Bullish on economic cycle but not on market cycle in near term: Jefferies MD

02/09/2021

India’s growth outlook is looking better but one has to differentiate between the economic cycle and the market cycle, according to Mahesh Nandurkar, managing director of institutional brokerage firm Jefferies.

“I am very bullish on the economy. The economic revival is just around the corner. We are already going through it,” he said.

However, he added a rider. “I just believe that the economic cycle and the market cycle have to be differentiated. So, while I am very bullish on the economic cycle, I am not so bullish on the market cycle at least in the near term,” he said in an interview with The Economic Times.

Stock market rally

Nandurkar said the unidirectional movement in the market has not been observed in the past and reflects the coordinated efforts of all the global central bankers.

“I feel that the longer the market runs in this unidirectional manner, greater are the chances of the type of correction that you talked about,” he said.

Capex cycle and bank lending

Nandurkar said he believes the housing market revival will eventually lead to a broader capex revival as well and there is already some initial movement on the infrastructure side as certain industries like steel are driving the capex.

“It will take two to four quarters for the broader capex cycle to be seen but we are seeing some initial signs of it,” he added.

Given the current valuations of many large private banks in India they are a better bet on the risk-reward parameter to take advantage of the capital expenditure revival in the economy, said Nandurkar.

According to him, the smaller non-banking financial companies and banks will probably give better returns. But they are not completely out of the woods in terms of the asset quality question marks. At the same time, the large banks are still trading at reasonable valuations.

“So, from the risk-reward perspective, large private-sector banks are best in my view. Within the broader banks and financials space, the non-lending part and especially the insurance side is also looking pretty attractive,” he said.

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Devyani, four others gain but CarTrade, four others fall after August IPOs

02/09/2021

Indian companies have been rushing to launch initial public offerings in 2021, and there are more to come over the next few months. In September alone, almost a dozen companies could float their share sales. But amid all this euphoria, how have companies that listed on stock exchanges last month performed?

Overall, at least 20 companies have gone public since April this year and raised around Rs 45,000 crore through IPOs. In August, 10 companies made their trading debuts, and the list of winners and losers is divided equally. Of these, three companies were from the healthcare sector—Glenmark Life Sciences, Krsnaa Diagnostics and Windlas Biotech—seeking to take advantage of the bullish sentiment in the wake of the Covid-19 pandemic.

The other companies that listed in August were KFC chain operator Devyani International, Rolex Rings, Exxaro Tiles, CarTrade, Chemplast Sanmar, Nuvoco Vistas and Aptus Value Housing Finance. All these IPOs were oversubscribed. In particular, Krsnaa Diagnostics and Devyani International attracted huge response to their offerings.

Analysts say excess supply and stretched valuations are among the factors that pulled shares of several companies down. Here’s a quick check on who gained and who didn’t since the listing.

Devyani and other winners

Devyani International Ltd, which operates Pizza Hut, KFC and Costa Coffee chains in India, had surged 37% on its debut against its issue price of Rs 90. Its shares are now trading around Rs 125 apiece.

Auto components maker Rolex Rings had jumped 30%on its debut on August 9 compared to the IPO price of Rs 900.Its shares are still 20% above the issue price.

Exxaro Tiles climbed 10% on its debut on August 16 and now around Rs 132.45 apiece versus the issue price of Rs 120. Specialty chemicals maker Chemplast Sanmar closed about 1% on debut but has since gained 14%.

Aptus Value Housing Finance had also fallen 1% on its trading debut but is now above its IPO price of Rs 353.

CarTrade and other losers

Glenmark Life was first of the block, listing on August 6. Its shares gained almost 4% on the first day against the issue price of Rs 720. The shares subsequently touched almost Rs 800 before falling to close at Rs 670.85 on September 2.

Krsnaa Diagnostics had closed 4%higher the same day against the issue price of Rs 954. But it has now slipped below the issue price.

Windlas Biotech had fallen 11% on its debut from the IPO price of Rs 460. Its shares are now at Rs 394.2 apiece.

CarTrade lost 8%on its debut and is now 10% below its issue price of Rs 1,618.

Cement maker Nuvoco Vistas Corporation dropped 7%on its first day but has inched up since then to close in on its issue price of Rs 570 per share.

To know more about IPOs and how to apply and check IPO allotment status, click here.

