Nifty 18210.95 (-0.31%)
Sensex 61143.33 (-0.34%)
Nifty Bank 40874.35 (-0.88%)
Nifty IT 35503.9 (0.97%)
Nifty Financial Services 19504.75 (-0.74%)
Adani Ports 745.85 (-0.54%)
Asian Paints 3094.65 (4.20%)
Axis Bank 787.50 (-6.46%)
B P C L 427.70 (-0.78%)
Bajaj Auto 3776.50 (-0.40%)
Bajaj Finance 7482.15 (-4.75%)
Bajaj Finserv 18012.00 (-1.86%)
Bharti Airtel 702.35 (0.88%)
Britannia Inds. 3697.85 (0.14%)
Cipla 922.50 (1.65%)
Coal India 173.60 (-0.83%)
Divis Lab. 5149.35 (2.60%)
Dr Reddys Labs 4662.70 (-0.08%)
Eicher Motors 2583.90 (-0.25%)
Grasim Inds 1728.40 (-0.63%)
H D F C 2915.00 (0.12%)
HCL Technologies 1177.15 (0.89%)
HDFC Bank 1642.80 (-0.60%)
HDFC Life Insur. 693.85 (0.55%)
Hero Motocorp 2690.15 (-0.38%)
Hind. Unilever 2396.60 (-1.65%)
Hindalco Inds. 479.85 (-1.28%)
I O C L 130.80 (-0.53%)
ICICI Bank 835.00 (0.68%)
IndusInd Bank 1142.55 (-1.07%)
Infosys 1728.95 (1.48%)
ITC 238.45 (0.74%)
JSW Steel 684.90 (-1.36%)
Kotak Mah. Bank 2188.25 (-1.03%)
Larsen & Toubro 1784.55 (-0.65%)
M & M 886.80 (-0.87%)
Maruti Suzuki 7356.25 (0.81%)
Nestle India 19004.60 (-1.11%)
NTPC 141.30 (-1.33%)
O N G C 157.90 (-3.19%)
Power Grid Corpn 190.25 (-0.08%)
Reliance Industr 2627.40 (-1.26%)
SBI Life Insuran 1186.00 (1.19%)
Shree Cement 28107.75 (1.19%)
St Bk of India 519.15 (1.29%)
Sun Pharma.Inds. 825.10 (1.43%)
Tata Consumer 818.75 (1.22%)
Tata Motors 497.90 (-2.11%)
Tata Steel 1326.15 (-1.30%)
TCS 3489.75 (0.21%)
Tech Mahindra 1567.85 (0.29%)
Titan Company 2460.10 (0.22%)
UltraTech Cem. 7354.20 (1.17%)
UPL 741.50 (3.96%)
Wipro 671.10 (0.44%)

Detailed Analysis of Budget 2021 and Sector Impact

Detailed Analysis of Budget 2021 and Sector Impact
by Nikita Bhoota 02/02/2021
Summary:
The FY22 Union Budget is refreshingly aggressive in taking aim at spending in the high multiplier areas of the economy – capex was up 25%, with emphasis on road, infra and railways, and can give a significant growth impetus to the economy when most needed. It is also conservative in revenue projections (e.g. corporate tax / GDP down by 30bps relative to FY20), and rightly so. Personal and corporate taxes have not been raised. Recent protectionist trends on customs duty continue. Water and Sanitation gets an outsized Rs750bn boost. Cyclicals will do well on the back of this budget.

Roads, railways in spotlight: Roads and railways see 44%/53% increase to Rs1.2/Rs1.1trn respectively, with overall capex up 25% to Rs5.54trn for FY22. A bad bank proposal to rescue PSU banks (and credit growth in the economy) looks promising. Also, Rs350bn set aside for vaccination should cover 1/3rd of the population.

Fiscal deficit reasonable: Fertilizer and food subsidy backlog clearance has been included in Rs34.5trn FY21 expenditure but for which the expenditure growth would have been 9% in the context of -4.5% NGDP growth. Again adjusted for this, FY22 growth would be 9% in the context of 15% NGDP growth, and with a 6.8% fiscal deficit. Thus, the deficit % is more accurate, and the govt. has exerted a stabilizing impact on the economy. Disinvestment revenue assumption of Rs1.75trn is the main risk, as in recent year.

No new taxes: The government has done well to resist the temptation of raising tax burden. Higher taxes could have hurt consumer spending at a time when demand is gradually normalizing. Affordable Housing saw reiteration of some previous announcements.

