PremiumThe trajectory of policy by the Federal Reserve and other central banks, particularly as inflation continues to present a challenge, will be in focus into 2022. Many strategists are predicting more volatility in the year ahead as the path forward becomes less clear
Indian markets surged on Monday, largely led by gains in banks and financials.
The Sensex surged 929.40 points or 1.6% to end the day at 59,183.22, while Nifty jumped 271.70 points to 17,625.70. Nifty Bank rose 940.20 points or 2.65% at 36,421.90.
All sectoral indices, barring pharma, closed higher, with banks, financials, metals, IT, and auto leading the rally.
Indian markets opened on a positive note on the first trading day of the year despite mixed Asian market trade. During the afternoon session markets maintained their upward momentum and continued to trade in positive territory, following gains in auto, banking and realty stocks. Healthy buying was observed in blue-chip stocks. Sentiments were upbeat as Finance Ministry said that Goods and Services Tax (GST) revenues grew 13 per cent to over ₹1.29 lakh crore in December 2021, as compared to ₹1.15 lakh crore GST revenues in the same month last year, mainly due to pickup in economic activity and anti-evasion steps. However, traders overlooked report that India’s manufacturing activity lost some momentum in December easing to a three month low after hitting a 10 month high in November, amid fears that the rapidly spreading third wave of the Coronavirus (Covid-19) pandemic may hit consumer sentiment and output.
17200-17300 may act as an important levels in the market for Nifty to stay positive. If the market sustained the level of 17200-17300 we can expect it to trade till the range of 17500-17600. Technical indicators also support positivity in the market.
Emaar Properties will develop a shopping mall in Srinagar, as part of an agreement between the governments of Dubai, and Jammu and Kashmir, to facilitate investments into projects.
"UAE and India are comprehensive strategic partners and this project by Emaar will be a landmark of Jammu and Kashmir. I would like to congratulate Emaar and all the partners in this project, and am sure we will see many such projects coming up in the near future. UAE and India’s economic partnership is at an inflection point and we will invite other UAE investors to look at this opportunity too," said Dr Ahmed Abdul Rahman Albanna, UAE Ambassador to India.
According to the agreement, the project ‘Mall of Srinagar’ by Emaar will be about 500,000 sq ft in size.
Even as fats spreading Omicron variant of covid threatens to disrupt the economy, business resumption remained high last week in India. The Nomura India Business Resumption Index, which tracks high frequency data, inched up to 120.3 for the week ended 2 January from an upwardly revised 120.2 during the prior week (119.8 previously).
This was largely due to a 10.4 percentage points weekly rise in the Apple driving index. Google workplace mobility index fell 6 pp and the retail, while recreation mobility index rose 0.6 pp. Labour participation rate inched down marginally to 40.6% from 40.7% in the prior week, and power demand fell 3.1% week-on-week after a 2.5% rise the prior week.
Nomura said India seems to be on the cusp of a third covid wave. New daily cases rose to 33,750 as of Sunday from 6,500 a week ago. Maharashtra, Delhi and West Bengal have reported the bulk of the new cases, but numbers in other states have also been rising sharply, with 1,700 confirmed Omicron cases so far. Vaccination pace rose to 6.5 million per day in December from 5.4 million per day in November, with 44% of the population fully vaccinated.
Key highlights:
Huge Sectoral Tailwinds: USA has officially passed a bill in its Senate house to ban cotton products from Xinjiang region which Huge Sectoral Tailwinds: The USA’s ban on cotton products from the Xinjiang region (which accounts for 20% of world cotton production), has substantially increased demand for Indian Textile products. Moreover, the Indian Textile Industry has been a key beneficiary of the USA’s China + 1 strategy which intends to de-risk its reliance on the Chinese supply chain since the Covid-19 outbreak. The company has also been benefiting from the rising trend of the Homebody Economy wherein the consumer spending pattern is shifting towards quality Home utility products. Tailwinds such as strong government policy support further back out thesis.
