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SEBI Imposes Rs 25 crore fine on Ambani and Family- Top Indian Market News

SEBI imposes Rs 25 crore fine on Ambani and Family

Market regulator SEBI or Securities and Exchange Board of India has imposed a Rs 25 crore fine on Mukesh Ambani, Anil Ambani, Nita Ambani, Tina Ambani, KD Ambani, and other family members, in a case dating 20 years back. According to SEBI guidelines, any promoter buying into more than 5% stake/voting rights in a company has to make a public announcement to its shareholders, in case they may withdraw from the company for whatsoever reason. According to SEBI, there were multiple violations made with regard to this by members of the Ambani family. 

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AstraZeneca Sends Legal Notice To Serum Institute Over Delays In Vaccine Supply

UK-based AstraZeneca has sent a legal notice to Pune-based vaccine maker Serum Institute of India(SII). The notice comes after AstraZeneca alleged that Serum Institute is delaying the supply of vaccines under contract and is also violating obligations to other countries in supplying the Covishield vaccine to other countries. Adar Poonawala, CEO of SII has said that the delay is because of the Centre’s decision to halt vaccine exports temporarily. He also said that he would temporarily prioritize domestic needs. 

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Macrotech Developers IPO subscribed 35% on Day Two

Macrotech Developers or formerly known as Lodha World launched its IPO on April 7, 2021. The company was subscribed 26% on the first day of the bidding, receiving. bids for 95.91 lakh equity shares. On the second day, the company was subscribed 35%. The company is known for building the Trump Towers in Mumbai and the tallest building in India, World One.

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Zydus Gets Usfda Nod For Drugs Used To Treat Hypertension And Cancer

Indian Pharmaceutical company Zydus Cadila has received approval from the United States Food and Drug Administration for Ibrutinib capsules to treat cancer and Macitentan tablets that are used to treat hypertension.  

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Kalpataru Power Acquires 51% Stake In Fasttel 

Kalpataru Power Transmission Ltd’s (KPTL’s) wholly-owned subsidiary in Brazil has completed the acquisition of 51 percent controlling stake in Fasttel Engenharia Ltda. Fasttel specializes in engineering, procurement, and construction (EPC) and maintenance of power transmission lines, distribution systems and sub-stations 

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Minda Corp: Co-Signs Strategic Partnership With Israel Based Company For First Unique Collision Avoidance Technology For 2 Wheelers In India


Minda Corporation announced a strategic partnership with an Israel-based Ride Vision, an advanced driver-assistance systems company. The company plans to bring artificial intelligence-based collision avoidance systems to the Indian two-wheeler market. The company in its quarterly report had announced that it was going to pump Rs 250 crores into business expansion. The company had reported a ~19% increase in profits over the last quarter.

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Airtel Refused To Pay Videocon’s AGR Dues: DoT to SC

The Department of Telecommunications has told the Supreme Court that Airtel, which had acquired now-defunct Videocon’s telecom spectrums in 2016 has refused to pay the AGR dues applicable on the spectrum. The DoT has raised a demand to recover Rs 1375 crore of Videocon’s dues payable by Airtel. Airtel on the other hand holds that the DoT has made no such demand to recover any such dues and has agreed in the past that these dues are solely recoverable from Videocon itself. 


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Infosys: Co Announces Strategic Long-term Collaboration With ArcelorMittal For Digital Transformation

Indian IT-Giant Infosys has announced a long-term collaboration with multinational steel manufacturing corporation ArcelorMittal for Digital Transformation. Infosys will offer application management and business process management (BPM) services to ArcelorMittal’s Business Center of Excellence (BCoE) in Europe.

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AstraZeneca Vaccines Causes Rade Blood Clots: New Advisory Issued

UK vaccine maker AstraZeneca Plc’s Covid-19 vaccine has been causing blood clots in individuals below 30. In fact, there have been 19 deaths recorded so far due to blood clots caused by the vaccine in the UK. The Medicines and Healthcare products Regulatory Agency(MHRA) has issued new advisories. It has stated that the blood clot in found rarely, in close to 4 out of 10 lakh people. The UK’s Joint Committee on Vaccination and Immunisation (JCVI) has advised offering an alternative to the AstraZeneca Covid-19 vaccine to adults under the age of 30, due to the blood clot link. 

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Vehicle Registrations Down By 28.64% In March 2021: FADA

The Federation of Automobile Dealers Associations (FADA) has said that overall vehicle registrations are down by 28.64% in March 2021 as compared to last month. Tractor and Passenger Vehicles are the only two segments that have witnessed double-digit growth in the season. As compared to March 2020, Two-wheeler sales were down by 35.26%, Three-wheeler sales reduced by 50.72%, Three-wheeler sales were down by 50.72%.

Read More Here.