Key policy initiatives:
    1. The turnover threshold for tax audit further raised to Rs100mn from Rs50mn earlier, if 95% of transactions are digital.
    2. The central government will launch a scheme with an outlay of ~Rs3tn over five years for easing the financial stress of DISCOMs. However, earlier attempts of government to reform state DISCOMs have not been successful.
    3. The government has proposed setting up a Bad Bank (BB) to remove stressed loans from PSU Banks’ balance sheets. The government has proposed to set up Development Financial Institution with initial capital of Rs200bn with the intent of lending Rs5tn over the next three years.
    4. The government has eased direct tax compliance with steps like
      (i) Senior citizens (aged above 75 yrs) are exempted from filing IT returns if the income is only from pension and interest income,
      (ii) Time limit for re-opening assessment has been reduced to 3 yrs from 6 yrs earlier (except if there is evidence of concealment of income of more than Rs5mn in a year),
      (iii) Faceless Dispute Resolution Committee for taxable income up to Rs5mn and disputed income upto Rs1mn.
    5. The government has proposed to consolidate SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized single Securities Markets Code. Proposed rationalization of custom duty on Gold and Silver (to be brought down to 7.5%).
    6. Raised customs duty on cotton from 0% to 10%, on raw silk and silk yarn from 10% to 15%.
    7. Reduced customs duty uniformly to 7.5% on semi, flat and long products of non-alloy, alloy and stainless steel products.
    8. Exempted duty on steel scrap till March 2022.
    Key tax proposals
      1. Some of the key changes of indirect tax proposals include
        (a) Customs duty on various steel products and copper scrap has been cut by 2.5ppt,
        (b) Imposed custom duty (5%) and agriculture cess (5%) on cotton,
        (c) Increased custom duty on prawns/fish feed to 15% from 5% earlier.
        (d) Increased custom duty on carbon black to 7.5% from 5% and imposed 7.5% duty on phenol import
        (e) Increased customs duty on solar inverters to 20% (from 5% earlier) and solar lamps/lanterns would attract 15% customs duty instead of 5% earlier.
      2. The government has also proposed to review 400 custom exemptions and announce a revised custom duty structure by October 01, 2021.
      3. 100% tax exemption for developers under section 80IBA for affordable housing extended by one year to March 2022. Additional deduction of interest expense of Rs150,000 for Affordable Housing also extended by one year.
      4. TDS on dividend announced by SPV to REIT is eliminated to simplify compliance.

      Sector Summary:

      Sector

      Impact

      Key Measures

      Stock Impact

      Positive

      Negative

      ACS

      Negative

      Increase in import duties on compressors for refrigerators and air conditioners from 12.5% to 15%.

       

      Bluestar, Havells

      Auto

      Positive

      Announcement of voluntary scrapping policy to phase out old vehicles. Deployment of PPP models for city bus service, focus on higher infra and road construction and Increase in customs duty on few auto parts which is unlikely to have a material impact.

      Ashok Leyland, Tata Motors, Apollo Tyres

       

      Infrastructure

      Positive

      Overall capital outlay under the budget increased by 26% YoY to Rs5.54trn for FY22. Capital outlay for highways increased by 18% to Rs1.08trn (Including borrowings by NHAI), allocation up 10% vs FY21RE. Targeting highway awards of 8500km in FY22. Railways allocation including borrowings up 33% vs FY21BE but down 11% vs FY21RE due to shortfall loan under covid. Three new DFC projects under consideration. 100% electrification target by Dec-23 vs 76% currently. Boost to private industrial capex under PLI scheme for 13 sectors along with setting up seven textile megaparks to generated order inflows for EPC players. Rs2.87trn allocated over 5 years for the Jal Jeevan Mission (Urban) to provide water supply in all 4,378 Urban Local Bodies with 2.86 crores household tap connections, as well as liquid waste management in 500 AMRUT cities. Easing legislations to enable debt financing of InVITs and REITs by FPIs. New technologies such as “MetroLite” and “metroNeo” to be deployed to provide metro rail services at much lesser costs in Tier 2 cities and peripheral areas of Tier 1 cities. Setup of professionally managed Development financial institution with capital of Rs200bn and lending portfolio of atleast Rs5trn over next three years. 100% Tax exemptions for developers for affordable housing have been extended by 1 year. Also rental housing projects (notified by Govt.) also would be eligible for this deduction.

      NCC, Capacite Infra, Ashoka Buildcon, KNR Constructions, Dilip Buildcon, HG Infra, PNC Infratech & Sadbhav Engineering

       

      Cement

      Positive

      Focus on higher infrastructure spending and push for affordable housing augurs well for cement consumption. Note that housing segment accounts for 65-70% of cement consumption, while infrastructure segment offtake 18-20% and balance is industrial & commercial segment. Focus on project execution would aid cement volume growth.