Flooring Solutions to aid growth: The company has extensive experience in distributing and marketing traditional home textile portfolios as well as built deep relationships with various distributors. Leveraging these advantages, WIL forayed into the Flooring solution market with a wide range of product offerings including Hard and Soft Flooring. The company has entered into a long-term strategic arrangement with one of the largest US-based distributors of hard-flooring and the product has received encouraging traction in other international markets as well. The company also plans to revolutionize the domestic interior and renovation market with this segment and is developing a distribution channel and product marketing for the same. The segment at its peak is expected to generate revenue of ₹2,200-2,500 Cr with an asset turnover of 2-2.5x.
Maintaining margins by product/channel mix and price increase pass-on to consumers: The management continues to focus on product innovation and increasing the share of value-added products to improve the company’s overall margin profile. The company is also focusing on increasing the share of E-commerce and private brands that have higher realizations. Given its long relationship with its consumer, WIL is able to pass on its cost with a time lag, reducing the impact of higher RM on the margins.
Q3 total deposits grew 9% year-on-year and 2% sequentially to ₹1.75 trillion. Loans grew 12% YoY. CASA ratio was at 36.7% as of 31 December.
PV OEMs’ attempt to catch up to the demand for popular models was impacted by production cuts, while 2W OEMs have likely been able to pare down high channel inventories post festive season (~8-10 weeks). Entry-level demand trends across 2Ws and PVs have remained weak. OEMs are hoping to stoke consumer sentiment with new launches (e.g. M&M XUV700, Tata Punch, MG Astor, TVS Raider) even as availability of popular models remain elusive; however, increasing price hikes (~8-10% across segments since Jan’21) and rising fuel costs could limit consumer wallet spends at the entry level even as covid cases surge throughout the country. Faster vaccination leading to opening up of workplaces and educational institutes could aid revival of transportation segments (e.g. 3Ws/buses/scooters) in CY22.
Shares of Tata Motors gained nearly 4% on Monday after the company reported a 50% jump in total passenger vehicle sales for December.
The stock jumped 3.59% to ₹499.70 on the BSE. On the NSE, it rose 3.60% to ₹499.80.
Tata Motors on Saturday reported a 50% jump in total passenger vehicle sales to 35,299 units in December. In the third quarter ended December, the company said its total passenger vehicle sales stood at 99,002 units compared with 68,806 units sold the same period in the previous year, up 44%.
Shares of Mumbai-based real estate companies such as Sunteck Realty Ltd, Oberoi Realty Ltd and Kolte Patil Developers Ltd rose 2.5-3% each on the National Stock Exchange in opening deals on Monday.
The Maharashtra government on Saturday announced that property tax on residential units of up to 500 square feet, located within the Mumbai municipal area limits, will be waived off. According to the urban development minister Eknath Shinde this move will benefit owners of over 16 lakh houses.
However, some analysts say, investors should not read too much into today’s up move in real estate stocks. "The property tax waiver is not a game changer like the stamp duty cuts. Don't extrapolate it. Also, this waiver is unlikely to benefit listed developers much given that it applies to projects mostly located towards the outskirts of the city," said an analyst with a domestic brokerage house requesting anonymity. Investors would reckon that the Maharashtra government had temporarily announced a temporary stamp duty cut in August 2020 to boost sales in the state. Stamp duty was cut from 5% to 3% for properties bought until 31 March 2021.
US private equity (PE) firm General Atlantic hopes to make its first investment in an Indian software-as-a-service (SaaS) firm this year, as it focuses on investing in and assisting startups that have the potential to be valued at more than $10 billion and even $100 billion.
“We are quite excited about SaaS companies and anticipate it will be a major theme for us in 2022," said General Atlantic managing director Sandeep Naik, who is also the firm’s head for India and South-East Asia.
However, he did not disclose the names of potential investments. (Read here)
Bajaj Auto on Monday said its exports rose 30% year-on-year to over 2.5 million units in calendar year 2021 despite challenging global environment.
The 2.5-million vehicles exports in 2021 were the highest ever for the company in a calendar year, Bajaj Auto said in a statement.
Bajaj exports its vehicles to over 70 countries.
CY21 has seen a strong economic recovery from the unlocked lows. The recovery in growth mainly stemmed from the government led initiatives by focusing on “Atmanirbhar" schemes panning across a gamut of sectors, which, in turn, will act as a multiplier catalyst across layers of GDP growth and get the economy back on fast track to achieve the $5 trillion aspiration.