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Editorial

What Is Taper Tantrum? Can It Affect The Indian Economy?

Ex-RBI Governor Raghuram Rajan in a statement said that India could face another ‘Taper Tantrum’ sometime soon. A Standard and Poor’s(S&P) report stated that India, Philippines most vulnerable in a ‘taper tantrum’-like scenario. So what exactly does the word ‘taper tantrum’ mean? What does it mean for the Indian economy? Let’s find out.

The Taper Tantrum of 2013

  • The story dates back to the 2008 housing market crisis in the US. Banks had given out huge amounts in housing loans to people who couldn’t afford to pay it back. At the end of it, banks were left with huge amounts in unpaid loans, the stock markets had crashed. Eventually, a lot of money was lost in bad loans, crashed stock markets, and junk bonds. The global economy was crippled. 
  • This is when the US Federal Reserve or the Fed, which is the central bank in the US comes into the picture. The US Fed announced Quantitative Easing(QE). In Quantitative Easing, the government is essentially pumping money into the economy. It does so by cutting interest rates, buying bonds from the market, policymaking, and other banking instruments. The Fed had the mission of refilling the banks and the economy with cash.
  • Remember, in bonds, as the demand for them increases, their price increases, and yield decreases, and vice versa. The Fed first bought all the short term US-Treasury notes from financial institutions, this decreased the short-term interest rates. However, the interest rate on long-term notes was intact. Soon, short-term interest rates on loans were almost close to zero. This is good for the borrower, but what about the lender? It’s bad news for the lender. The lender then has to search for other instruments yielding higher interest rates. Finally, The investors in the US found two solutions, the stock market and foreign investment in developing countries. 
  • India wasn’t impacted much by the global economic crisis in 2008. Fairly so, India became an investment opportunity for US Investors. While the global flows had declined by 10.5% in 2008, Foreign Direct Investment(FDI) in India increased by 46% the same year. This was the case with many developing economies. They received foreign investment in huge amounts from already developed countries that were affected by the global economic crisis. These developing countries prospered from foreign investments.
  • Now comes the ‘Taper Tantrum’. Fast forward to 2013, the economy had revived, things were going pretty well all around the world, which is when the Fed announced that they were going to ‘taper’ or ‘wind down’ the Quantitative Easing(QE) or essentially stop pumping money into the system. While this was just an ‘announcement’ this sent ripples across the globe. 
  • Now, foreign investment is much riskier than investing in local sovereign bonds. The announcement by the Fed to taper the Quantitative Easing made investors believe that the interest rates back home would go up. This would increase the incentive to invest in safer domestic instruments like bonds over foreign investment.

What was the Impact?

  • What was the impact of the announcement? Naturally, since the stock markets were overpriced, investors started withdrawing money from the stock markets. They also started withdrawing funds that were invested in the emerging markets. This caused economic turmoil in emerging markets across the world. Investors started exchanging the local currency (Indian Rupee) for the Dollar. This had a negative impact on the price of the Indian Rupee(INR) against the US Dollar(USD).  
  • Since the government would stop buying bonds from the market, it was perceived that bond prices would decrease. Therefore, the bondholders started selling their bonds which lead to a decrease in price and increase in yield of bonds. This period was relatively short-lived and therefore called the ‘Taper Tantrum’. Even though the Fed had announced, it decided to hold back on its decision after the Taper Tantrum for some time. 

Taper Tantrum Coming Back?

The economic situation in 2021 is similar to that of the economic crisis in 2008. When the taper tantrum occurred, sectors with high foreign investments, debt mutual fund holders, and bondholders were affected the most. Governments are intensively pushing stimulus packages and Quantitative easing programs to restart the economy. Stock markets are overpriced and a lot of foreign investors have shored up in emerging markets. 

Finance Minister Nirmala Sitharaman said that India does not face a risk of Taper Tantrum, as it did in 2013 and that the ministry and RBI are vigilant enough to avoid the situation this time.

The last Taper Tantrum was a panic reaction from investors in a volatile market. It wasn’t correlated to any other macroeconomic factors in the past. The macroeconomic conditions of 2021 aren’t similar to that of 2013. Unlike last time, economists and bankers might have learned their lessons and a Taper Tantrum-like situation might not actually happen after all. 

Categories
Editorial

How the Rural Economy Reflected on the Stock Market in COVID-19

The COVID-19 pandemic left economies devastated, and people without jobs. And as we all saw in the headlines of every newspaper, there was a rather difficult mass migration from urban to rural India. This left two dilemmas, what shall happen to the decreased urban demand? In the absence of income, how will consumer spending thrive in rural areas?

There was rising a rising sense of uncertainty. The suddenness of events left many confused. The lack of knowledge and research about the virus caused panic throughout caused by rumours. What many failed to notice in India was the resurgence of a rural economy in the underbelly of COVID-19 lockdown.