      All Companies

       

      Capital Goods

      Positive

      Contrary to expectations, despite the pandemic FY21 capex in defence, roads & highways and rail & metro is pegged to be 18/12/55% higher than initial budgets. This implies strong room for execution ramp up in 4QFY21

      L&T, KEC, Cummins & ABB

       

      Metals

      Neutral to negative

      Customs duty on semis, flats and long products of alloy, non alloy and stainless steels have been reduced from 10%/12.5% to 7.5%. Anti-dumping duties and Countervailing duties on certain steel products have also been revoked.

       

      Tata Steel, SAIL, JSPL and JSW Steel

      Oil & Gas

      Neutral

      Agriculture Infrastructure and Development cess of Rs2.5/l imposed for petrol and Rs4/l diesel. An equivalent reduction has been carried out from the Basic Excise Duty and Special Additional Excise duty for auto fuels. Hence, this measure will be neutral for margin as well as retail selling price of petrol and diesel.Asset monetization to be carried out for product and crude pipelines of GAIL, IOCL and HPCL via InvIT. CGDs to be set up in 100 new districts. Customs duty for naphtha reduced to 2.5% from 4%.

      GAIL, IOCL, HPCL

       

      Power

      Positive

      A reform-based result-linked scheme with Capital Outlay of Rs3tn over next 5 years to be launched to assist DISCOMS for various infrastructure creation like up gradation of systems, prepaid smart metering, feeder separation etc. Proposal to end up DISCOM monopolies by setting up framework which will provide alternatives to consumers for choosing distributor from more than one distribution company. Proposal of infusing capital of Rs10bn in SECI and Rs15bn in IREDA.To boost up domestic production, import duties on solar inverters and solar Lanterns increased from 5% to 20% and 15% respectively.

      Tata Power & Torrent power

       

      NBFCs/SFBs/HFCs

      Positive

      For NBFCs with minimum asset size of Rs1bn and above, the minimum size of loans which can be addressed through SARFAESI has been brought down from Rs5mn to Rs2mn. Interest deduction of Rs0.15mn on loans taken for purchase of affordable housing units extended by one more year till FY22. Developers will continue to get tax holiday on Affordable housing projects till FY22 (extension of a year). Tax Neutrality of conversion of Urban Cooperative Bank (UCB) into a Small Finance Bank (SFB). The UCB shall not be required to pay capital gains for the assets transferred to the SFBs.

      Aavas, Canfin Homes & smaller NBFCs

       

      Large Private Banks

      Positive

      After the IWG report in November 2020, it was widely anticipated that Tax Neutrality clause required for conversion of Large Bank Groups into the NOFHC structure would be announced in this Budget. That announcement is absent.

      HDFC Twins, ICICI Bank & Kotak Bank

       


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      Next Article

      Is Ratio Analysis Important for Stock Investment?

      Is Ratio Analysis Important for Stock Investment?
      by Nikita Bhoota 04/02/2021

      Stock investing requires careful study of financial data to find out the company's true value. This is generally done by studying the company's profit and loss account, balance sheet and cash flow statement. However, this can be time-consuming. An easier way to check a company's performance is to do ratio analysis. Ratio analysis is a good way to run a fast check on a company's health.

      "Ratio analysis not only helps in knowing how the company has been performing but also makes it easy to compare companies in the same industry and make a wise investment decision. 

      Let’s discuss some of the ratios in detail that one should look at before investing in a stock.

      P/E Ratio
      The price-to-earnings, or P/E, the ratio shows how much equity investors are paying for each rupee of earnings. It shows if the stock is overvalued or undervalued. 
      One can know the ideal P/E ratio by comparing the current P/E with the company's historical P/E, the average industry P/E and the market P/E. For example, a company with a P/E of 10 may look expensive when compared to its historical P/E, but may be a good buy if the industry P/E is 15 and the market average is 18.

      Price-to-Book Value
      The price-to-book value (P/BV) ratio is used to compare a company's market price to its book value. A P/BV ratio of less than one shows the stock is undervalued (value of assets on the company's books is higher than the value the market is assigning to the company). It indicates a company's inherent value and is useful in valuing companies whose assets are mostly liquid, for example, banks and financial institutions.

      Debt-to-Equity Ratio
      It shows how much debt is involved in the business vis-a-vis promoters' capital (equity). A low figure is usually considered better. However, it is industry-specific, with capital intensive industries such as automobiles and manufacturing the ratio can be higher than others.