 

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Ami Organics IPO records huge demand; QIBs come as face saver for Vijaya Diagnostic

03/09/2021

Two initial public offerings (IPOs) had a contrasting picture on their last day with the share sale of Ami Organics seeing all-round bumper demand while Vijaya Diagnostic managing to sail through thanks to institutional investors.

The two issues were floated at a time where there is growing concern about the state of primary markets and the froth in valuations with some recent issues falling below their issue prices despite the secondary market indices hitting record highs.

Ami Organics

The Surat-based specialty chemical manufacturer Ami Organics saw its IPO covered 64.5 times, as per provisional data by the BSE and the NSE at the close of the issue period.

High-net-worth investors (HNIs) piled up big time while corporate investors and qualified institutional buyers (QIBs) also applied for several times the number of shares reserved for them.

Non-institutional investors, a segment that essentially captures demand from HNIs and corporates, bid for more than 154 times the number of shares reserved for them, with HNIs leading the show. QIBs applied for more than 86 times the shares allocated for them.

Retail investors were less wide-eyed but they also pitched in in enough numbers. The retail book was covered over 13 times.

The public issue size was Rs 566 crore, including 171 crore that came in via anchor allotment. The company raised Rs 200 crore through a fresh issue of shares and the rest of the money went to selling shareholders, essentially the promoters.

Intensive Fiscal Services, Ambit and Axis Capital are the book running lead managers to the issue.

Vijaya Diagnostic

Hyderabad-based pathology chain Vijaya Diagnostic Centre Ltd also saw oversubscription but only due to the push by QIBs. The issue by the private equity-backed company, which had attracted anchor investors including the sovereign wealth funds of Abu Dhabi and Kuwait, was covered 4.5 times.

The retail book was just about oversubscribed with 1.2 times demand while the non-institutional investors’ portion was covered 1.33 times.

The QIB portion was covered 13 times, saving the day for the company.

The public issue size, excluding the anchor book, was Rs 1,328 crore.

ICICI Securities, Edelweiss and Kotak Mahindra Capital are arranging the IPO.

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Sensex races past 58,000; Maruti, Bajaj Auto, banks lead gains

03/09/2021

Indian stock markets touched new highs on Friday, with the 30-stock benchmark BSE Sensex crossing 58,000 for the first time as the investor euphoria continues unabated.

The new milestone comes barely three days after the Sensex climbed past 57,000 on Tuesday, marking the shortest period for the Sensex to add 1,000 points.

The Sensex hit a high of 58,115.69 in morning trade on Friday and ended at 58, 129.95. The National Stock Exchange’s Nifty 50 also created a new record, going past 17,300 for the first time. Nity ended at 17,323.60.

The Sensex has now soared 126% since crashing to 25,638.90 in March 2020 due to concerns related to the Covid-19 pandemic. The non-stop rally has prompted many analysts to sound a note of caution and warn about a possible correction.

Maruti, Bajaj Auto and other gainers

Carmaker Maruti Suzuki and two-wheeler maker Bajaj Auto were among the top gainers, up 1.7% and 1.9%, respectively, after reporting robust vehicle sales numbers for August.

Reliance Industries, India’s biggest company by market value, rose 1.25%. Banks climbed, too. IndusInd Bank jumped 1.5% while Kotak Mahindra Bank rose 1.3%. State Bank of India, the nation’s biggest lender, rose 0.8%.

Hindustan Unilever was the biggest loser, falling 0.7% in morning trade. Tech stocks slipped as well. HCL Technologies was down 0.5% while Tech Mahindra and Tata Consultancy Services were 0.3% lower.

Midcap, Smallcap indexes

In the broader markets, the BSE MidCap index was 0.44% higher while the BSE SmallCap index gained 0.68%.

Among sectoral indexes, the BSE Auto Index was up 1.4% while BSE Consumer Durables gained 1.2%. The FMCG index was flat, weighed down losses in Hindustan Unilever and Nestle.

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Explained: SEBI’s new margin rules and what all the fuss is

04/09/2021

The new peak margin rules unveiled by capital markets regulator the Securities and Exchange Board of India (SEBI) have caused much consternation among not just retail investors but also stock brokers, several of whom have voiced their concerns publicly. Even as these new rules kicked in on Wednesday, investors took to Twitter in anger, targeting the market regulator and alleging that it was against their interests. 

