Indian Bonds to be Included in Global Bond Market Indices

Indian bonds to be Included in Global Bond Market Indices
by 5paisa Research Team 08/09/2021

A recent report by Morgan Stanley has highlighted that Indian bonds could be included in global bond market indices before February 2022. The Indian government has been lobbying for some time with global index majors like JP Morgan, FT and MSCI for inclusion in the global bond indices. That effort appears to be fructifying.

As per a recent report by Morgan Stanley, India was likely to be included in JP Morgan’s GBI-EM (Global Bond Index – Emerging Markets) as well as in the Global Aggregate Index. However, it will take some more time before India is included in the World GBI indices as Indian bond markets are yet to reach that level of depth and liquidity. 

Why is the inclusion in global bond indices important? Typically, a large chunk of the global money gets allocated by passive funds like index funds and ETFs. This is true of equities and also of bonds. While India has been present in most of the benchmark equity indices, it had been absent in the bond indices. That had impacted global capital flows into Indian debt.

It is estimated that the inclusion in the bond index would right away result in infusion of an impressive $40 billion into Indian debt. Also, Morgan Stanley, has pointed out in its report that over the next 10 years, Indian bonds could get as much as $250 billion of flows from such passive funds. That would not only reduce the pressure on equity flows, but make bond markets substantially more liquid.

Also Read: Difference Between Convertible and Non-Convertible Debentures

Currently, foreign ownership of Indian government debt is less than 2%. This figure is expected to increase to 9% over the next decade. This would also impel the Indian government to remove foreign portfolio limits on bonds. Morgan Stanley has also estimated that the rupee could appreciate 2% over next few years and that would add to the dollar yields for global investors and make effective yields a lot more attractive.

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SAIL to Double Steel Capacity to 50 MTPA by 2030

SAIL to Double Steel Capacity to 50 MTPA by 2030
by 5paisa Research Team 08/09/2021

Steel Authority of India Limited (SAIL) has laid out an elaborate plan to double its steel manufacturing capacity from the current 23 million tonnes per annum (MTPA) to over 50 MTPA  by 2030. This phase of expansion will begin from 2023-24, after the ongoing expansion program is completed.

 

SAIL Plant

Current Capacity

Phase 1

Phase 2

Capacity by 2030

Durgapur

2.50 MTPA

7.50 MTPA

Nil

7.50 MTPA

Rourkela

3.70 MTPA

8.80 MTPA

Nil

8.80 MTPA

Bokaro

4.60 MTPA

9.50 MTPA

Nil

9.50 MTPA

Burnpur IISCO

2.50 MTPA

3.00 MTPA

7.50 MTPA

7.50 MTPA

Bhilai

7.00 MTPA

Nil

14.00 MTPA

14.00 MTPA

Others

3.00 MTPA

Nil

Nil

3.00 MTPA

 

The capacity expansion across the various plants of SAIL will be spread over two phases. While Durgapur, Rourkela and Bokaro will see capacity expansion in Phase 1, Bhilai will see capacity expansion in Phase 2. The IISCO plant in Burnpur will expand capacity in both the phases. Once the two phases of expansion are completed, the total capacity of SAIL will grow from the current 23 MTPA to 50 MTPA by year 2030.

The total expansion program will entail an investment of Rs.150,000 crore. SAIL has already procured a 30-year mining lease for iron ore in Rajasthan’s Bhilwara district to ensure steady supply of iron ore for steel production. This expansion is part of the National Steel Policy 2017, which had envisaged India’s steel output to grow 3-fold to 300 MTPA by the year 2030 with SAIL having one-sixth market share.

Steel companies have been in a structural rally in the last one year as is evident from the stock prices which have grown multi-fold. There has been a massive demand for steel coming domestically and from abroad. The global steel shortage has also ensured that steel prices remain buoyant on the London Metals Exchange (LME). The expansion seeks to make the best of this robust demand.
 

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World EV Day 2021- Best EV Stocks to Buy

World EV Day 2021
by 5paisa Research Team 08/09/2021

World EV Day is celebrated on 09th September. Electrical Vehicles (EV) do not use the traditional fossil fuels like petrol and diesel. Instead, they use batteries to power their vehicles, that are more environment friendly and have a more acceptable carbon footprint. They do not pollute the air or deplete the ozone layer as traditional fossil fuels do.

India may not have scaled its EV plans to the same level as China, but the government is serious about a long-term shift to zero-emission EVs. That entails the right ecosystem like availability of electrical vehicles, adequate charging points, ancillaries for EVs, manufacture of batteries etc. Here are companies that could emerge as key players in the EV shift.

•  Tata Motors (CMP Rs.298.40) – Tata Motors and Jaguar Land Rover are substantially electrifying their fleets. Tata’s Tigor and Nexon models are already EV leaders. It is the one auto company to bet big on EVs.

•  Hindalco (CMP Rs.463.25) – India’s premier aluminium manufacturer is also in the midst of deleveraging. Aluminium due to its light weight has great demand among EVs. It is likely to see exponential demand growth from the EV thrust.

•  Amara Raja Batteries (CMP Rs.720.05) – It has already invested in developing lithium-ion cells that are considered a lot more efficient for EVs. Amara Raja is one of the recipients to get this technology from ISRO.

•  Minda Corp (CMP Rs.123.50) – It is first of the auto component makers off the block supplying to EV manufacturers. It has already secured orders to supply mobility components for EVs. It is largely R&D driven and has a marquee EV client list.