      Operating Profit Margin (OPM)
      It measures the proportion of revenue that is left after meeting variable costs such as raw materials and wages. It is calculated by dividing operating profit by net sales. The higher the margin, the better it is for investors. While analysing a company, one must see whether its OPM has been rising over a period. Investors should also compare OPMs of other companies in the same industry.

      EV/EBITDA
      Enterprise value (EV) by EBITDA is often used to value a company. EV is market capitalisation plus debt minus cash. It gives a much more accurate takeover valuation because it includes debt. EBITDA is earnings before interest, tax, depreciation and amortisation.

      This ratio is used to value companies that have taken a lot of debt. A lower ratio indicates that a company is undervalued. However, it is important to note that the ratio is high for fast-growing industries and low for industries that are growing slowly.

      Price/Earnings Growth Ratio
      The PEG ratio is used to know the relationship between the price of a stock, earnings per share (EPS) and the company's growth. Generally, a company that is growing fast has a higher P/E ratio. This may give an impression that the company is overvalued. Thus, P/E ratio divided by the estimated growth rate shows if the high P/E ratio is justified by the expected future growth rate. The result can be compared with that of peers with different growth rates.

      A PEG ratio of one indicates that the stock is valued reasonably. A figure of less than one indicates that the stock may be undervalued.

      Return On Equity
      Return on equity (ROE) measures the return that shareholders get from the business and overall earnings. It helps investors compare profitability of companies in the same industry. ROE is net income divided by shareholder equity.

      "ROE of 15-20% is generally considered good, though high-growth companies should have a higher ROE. The main benefit comes when earnings are reinvested to generate a still higher ROE, which in turn produces a higher growth rate. 

      Interest Coverage Ratio
      It is earnings before interest and tax, or EBIT, divided by interest expense. It indicates how solvent a business is and gives an idea about the number of interest payments the business can service solely from operations.

      Current Ratio
      This shows the liquidity position, that is, how equipped is the company in meeting its short-term obligations with short-term assets. A higher figure signals that the company's day-to-day operations will not get affected by working capital issues. A current ratio of less than one is a matter of concern. The ratio can be calculated by dividing current assets with current liabilities. 

      Asset Turnover Ratio
      It shows how efficiently the management is using assets to generate revenue. The higher the ratio, the better it is, as it indicates that the company is generating more revenue per rupee spent on the asset. However, the comparison should be made between companies in the same industry. This is because the ratio may vary from industry to industry. 

      Dividend Yield
      It is the dividend per share divided by the share price. A higher figure signals that the company is doing well. But one must be cautious of penny stocks (that lack quality but have high dividend yields) and companies benefiting from one-time gains or excess unused cash which they may use to declare special dividends. Similarly, a low dividend yield may not always mean that it is a bad investment as companies (particularly at nascent or growth stages) may choose to reinvest all their earnings so that shareholders earn good returns in the long term.

      Conclusion:
      While ratio analysis helps in assessing factors such as profitability, efficiency and risk, added factors such as macro-economic situation, management quality and industry outlook should also be studied in detail while selecting a stock for investment.

      Next Article

      Market Performance in January 2021

      Market Performance in January 2021
      by Nikita Bhoota 05/02/2021

      Market Update:

      Nifty 50 declined 2.1%, while BSE Sensex lost 2.8% on MoM basis in January 2021.

      Global market sentiments have been sluggish due to stalled vaccine rollouts in the west and contagious new corona virus strains.

      Indian markets too lost their momentum as market participants turned cautious ahead of the Union Budget on February 1, 2021.

      Broader markets attempted to be resilient during the month as investors kept searching value in the mid and small cap space.

      FIIs bought ?14,512cr (vs. ?53,500cr bought MoM) in Indian equities, while DIIs sold ?15,725cr worth of equities (vs. ?26,514cr sold MoM) during the month.

      Fixed Income Market

      In January 2021, India’s 10-year bond yields remained flat at around 5.9% despite RBI’s intent to normalize short term rates.

      However, the central bank reiterated its commitment to remain accommodative and maintain excess liquidity to support economic growth.

      Although December retail inflation cooled off to 4.6% and was within the RBI’s target range (4%+2%), the possibility of rate reduction is negligible and there is upside risk due to inflation strengthening on the back of increasing commodity prices.

      Stock Performance:

      The market witnessed huge volatility in January 2021 ahead of the union budget 2021. Below are the top 10 gainers and losers on Nifty 100 in January 2021.

      Gainers

      Company

      01 January 2021

      29 January 2021

      Gain

      Tata Motors Ltd.

      186.5

      262.7

      40.9%

      UPL Ltd.

      469.3

      560.7

      19.5%

      Bosch Ltd.