Many migrant workers started returning to their home states by every means possible and other Govt. initiatives like the shramik express. This would mean that urban consumption and demand for goods would go down whereas it would increase in the rural areas. To sustain in rural areas the most suitable source of income is Agriculture. How exactly was agriculture impacted in COVID-19 pandemic?

How do I catch the Rural Theme in markets?

  • There is almost no other reliable source of income in rural areas apart from agriculture and dairy. When the lockdown was imposed it was amidst the Rabi Crop Harvesting Season(April-May), the seizure of the supply chain and logistics served a major blow to it.
  • However, there were multiple stimulus packages aimed specially to benefit the rural areas. MNREGA(Mahatma Gandhi National Rural Employment Guarantee Act), Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) and other direct benefit transfer schemes.
  • Spurt in rural spending will not only benefit a lot of agri-related equipment but also other aspirational products. Look out for greater demand for FMCG products, two-wheelers, entry-level cars etc. All these are aspirational products for the rural population and could see a distinct rise in demand in the coming month
  • Rural housing could be a big theme in the coming months. The government has already laid emphasis on low-cost housing by giving it infrastructure status. Companies that operate in this space with a credible and sustainable business model will be among the names to benefit from this development.
  • The rural population has managed to adapt and invest in its own setting. There has been an encouragement in enabling farmers to obtain long-term debt in order to kick start the agrarian economy.
  • As the monsoon season approaches, there has been more than normal sowing of “Kharif” crops to ensure a healthy income in the harvesting season in the coming winter season.
  • As many parts of India face a water crisis till date you can expect a fair share of a boost in the irrigation systems like motors, pipes, channels etc.

Automobile

As People started migrating to rural areas, there was a rise in rural population. 70% of rural household occupationally rely on agriculture as a source of livelihood. When the sales of a passenger vehicle, two-wheeler and commercial vehicles slumped, those of Farm Equipment Sector (FES) such as tractors and tillers rose. Some players in the industry include Mahindra and Mahindra, Escorts and VST Tillers.

OEMs
		July 2020
		July 2019
		% change

Mahindra & Mahindra
24,463
		19,174
		+28%
Escorts4,9534,505+10%
VST Tillers10,84210,308+6%
Farm Equipment Sector (FES) Sales Figures

Read more about Automobile sector during COVID by clicking here.

Agro-Chemicals, Pesticides and Fertilizers.

The use of pesticides and agro-chemicals in agriculture increase marginally.

Kilpest India Ltd. showed an amazing performance, both in terms of Quarterly (1,093.2%) and Yearly (1814.86%) Net Profit. Kilpest India Ltd is one of India’s leading Agri based companies. Kilpest is an ISO certified company and has representation in India in the field of agriculture business comprising Crop Protection Products and Public Health Products, Bioproducts, Micro-Nutrients and Mix fertilizers.

United Phosphorus Ltd (UPL) and PI Industries (PIIND) are the two of the biggest players in the pesticide and agrochemical industry in India. United Phosphorus recorded 200% Net Profit Growth QoQ and PI Industries had a .

Price levels of KILPEST UPL and PIIND

Coming to fertilizers, government data states that fertilizer sales jumped 83% to 111.61 lakh tonnes in Apr-June. Read more over here.

Company NameQoQ Net Profit% YoY Net Profit% Market Cap
Coromandel Int.+6.1%+296.3%22,852.0
Khaitan Chemicals &
Fertilizers Ltd. 		+197.4%+16.7%185.2
Madras Fertilizers Ltd.+3,174.2%+459.4%327.8
Growth in Fertilizers sector(Amount in Rs. Crores)

Another company that is worth taking note of is Rallis India Ltd. which is a subsidiary of Tata Chemicals, the company filed a quarterly Net Profit of 13,000%(Between April and June)! Rallis India Ltd. specialises in crop-care, pesticide, agrochemical and other agri-care products.

How have “rural themed” FMCG companies performed?

Dabur and Emami are two FMCG companies with a strong rural presence. While Dabur has a market cap of more than Rs.90,000 Crores and Emami has a market cap of Rs.14,860 Crores.

Dabur and Emami recorded Net Profit growth% of 21% and 60.8% each respectively. They are an essential bridge between rural areas and FMCG market considering that rural India accounts for 37 per cent of India’s FMCG spends, both these companies have a very strong rural presence.

Did the Rice Market Benefit?

India had the highest export volume of rice worldwide, at 9.8 million metric tons as of 2018/2019. India’s rice export fell due to slowdown and seized the supply chain but increased by 52.5% in April-May.

India handles 25% of global rice exports, However, rice contributes only 2 per cent to the Indian export basket. The COVID situation caused many non-agricultural and developing countries to put a cap on rice exports to meet local supplies. On the other side, India maintains a surplus of rice making exports of huge volumes possible.