At the onset of CY22, a sea change is expected in the way business operates and transforms itself given the innovations in the Digital and Tech world. Hence, in this report, we try to highlight various themes that will run across different sectors and their long term ramifications, which will be consequential on all stakeholders concerning the business. From a market perspective, sectors that we are bullish on are IT, capital goods, auto ancillaries (EV exposure), retail and real estate.
We also highlight the key risks for CY22 that may get manifested in the form of a) reversal in interest rate cycle globally amid inflationary pressures and b) geopolitical risks that may decide the direction of already spiking energy costs.
Some of the themes to hog the limelight for CY22 are:
· Would Technology continue to shine on virtualisation of business
· Will private sector capex revive capital goods
· Would retail sector emerge as a dominant performer
· Would EV dent autos after higher commodity and chip concerns
· Would pharma & chemicals remain volatile
· Would there be a revival in credit growth after asset quality concerns are behind us
· Have metals peaked out
· Would FMCG companies deliver growth commensurate with valuation
· Would consumer durables keep gaining market share
· Is real estate a one-year story
· Would 5G further lift fortunes of telecom companies after tariff hikes
Future Retail has asked a New Delhi court to declare ongoing arbitration proceedings with Amazon.com illegal, saying the country's antitrust agency had suspended a 2019 deal which Amazon used to assert its rights over Future.
Amazon successfully used the terms of its toehold $200 million investment in debt-laden Future to block the Indian retailer's attempt to sell retail assets to a rival, alleging breach of certain contracts.
But the Indian antitrust body, the Competition Commission of India, in December suspended the 2019 deal saying Amazon suppressed information while seeking approvals.
The long-running dispute is being heard by a Singapore arbitration panel, but both sides have been fighting parallel cases in Indian courts to enforce or overrule certain decisions taken by the arbitrator.
Coal India reported strong sales volume growth of 15.7% year-on-year in December, boosting investor confidence. The stock was up more than 3% in early deals on Monday. Offtake has been robust led by firm demand from the power sector. April-December offtake stood at 481.8 mt, up 17.6% year-on-year.
With good volume growth, the company is also likely to have taken care of the high coal Inventories of about 100 million tonne (mt) that it had at the start of the financial year.
The company produced 413.6 mt of coal during April- December. Coal production in December rose 3.3% year-on-year.
It has raised its sales volume guidance to 660-670 mt for FY22.
A recent ruling by the Securities and Appellate Tribunal (SAT) against the markets regulator and its adjudicating officer has become a sore point between the two institutions.
The Securities and Exchange Board of India’s (Sebi’s) petition against the SAT ruling in the Supreme Court said unwarranted adverse remarks will impede the markets regulator’s ability to work fearlessly and independently.
The matter pertains to a SAT order passed on 16 December where it had questioned Sebi on a 12-year delay in starting the quasi-judicial process and sending a show-cause notice to Yatin Pandya, who is alleged to have manipulated the stock price for Sterling International Enterprises Ltd to evade long-term capital gains tax.
Pandya and 29 other entities allegedly traded among themselves to create a false and misleading impression of genuine trading in scrips of Sterling, Sebi said in its order passed in September. The trading dates back to 2008-09. (Read here)
Edelweiss Financial Services Ltd on Monday said it has allotted 45,62,472 NCDs amounting to ₹456.24 crore from the issue of secured non-convertible debentures. The financial services company received over 16,000 applications pan India.
The company decided to do an early closure of the issue on 22 December against the scheduled closure on 27 December.
Edelweiss Financial Services on 6 December had launched the NCD issue with a face value of ₹1,000 each, aimed to raise ₹200 crore (base issue), with an option to retain oversubscription up to ₹300 crore, aggregating to a total of ₹500 crore.
The issue has seen significant demand in the retail and the high net worth individual (HNI) segment with a total collection of ₹361.97 crore. The Issue also saw good interest from the existing investors.
Almost 46% of the total issue size got subscribed for five years and 10 years tenure.
India’s manufacturing sector continued to grow in December, with rise in production and new orders, but at its slowest pace since September. Cost pressures also maintained their upward trajectory, showed a private survey.