•  Greaves Cotton (CMP Rs.141.45) – It announced a foray into the multi-brand EV retail segment and expects it to become a big contributor to top line and bottom line. It is the only multi-brand EV store and an extension of its high-end engine focus.
(Note: Above prices are closing NSE prices as on 09-Sep-2021)

These 5 stocks are indicative of the EV opportunity and the direct and indirect beneficiaries. It would be advisable to consult with your advisors before making any investments.
 

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Zomato pulls out of Groceries and Nutraceuticals

Zomato pulls out of Groceries and Nutraceuticals
by 5paisa Research Team 12/09/2021

One of the unique features of digital players is speed and flexibility. In a show of alacrity, Zomato has taken a decision to pull out of groceries retailing and its nutraceuticals business and concentrate on its core food delivery business. Zomato will also exit its much smaller nutraceutical business selling health and fitness products.

Zomato was running grocery deliveries on a beta basis. However, its experience was of poor customer experience as well as gaps in order fulfilment. In the last few years, a number of dedicated logistics focused companies have come up in the digital space, and substantially crunched the time to delivery. Zomato did not see too much value in investing resources in this area.

There is one more reason for Zomato to stay away from delivery of groceries. It recently picked up 10% stake in Grofers and would prefer to leverage the groceries delivery franchise of Grofers to spearhead that side of the business. Grofers has fine tuned groceries down to delivery in under 10-20 minutes through a fine-tuned collection and deep-tech delivery model. Zomato would rather develop on this model rather than reinvent the wheel.

Zomato had entered the groceries delivery business during the pandemic last year but with activities getting back to normal, it does not see too much benefit. Also, Zomato hopes to derive better outcomes from its Rs.745 crore investment in Grofers. Hence, Zomato has already clarified that it does not intend to get into this activity of groceries delivery and would prefer to leave to specialists like Grofers.

Zomato has already communicated to all its grocery partners, that it will shut its grocery pilot effective 17th September. Grofers offers delivery of groceries in as short as 10 minutes. Grocery delivery is a different ball game relying on smart hub locations, supply chains and deep tech to understand customers better. That is not the core competency of Zomato anyways.

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Ami Organics and Vijaya Diagnostics - Grey Market Premium

Grey Market Premium - Ami organics & Vijaya Organics
IPO
by 5paisa Research Team 12/09/2021

Grey market premium or GMP may not have much of official value, but as an information indicator it is useful. It gives a quick view on where the stock is expected to list and at what levels it could trade. This is specifically in case of IPOs where the GMP is a good lead indicator of how the stock could list.

GMP signals for Ami Organics

Ami Organics IPO closed on 03-Sep and the issue was subscribed 64.54 times. The issue has been priced at Rs.610 and the discovered price represents the upper end of the IPO price band. Ami Organics is a pharma intermediates manufacturer with a solid franchise of API clients in India and abroad. The stock is slated to list on Tuesday, 14-September.

As of Monday, the GMP was hinting at a premium for Ami Organics. Against the issue price of Rs.610, the GMP was hinting at a listing price of Rs.767, representing a premium of Rs.157 over the issue price. In percentage terms, this is a 25% premium as signalled by the grey market.

GMP signals for Vijaya Diagnostics

Vijaya Diagnostics IPO closed on 03-Sep and the issue was subscribed 4.54 times. The issue has been priced at Rs.531 and the discovered price represents the upper end of the IPO price band. Vijaya Diagnostics is a specialized diagnostics and testing company with a solid franchise of direct customers. The stock is slated to list on Tuesday, 14-September.
As of Monday, GMP was hinting at a discount for Vijaya Diagnostics. Against the issue price of Rs.531, the GMP was hinting at a listing price of Rs.522, representing a discount of Rs.9 over the issue price. In percentage terms, this is a 2.26% discount as signalled by the grey market.

It must be noted that GMP prices are unofficial and hence must be taken as purely indicative and not as conclusive indicators of listing price.

 

Also Read: 

Upcoming IPOs in 2021

IPOs in September

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Specialty Chemicals Companies to Hike CAPEX by 50% in FY-22

Specialty Chemicals Companies to Hike CAPEX by 50% in FY-22
by 5paisa Research Team 12/09/2021

After a lull in capital spending in the midst of the pandemic in 2020, specialty chemical companies will see capital expenditure (capex) rising by 50% yoy to Rs.6,200 crore in FY22. This takes the capex of specialty chemical companies back to pre-COVID levels. Specialty chemicals are specialized chemicals that go into a number of user industries like pharmaceuticals, paints, petrochemicals, metal products etc.

Specialty chemicals companies are seeing solid traction from domestic and export demand. Domestic demand has been rising with revival in most of the user industries back to normal levels of output. The latest IIP numbers reflect that Indian economy is back to pre-COVID levels of output. In the Indian markets, specialty chemical companies have gained from higher demand and better price realizations.

Also Read: Rally in Specialty Chemical Companies

The big shift has happened on the exports front. In last 2 years, the Chinese government clamped down heavily on the Chinese chemical companies that did not comply with environment norms. That drastically reduced the chemical output from China in the global export market. 

Additionally, the pandemic highlighted the risks of depending too much on China for the supply chain. Till 2019, most countries relied on China to supply specialty chemicals for various applications. However, the pandemic led to severe supply chain embarrassments forcing global companies to look at India as an alternative. 

There were other factors favouring Indian companies. Lower supplies from American hubs due to hurricanes and blockade of Suez Canal impacted global supply chains of specialty chemicals. Since demand was robust, specialty chemical companies could easily pass on higher crude costs via higher prices. This has encouraged a surge in capex this year.

Last year, revenue growth for specialty chemical companies fell to 10% and is expected to revive to 20% in FY22. Apart from the China factors, Western nations are increasingly looking at India, which is already among the top-3 specialty chemicals manufacturers in the world. Higher capacities will just underscore that advantage.