      12,986.1

      15,327.5

      18.0%

      SBI Cards & Payment Services Ltd.

      852.9

      986.1

      15.6%

      Bajaj Auto Ltd.

      3,481.3

      4,005.8

      15.1%

      Hindustan Zinc Ltd.

      239.1

      274.8

      14.9%

      Havells India Ltd.

      909.9

      1,044.8

      14.8%

      Grasim Industries Ltd.

      933.4

      1,055.7

      13.1%

      United Breweries Ltd.

      1,183.2

      1,299.7

      9.9%

      Eicher Motors Ltd.

      2,542.7

      2,744.3

      7.9%

      Source: Ace Equity

      Tata Motors Ltd.
      The stock gained 40.9% in January 2021 on continuous efforts of management on debt reduction and improving operating margins. Additionally, there were also rumours in January 2021 that Tata Motors is partnering with Tesla, which further pushed the share price higher.

      UPL Ltd.
      The stock rose 19.5% on NSE due to heavy volume on the exchange. A few weeks ago the company had successfully redeemed $410 million worth of dollar-denominated bonds before their due date of October next year. The move, it said, was in-line with the company's earlier commitment to reduce its overall debt and was seen addressing one of investors' key concerns.

      Bajaj Auto Ltd:
      The stock gained 15.1% on account of strong quarterly results.

      Hindustan Zinc Ltd.
      The stock gained 14.9% on account of strong quarterly results.

      Havells India Ltd
      The stock gained 14.8% on account of strong quarterly results. In its investor presentation, Havells said that the encouraging business performance with growth across divisions and regions led by an improvement in consumer sentiment and festive season.

      Grasim Industries Ltd.
      The stock jumped 13.1% on NSE as it announced that it was getting into the business of manufacturing paints.  

      Eicher Motors Ltd.
      The stock jumped 7.9% as brokerage firms maintained outperform rating on the stock.

      Losers:

      Company

      01 January 2021

      29 January 2021

      Loss

      Bandhan Bank Ltd.

      400.2

      309.5

      -22.7%

      Biocon Ltd.

      465.8

      371.8

      -20.2%

      Kotak Mahindra Bank Ltd.

      1,994.1

      1,713.0

      -14.1%

      ICICI Lombard General Insurance Co Ltd.

      1,519.2

      1,315.5

      -13.4%

      Asian Paints Ltd.

      2,775.6

      2,407.4

      -13.3%

      Divis Laboratories Ltd.

      3,849.1

      3,369.9

      -12.4%

      Dr. Reddys Laboratories Ltd.

      5,241.4

      4,602.7

      -12.2%

      Motherson Sumi Systems Ltd.

      164.1

      145.0

      -11.7%

      Pirama lEnterprises Ltd.

      1,480.4

      1,311.5

      -11.4%

      Bajaj Finance Ltd.

      5,280.2

      4,734.6

      -10.3%

      Source: Ace Equity
       

      Bandhan Bank Ltd.
      The shares plunged 22.7% in January 2021 due to weak quarterly result and brokerages raise concerns over credit cost.

      Biocon Ltd.
      The stock fell 20.2% in January due to weak quarterly results.

      Kotak Mahindra Bank Ltd.
      The stock fell 14.1% as investors expressed concerns over the level of bad loans held by India’s third-largest lender by market value.

      ICICI Lombard General Insurance Co Ltd.
      The stock declined 13.4%. It is likely due to fall in Nifty Finance Index. The index was down 3.9% in January 2021

      Dr. Reddys Laboratories Ltd.
      The shares plunged 12.2% due to weak quarterly result. The profits were impacted due to trigger based impairment charge taken on a few acquired products, including gNuvaring.

      Disclaimer: The above report is compiled from information available on the public platforms. These are not buy or sell recommendations.

       

      Next Article

      ETF - Types & Performance in Indian Market in India

      ETF - Types & Performance in Indian Market
      by Mrinmai Shinde 12/02/2021

      ETFs has been in the financially world only since the past 25 years, however it has captured the likes of institutional and retail investors round the world. In the beginning, they were promoted as an inexpensive, index-investing option vis-à-vis mutual funds. 

      Index investment itself is a concept created by John Bogle, the founding father of Vanguard Group that is one of the largest AUM’s in the world with over US$6 trillion in Assets underneath Management.

      So what is an ETF and how did they gain popularity in India?

      ETFs are funds that track Indices. Hence when once buys units or shares of an ETF, you are purchasing units or shares of a fund that tracks the yield and return of its native index. ETFs do not try to outperform or beat the index instead they mimic the index performance.