At 55.5 in December, the seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) pointed to a robust improvement in overall operating conditions though the headline figure slipped from November's ten-month high of 57.6, market intelligence provider IHS Markit said in a statement.
The latest quarterly reading was at 56.3, its highest since the final quarter of FY21. The index is based on a survey of 400 producers and tracks new orders, output, jobs, suppliers’ delivery time and stocks of purchases. The index shows expansion at 50 or above and contraction below this mark.
The statement said the growth of new work and production was sharp in spite of losing momentum. Companies continued with their stock-building initiatives, as evidenced by another robust upturn in buying levels. Business confidence strengthened, but sentiment was again dampened by concerns surrounding supply-chain disruptions, Covid-19 and inflationary pressures, it said.
With the worst of asset quality concerns behind us amid resolution of big ticket stressed assets and economic optimism in the post-Covid era, Nifty earnings CAGR is impressively placed at 25.7% in FY21E-23E.
We value the Nifty at 20,000 i.e. 24.5x P/E on FY23E EPS of | 815 with corresponding Sensex target at 66600.
Mid-caps, small-caps gave stellar returns in CY21. This is expected to continue in CY22E driven by inherent business moats as the earnings CAGR for midcap, small cap in FY21-23E is expected at ~39%, 28%, respectively. Going forward, innovative themes present in the midcap & small cap space (like speciality steel chemicals, home textiles, CRAMS, etc), superior earning potential and reasonable valuations (trades at <20x PE on FY23E, ~0.5x PEG) make us believe that more upsides are in store for investors.
il prices firmed on Monday as the market kicked off 2022 on a positive note with suppliers in focus ahead of Tuesday's OPEC+ meeting, although surging COVID-19 cases continued to dent demand sentiment.
Brent crude added 59 cents, or 0.76%, to $78.37 a barrel. U.S. West Texas Intermediate crude futures gained 63 cents, or 0.84%, to $75.84 a barrel.
India's unemployment rate hit a four-month high in December, as per data from the Centre for Monitoring Indian Economy (CMIE) showed on Monday.
The unemployment rate rose to 7.9% in December from 7.0% in November, its highest since 8.3% in August.
Economic activity and consumer sentiment have been hit in the South Asian nation after a rise in cases of the Omicron coronavirus variant and social distancing restrictions in many states.
Urban unemployment rate rose to 9.3% in December from 8.2% in the previous month while the rural unemployment rate was up 7.3% from 6.4%, the data showed.
Many economists worry that the Omicron variant could reverse the economic recovery seen in the previous quarter.
Nippon Life India Asset Management Limited (NAM India), asset manager of Nippon India Mutual Fund (NIMF), on Monday announced the launch of Nippon India Nifty Auto ETF, country’s first auto sector ETF (exchange-traded fund).
The New Fund Offer (NFO) will open on 5 January 2022 and close on 14 January 2022 and the minimum investment amount required is ₹1,000. Investors can add in multiples of Re 1 after the minimum amount of ₹1,000.
The Nifty is in positive terrain, the breakout level was 17350 and we managed to close above that on Friday. This should allow the index to move higher to 17575-17600 and then 17800. A good base has been formed at 17100 and as long as we can.
UPL Ltd raised a second tranche of $700 million sustainability linked loan on 31 December, with a reduction of interest cost by 35 bps and an opportunity for a further reduction of 5 bps on achievement of sustainability indicators agreed with the banks.
The first tranche of $750 million was raised in March and April 2021. Of the $1.45 billion, the debt maturity for $1.25 billion gets extended by two years to FY26 against FY24 earlier.
The short term trend of Nifty continues to be positive and one may expect further upside in the short term. A sustainable move above 17,640 on NSE Nifty is likely to negate the bearish setup and that could open more upside as per daily and weekly timeframe chart. Immediate support for Nifty is placed at 17,260 levels.
Telecom equipment makers have produced more than ₹6,200 crore worth of products with an investment of close to ₹247 crore since the launch of the production-linked incentive (PLI) scheme for the segment, the Economic Times has reported.