So, what exactly is margin?

Margin is essentially a facility that traders use to buy shares they cannot yet afford. They basically pay a part of the money to buy those shares with a marginal amount of the total value. The remainder of the money has to be paid in two days’ time. 

What do these new SEBI rules say? 

The new rules essentially apply to the futures and options (F&O) segment of the stock market and to intraday traders. They stipulate that the traders punting on the F&O segment or doing intraday trades will need to have 100% of the margin money in the linked bank accounts, to be able to trade—buy or sell shares—as against a minimum 75% requirement till the end of August. 

The margin rules apply both to buying and selling of shares you may hold as a trader. This will require both buyers and sellers to keep extra cash aside or pledge shares of equivalent amounts, for their trades to go through. 
The actual value of the 100% margin requirement though is not the same for every script. It is based on what is called the ‘value at risk’ (VaR) margin. 

The VaR is different for shares of bigger companies, as compared to those for smaller ones or penny stocks, for which it is significantly higher. 

Also, the ‘Buy Today-Sell Tomorrow’ (BTST) facility has been closed. This means you can only sell a share after you have received its delivery, two days after closing the trade, not the next day, even before you have received it in your demat account. Moreover, for the cash segment, funds from a sale cannot be used the same day, but only on the next day. 

But were these SEBI rules not introduced a year back?

Yes, these rules around peak margins were first introduced a year back. Since then, SEBI has been ratcheting up the margin thresholds in a phased manner. It had first mandated traders to keep 25% of the margin money between December 2020 and February 2021. This was upped to 50% between March and May this year, and then to 75% from June to August. Now, the limit has been raised to 100%. So, these rules have not hit the market out of the blue and were expected to be enforced. 

Then, what is the hullabaloo over the new SEBI rules really all about? 

The new rules will require traders and brokers to keep more margin money aside to punt on intraday and F&O trades they consider lucrative. Moreover, if they fall below the stipulated thresholds during the trading day, they will be penalized. These changes have them up in arms. 

What is SEBI’s rationale behind the move?

Simply put, SEBI wants to lower the leverage being taken by traders while betting on shares, thereby lowering their risk. 

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Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and Kisan Credit Card (KCC) linkage 

PM Kisan Scheme and Kisan Credit Card Linkage (photo source Nandhu Kumar, Unsplash)
04/09/2021

In this article we would explain all about Pradhan Mantri Kisan Samman Nidhi or PM-KISAN scheme and Kisan Credit Card or KCC. 

What is Kisan Credit Card ?

To provide Indian farmers with timely monetary assitance and credit support the government has launched multiple schemes. One such scheme is the Kisan Credit Card (KCC) scheme. Kisan Credit Card is a central government scheme which offers farmers with timely credit access. The scheme created by National Bank for Agriculture and Rural Development (NABARD) in 1998 provides farmers with short-term formal credit. It was created by the National Bank for Agriculture and Rural Development (NABARD). 

What is Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme?

Pradhan Mantri Kisan Samman Nidhi or PM-KISAN scheme under which a financial benefit of Rs. 6000/- per year is provided to the eligible beneficiary farmer families, payable in three equal 4-monthly installments of Rs.2000/- each. The fund is transferred directly to the bank accounts of the beneficiaries. In this scheme, Samman Rashi of over Rs. 1.15 lakh crores has been transferred to farmer families so far. 

Kisan Credit Card has now been linked to the Pradhan Mantri Kisan Samman Nidhi Yojana 

Now the Kisan Credit Card scheme has been linked to the Pradhan Mantri Kisan Samman Nidhi Yojana (PM Kisan). Due to this linkage now benificiaries can seek a loan from KCC for up to Rs 3 lakh at 4 % rate of interest. The KCC scheme was introduced to ensure that the credit requirement for farmers in the agriculture, fisheries, and animal husbandry sector was being met. This was done by helping them avail short-term loans and provide them with a credit limit to purchase equipment and for their other expenses as well.  

How does it benefit farmers?

Under this scheme farmers avail loan at significantly lower interest compared that offered by banks. The interest rate for KCC starts as low as 2% and averages around 4% and farmers can repay loans depending on the harvesting period of their crop for which the loan was given.  

Farmers can also apply for Kisan Credit Card through the State Bank of India. SBI started this online service to facilitate KCC Review.