      Unlike other funds, ETFs trade like any other stock on the exchanges hence their price fluctuate throughout the day.

      In India, just like the US, ETFs have gained popularity because the top hedge funds or top AMCs have failed to beat the market benchmark in the past 5 years as per studies. Hence, a “Passive ETFs” is a better bet for investors.

      Along with this advantage, ETFs are also cost effect. Typical ETF administrative costs are around or less than 0.2% annually as compared to actively managed funds that charge upto 1% fees.

      How do ETFs work?

      As mentioned earlier, the ETFs are traded on the exchanges like other stocks. They act like both shares and mutual funds. The price of an ETF depends on the cost of the underlying asset itself. Hence, if the asset’s price goes lower or higher the price of the ETF reacts in direct proportion. 

      ETFs are managed both actively and passively. Actively managed ETFs are handled by portfolio managers who try to mitigate the risks and understand the market conditions. While Passively managed ETS follow a certain Indices trend 

      Even though these ETFs come with cost advantage there are certain limitations that come with it such as

      Brokerage fees: One can either for a fund manager to handle their funds or manage the funds by the themselves by opening a Demat account. If a fund manager is appointed then the investor may incur some commission fee costs.
       
      Market Volatility: ETFs heavily depend on the market trends. Hence, in good times the investor may earn handsome profits while in bad market conditions the investor may also incur heavy loses.
       
      Diversification:  As per study, most ETFs are passively handled hence majority the stocks chosen for investment would be best performing stocks, often the bluechip stocks whereby ignoring the potential of small cap companies. 

      Types of ETFs available:

      Equity ETFs: These funds have investments in equity instruments, 

      Gold ETFs: Such funds deal in commodity exchanges. These fund include physical gold assets. Purchasing units and shares of these funds makes an investor owner of gold on paper.

      Debt ETFs: These funds comprise of debt securities such as debentures, commercial papers, government securities, etc. 

      Currency ETFs: These funds purchase currency of different countries and gain profits from the currency fluctuations. These funds are based on future performance of the currency which is predicted with specific calculations. 

      ETF Performance in India

      Total ETF asset under management stands at Rs 2.07 lakh crore as of August 2020, and Nifty50 focused ETFs made nealy fifty perfect of the whole lot.  The value of AUM in Nifty50 ETFs is now at it’s record high, Rs. 1.02 lakh crore.

      According AMFI data it was observed that the domestic ETF AUM linked to equity and debt had grown at a rate of 65 per cent per annum over last 10 years. ETF AUM has increased by more than Rs 60,000 crore this financial year despite disruption caused by the pandemic. One of the reasons behind this success rate could the market creating new highs and giving investors their gains. 

      Almost 17 asset management companies introduced ETF schemes based on Nifty 50 till now, and they command 49 per cent market share. While there are 11 ETFs linked to Nifty50 outside India with investments worth around a billion dollars.

      There are nine products with focus on BSE Sensex, with AUM at Rs 41,276 crore, according to a BSE spokesperson. The AUM of Sensex ETF grew 50 per cent from Rs 27,556 crore in March 2020.

      According to the Icra data, NSE Indices have a 77 per cent market share of ETF market, while BSE indices, holds 22 per cent. In the debt ETF segment, NSE indices enjoy a virtual monopoly, thanks to Bharat Bond ETFs that have got huge inflows. Yet, penetration of ETFs among retail investors still remains low. For example, 88 per cent of equity fund AUM is contributed by individual investors (retail + HNI), but in the case of ETFs, it is only 8 per cent. Moreover, just 1 per cent of retail mutual fund investors’ money is in ETFs.

      Next Article

      Should investors follow FII actions in the stock market?

      fii holding
      by Nikita Bhoota 17/02/2021

      Foreign institutional investors (FIIs) were the net buyers in the Indian equity markets in the year 2020.  FII net investment stood at Rs. 1.7 lakh crore (source: NSDL) in equities in the year 2020. However, they have reduced their stake in some of the companies sequentially in the quarter ended December.

      We have shortlisted the companies from the Nifty 100 list in which the FII have reduced stake in the December quarter.
       

       

      Company Name

      Sept 20 Qtr

      Dec 20 Qtr

      Decline in Stake (%)

      Indus Towers Ltd.

      40.89

      26.63

      -14.26

      Bosch Ltd.

      6.67

      4.64

      -2.03

      UPL Ltd.

      37.15

      35.35

      -1.80

      Lupin Ltd.

      20.35

      18.97

      -1.38

      Oracle Financial Services Software Ltd.

      12.42

      11.04

      -1.38

      Container Corporation Of India Ltd.