The production and investment have so far been driven by large multinational players such as Ericsson and Nokia, with Indian companies having sought an extension to meet their targets, saying they have received just four months to meet the first-year milestones.
MNCs have invested ₹151 crore, the officer told ET. Large Indian manufacturers have invested ₹86 crore, while the remaining ₹9.7 crore of investment was from MSMEs.
At the heart of the bankruptcy proceedings of one of India's largest non-banking finance companies, Srei, and its subsidiary lies a lesser known asset management firm called Trinity, which runs multiple funds with diverse investments. Fearing that Trinity could slip out of control, the Reserve Bank of India (RBI)-appointed administrator has moved court to avert a change in the shareholding of Trinity Alternative Investment Managers Ltd, the Economic Times has reported.
Srei Infrastructure Finance, the main Srei company, owns 51% in Trinity, and the balance 49% equity is held by Payaash Capital, a Singapore-based entity. The administrator swung into action - first, serving a legal notice to Trinity, and then seeking a stay before the Kolkata bench of the National Company Law Tribunal in an attempt to block a rights issue proposed by the board of directors of Trinity.
Oil prices rose on Monday as the market kicked off 2022 on a positive note, although concerns over demand waning due to rapidly spreading COVID-19 pandemic limited gains.
Brent crude added 67 cents, or 0.86%, to $78.45 a barrel, as of 0102 GMT. U.S. West Texas Intermediate crude futures gained 77 cents, or 1.02%, to $75.98 a barrel.
Last year, oil prices rose around 50%, spurred by the global economic recovery from the COVID-19 pandemic slump and producer restraint, even as infections reached record highs worldwide.
Non-banking financial companies (NBFCs) showed resilience in 2021 despite the coronavirus pandemic woes and are expected to witness continued momentum in growth this year.
This year, the growth will be driven by the uptick in the economy, stronger balance sheet, higher provisions and improved capital positions of NBFCs.
On the other hand, gross non-performing assets (NPAs) of NBFCs are likely to rise, following the Reserve Bank of India's (RBI) move to tighten the NPA norms in November 2021.
"Our baseline assumption is that the worst is behind them (NBFCs) and things will start improving here on. We expect NBFCs to show higher growth and they will benefit from the economy moving up," Crisil Ratings Ltd Senior Director and Deputy Chief Ratings Officer Krishnan Sitaraman said.
The asset under management (AUM) of shadow banking players is expected to grow at 6-8 per cent in the current financial year and 8-10 per cent in the next financial year, Sitaraman said.
Reliance Industries Ltd plans to raise up to $5 billion in dollar-denominated debt and use proceeds primarily to refinance its existing borrowings.
The Mukesh Ambani-owned oil-to-telecoms conglomerate said the proposal for fixed rate notes, which could be issued in one or more tranches, was approved by the board in a meeting on Saturday.
While the company did not give further details on the use of proceeds, the Economic Times newspaper said it will be used refinance earlier debt raised from international investors, with a bundle of loans coming up for maturities in the next three to four months.
The newspaper said the offering would be the largest offshore raising by an Indian borrower in one go, adding that the move will be debt-neutral to the company.
Shares of RIL, Tata Motors, Maruti, M&M, Future Retail, RBL Bank, among other, will be in focus on Monday.
Financial markets in Australia, China, Japan, New Zealand and Thailand are closed on Monday for public holidays.
Hong Kong stocks rose at the open on Monday, kicking off the new year on a positive note after a healthy finish to 2021, though traders remain on edge over a range of issues including the fast-spreading Omicron virus variant.
The Hang Seng Index added 0.48%, or 112.87 points, to 23,510.54.
China Evergrande Group said its shares will be suspended from trading on Monday, without giving any reason. The embattled property developer has more than $300 billion in liabilities and is scrambling to raise cash by selling assets and shares to repay suppliers and creditors.
On Friday, US stocks capped a quiet day of trading with modest losses, even as Wall Street closed the books on another banner year. The major indices spent much of the day flipping between small gains and losses. The S&P500 index fell 12.55 points, or 0.3%, to 4,766.18. The Dow slid 59.78 points, or 0.2%, to 36,338.30. The Nasdaq fell 96.59 points, or 0.6%, to 15,644.97.
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