Steel: Tata Steel has commissioned a 5-tonne-per-day (TPD) carbon capture plant at its Jamshedpur hub.
- Jet Airways plans on resuming operations in March 2022.
- Zomato co-founder Gaurav Gupta quits the company.
- SBI has cut home loan interest rates; now starting at 6.7% pa.
- Domestic air traffic jumps 33.83%: Nearly 67 lacs domestic passengers travelled by air last month according to figures released by the Directorate General of Civil Aviation (DGCA). The air traffic in August was 33.83% higher as compared to July. IndiGo’s stock jumped 10.92% on Friday closing at ₹2,196.05. SpiceJet’s stock closed 3.42% higher at ₹78.55.
- August inflation in wholesale prices was at 11.39% in August. It was at 11.16% in July 2021. Wholesale inflation of food articles contracted 1.29% while fuel inflation rose to 26.09% and manufactured products inflation rose 11.39%.
Two companies made their debut on the BSE between 13-17th September –
- Ami Organics made a solid debut on the stock exchange, with its shares getting listed at a premium of 48% on Tuesday at ₹ 902 per share on BSE, while on NSE it carried a 49% premium, with price at ₹910. The company’s IPO was oversubscribed by 64.54 times.
- Vijaya Diagnostics made a lukewarm debut with its shares getting listed at 2.13% premium at ₹542.30. However, the stock rose upto ₹619 levels, up 16.6% during the listing day.
Meanwhile, Sansera Engineering IPO, which opened for subscription on 14th September, was subscribed 11.75 times on the IPO closing day.
As per Refinitiv data, India has IPO’s worth $6 billion in the pipeline. Following Zomato’s $1.2 billion IPO, digital payment firm Paytm and ride-sharing giant Ola are eyeing market debuts.
|Issue Size (Retail)
|Paras Defence and Space Technologies LTD
You can apply for this IPO on Arihant Capital.
👀 What caught our eye globally
Popular graphic design platform Canva sees its valuation more than doubles in 5 months to $40billion. But what’s even cooler is that the co-founders pledge to give a 30% stake (valued at $US12 bn) to a charitable foundation seeking to eliminate extreme poverty.
Sustainability-linked bonds Term of the week
SLBs bonds provide investors with a platform to invest in socially responsible companies, while companies are incentivised to improve their ESG (environmental, social, and governance) performance and diversify their source of long-term financing. They are beneficial to both the issuers and investors alike.
Disclaimer: This article is meant for informational purposes only, is not intended to serve as a recommendation to buy or sell any security, and is not an offer or sale of a security. This is also not a research report and is not intended to serve as the basis for any investment decision.