      24.54

      23.26

      -1.28

      Coal India Ltd.

      7.19

      6.50

      -0.69

      United Breweries Ltd.

      10.69

      10.04

      -0.65

      Bajaj Holdings & Investment Ltd.

      15.07

      14.52

      -0.55

      Bajaj Auto Ltd.

      13.56

      13.06

      -0.50

      Dr. Reddys Laboratories Ltd.

      29.58

      29.13

      -0.45

      Bharat Petroleum Corporation Ltd.

      11.98

      11.56

      -0.42

      Piramal Enterprises Ltd.

      28.96

      28.59

      -0.37

      Indian Oil Corporation Ltd.

      6.07

      5.83

      -0.24

      Tata Motors Ltd.

      15.84

      15.61

      -0.23

      Torrent Pharmaceuticals Ltd.

      12.17

      11.96

      -0.21

      Sun Pharmaceutical Industries Ltd.

      12.38

      12.19

      -0.19

      Avenue Supermarts Ltd.

      10.27

      10.09

      -0.18

      Tata Consultancy Services Ltd.

      16.00

      15.88

      -0.12

      SBI Cards And Payment Services Ltd.

      5.93

      5.84

      -0.09

      Reliance Industries Ltd.

      25.23

      25.18

      -0.05

      Abbott India Ltd.

      1.15

      1.10

      -0.05

      DLF Ltd.

      18.33

      18.28

      -0.05

      General Insurance Corporation of India Ltd.

      0.22

      0.19

      -0.03

      JSW Steel Ltd.

      13.34

      13.31

      -0.03

      Oil & Natural Gas Corporation Ltd.

      7.69

      7.67

      -0.02

      Source: Ace Equity

      The above table shows that FII has reduced stake in some of the top companies like Reliance Industries, Tata Motors, Avenue Supermarts, Tata Consultancy Services, Lupin Ltd. etc. 

      According to market experts and media reports, FII reducing stake in large-cap stocks could be a sign of rebalancing the portfolio or booking profits as many of the companies are already trading at 1 year high in the stock market.

      What investor should do?

      FIIs raising or reducing stake should not be the only parameter to make buy or sell in the stock market. The investors should also

       

      • Check the fundamentals of the company. The investor can add or hold the stocks with strong fundamentals.
      • Under fundamental parameters, one can check Cash flows, EPS, PEG ratio, revenue growth as well as future CAPEX plans etc.
      • The investor should also study the management and future expansion plans of the company.
      • The investor can also use technical parameters to make their buy or sell decisions in the stock market.

      Disclaimer: The above report is compiled from information available on the public platforms. These are not buy or sell recommendations.

       

      Next Article

      5 Multi-bagger stocks for the next 5-years

      top multi bagger stocks
      by Nikita Bhoota 18/02/2021

      Nifty50 and Sensex have doubled from March 2020 lows. The rally in the market was supported by huge global liquidity and coordinated efforts by countries across the globe to fight the coronavirus (Covid-19) pandemic. The successful introduction of covid19 vaccine, growth-oriented proposals in the budget across various sectors of the economy improved investor sentiments. Additionally, healthy corporate results also supported market performance.

      Some of the investors may think to liquidate their portfolio to take the advantage of rise in the markets. However, investors can consider to add quality stocks in their portfolio to earn superior returns in the long run.

      Thus, based on the positive outlook, future growth prospects, and management pedigree of the companies, we have selected the below 5 stocks that could be likely multi-baggers over the period of next 5-years.

      SBI Life Insurance (SBILI)

      SBI Life (SBILI) is our top pick for 2021. While SBILI marginally underperformed peers last year due to higher impact from pandemic-led lockdowns, we expect it to deliver strong growth in 2021, as its distribution channel comes back full force and the product mix stabilises with rise in share of protection. We believe SBILI will deliver top-quartile growth helped by a favourable base, backed by well-diversified distribution, rational cost structure, and an under-penetrated mass customer base. The stock is trading at discount to HDFCLI, despite offering similar growth. We forecast VNB Cagr of 18.3% over FY20-22E. The stock trades at 2.8x FY21E P/EV.

      Year New Premuim Income (Rs Cr) VNB (Rs Cr) VNB margin (%) PAT (Rs Cr) EV per share P/EV (x)
      FY20 40,324 2,010 18.7 1,422 263 3.3
      FY21E 50,254 2,243 19.5 1,529 310 2.8
      FY22E 60,477 2,815 20.4 2,046 360 2.4

      Source: 5paisa Research, Price and valuations as on February 17, 2021

      Sudarshan Chemicals (SCIL)

      SCIL saw a pick-up in domestic demand from the month of August, reflecting the broader economy’s return towards normalcy. In terms of end-use industries, coatings, plastics and inks are doing well. The non-specialty portfolio saw a good recovery after subdued business in earlier quarters. Demand for specialty pigments remains strong, thanks to the company’s strong technical capabilities. Management expects the long-term demand trend for its products to remain unaffected. However, there are near-term challenges in getting technicians for installation of new capacities and testing of processes. Capex activity on new products was delayed by ~9 months due to COVID. Now, management expects to launch one new product by March-2021 and another by Sep-2021/3QFY22. We expect revenue, EBITDA and PAT CAGR of 10.7%, 20.6% and 27.7% over FY20-22E. The stock trades at 26.3 FY21E EPS.

      Year Revenue (Rs cr) OPM (%) Pre-Exceptional PAT (Rs Cr) EPS (Rs) PE (x)
      FY20 1,708 14.4 108 15.7 31.9
      FY21E 1,740 16.1 131 19 26.3
      FY22E 2,092 17.1 176 25.5 19.6

      Source: 5paisa Research, Price and valuations as on February 17, 2021

      Kaveri Seeds

      Kaveri Seeds is one of India's leading seed producers, with a broad product portfolio that includes hybrids for cotton, corn, paddy, bajra, sunflower, sorghum and various vegetables. Kaveri Seeds has not raised any external money in the form of either equity or debt, and meanwhile has paid out ~₹850cr to shareholders (including FY20) via share buybacks & dividends. This reflect the company’s strong FCF generation. The non-cotton portfolio now contributes around half of total seed revenues but nearly 70% of total seed EBITDA. The non-cotton portfolio is likely to grow faster than the cotton portfolio (barring approval for new technology in cotton) and also generates higher margins. Kaveri remains ignored by most investors despite steady EPS growth, ~45% ‘core’ ROE (ex-cash), and a 7-8% dividend + buyback yield. At 9.6x FY21E PE, it looks clearly undervalued. We believe the shift in earnings mix towards the non-cotton business – which is less regulated, higher-margin and faster-growing – could drive an expansion in margins and an increase in valuation multiples over time.

      Year Revenue (Rs cr) OPM (%) Pre-Exceptional PAT (Rs Cr) EPS (Rs) PE (x)
      FY20 930 27.2 259 43.2 11.8
      FY21E 1,048 29.2 320 53.3 9.6
      FY22E 1,180 29.7 341 56.8 9

      Source: 5paisa Research, Price and valuations as on February 17, 2021

      UPL Ltd

      UPL maintained its guidance for 6-8% revenue growth and 10-12% Ebitda growth in constant currency terms. The company is committed to lowering net debt-to-Ebitda to 2x by Mar-2021. Management expects fixed overheads to increase by ~3% in FY21. Over the longer term, management expect earnings to grow in double digits for the next 3-4 years. It expects to continue gaining market share, as it expands its presence in South East Asia and China. The company is performing well in Brazil and India, and is already the #1 company in Mexico, Chile and Columbia. Given the increase in commodity prices over the past few months, farm incomes are healthy and the next few years look promising for the company. We expect revenue, EBITDA and PAT CAGR of 9.3%, 18.5% and 27.8% over FY20-22E. The stock trades at 12.7 FY21E EPS.

      Year Revenue (Rs cr) OPM (%) Pre-Exceptional PAT (Rs Cr) EPS (Rs) PE (x)
      FY20 35,756 19.9 2,399 31.4 17.1
      FY21E 39,315 22.4 3,227 42.2 12.7
      FY22E 42,681 23.4 3,921 51.3 10.5

      Source: 5paisa Research, Price and valuations as on February 17, 2021

      RBL Bank:

      RBL Bank, one of India’s fastest growing private sector banks with an expanding presence across the country, is an attractive play given the steep discount to peers and improved business model. Stronger internal accruals, potential resolution and Corporate portfolio consolidation will ensure good capitalisation for the near-to-medium term. RBL’s overall profitability is expected to improve going ahead on account of improvement in NIMs and lower credit cost. Improvement in NIM going forward would be driven by the increasing share of retail loans, deposit rate cuts and run-down of excess liquidity while improving asset quality is expected to bring down credit cost from peak levels.  The stock trades at 1.2x FY21E P/BV.

      Year NII (Rs cr) Pre-Exceptional PAT (Rs Cr) P/BV (x)
      FY20 3,630 510 1.4
      FY21E 3,790 580 1.2
      FY22E 4,260 1,190 1.1

      Source: 5paisa Research, Price and valuations as on February 17, 2021