We have taken two companies that benefited from this rising foreign demand.

Chaman Lal Setia Exports Ltd (Market Cap: Rs. 532 Cr)– Chaman Lal Setia Exports Ltd. is an India-based manufacturer and exporter of basmati rice. Chaman Lal Setia Ltd declared a Net Profit growth of (+)21.6%

GRM Overseas Ltd (Market Cap: Rs. 122 Cr) – GRM Overseas Limited engaged in the business of manufacturing and trading of rice. The Company produces a range of rice items to its customers spread across the world. GRM Overseas Ltd declared a Net Profit growth of (+)351.7%

Sale of Seeds in India.

Kaveri Seed Company Ltd. and Mangalam Seeds are one of the top seed companies. Indian stock markets have had a long affair with monsoons. Although Mangalam Seeds Ltd. has not declared its quarterly result, there is a strong sentiment regarding the forecast due to rising agriculture and pre-monsoon sowing both on the rise. Kaveri Seeds’ QoQ Net Profit Growth was 3,794.67%

JK Agri Genetics Ltd. and Nath Bio-Genes are two other major companies that deal in GM(Genetically Modified) Seeds.

JK Agri Genetics Ltd. is an India-based seed company. The Company is engaged in growing of non-perennial crops. It provides Agricultural and allied products and isalso involved in research and development, production, processing and marketing. It showed growth of +308.1% in Net Profit QoQ with a +295.7 Revenue Growth QoQ.

Nath Bio-Genes (India) Limited is engaged in the hybrid seed business. The Company is engaged in the business of production, processing and marketing of hybrid and genetically modified (GM) seeds. The Company’s segments include agricultural activities (seed production) and trading activities. Nath Bio-Genes Ltd.’s Net Profit multiple over FOUR TIMES after the lockdown.(~+411%)

NIFTY FMCG outshines NIFTY 50

NIFTY FMCG is the index that is closest to the agriculture sector than other indices. We take a 6-month time frame to analyse which index has suffered from COVID-19. While NIFTY 50 overall faces an overall decline of -6.65% NIFTY, NIFTY FMCG managed to recover and shine 3.79% more.

Surge in Rural Area Usage.

Shortly after the lockdown, there was a dip in data usage for a very small period. Post this the amount of data usage surged massively. Such that a majority of these data users belonged to the rural area. Data consumption under BharatNet(Read More Here) across the country in the April-June quarter was 5.52 lakh gigabyte (GB) as compared to 2.47 lakh GB in January-March. Overall, rural areas accounted for 83.3 per cent of the total 6.58 lakh GB data consumed under BharatNet across India during April-June.

Sum and Substance

In a survey conducted, more than 68% of the population in rural India faced a monetary crisis. 78% suffered job losses because of stringent lockdown measures put in place to control the spread of the virus, said the survey, The Rural Report, conducted by news portal Gaon Connection and Delhi-based Centre for Study of Developing Societies.

As much as 23% of the respondents were forced to borrow money to manage their households, while 8% had to sell a valuable possession The survey said that 28% of migrant workers were not paid for the work they had done in cities.

Only 27% of the economically poor households, which did not have ration cards to access the central scheme for highly subsidized foodgrain, said they had received wheat or rice from the government.

The monetary crisis caused physical dismay, the government support and fiscal stimulus even though was the best case scenario made way only for Dalal Street to book profits in certain segments. The socio-economics scenario can’t be portrayed in numbers.

The Rural themed stocks showed great results due to lesser population densities in rural areas and therefore lesser chances of contracting COVID making economic activity possible. Despite that, there has been a rising pile of COVID-19 cases in tier 3 and tier 4 cities putting the FMCG as well in an expected dismay.

There is just one hinge around which Dalal Street is balancing itself and that is the COVID-19 Vaccine.

Categories
Editorial Market News

The Rally of the Pharma Sector- COVID19

The Pharma sector has boomed. It is not difficult to guess why. It’s because of the ripples of the COVID-19 pandemic. The NIFTY Pharma happened to move sideways around the new year until March 2020, when the stock price fell for a short period. The NIFTY Pharma Index captures the performance of the pharma sector. This was because of the global economic slowdown. Moreover, indecisiveness on part of leaders to declare a lockdown in their country made the incident even more uncertain for the Pharma sector.

Nevertheless, the pharmaceutical market managed to meet the sudden peak in the demand for PPE Kits, Drugs, Safety Kits, Masks, Sanitizers and the paramount need to find a cure or a vaccine for it.

Investors, promoters, philanthropists, institutions and governments infused huge amount of funds into these Pharmas for R&D and mass production of safety kits.

The NIFTY Pharma stocks performed as given below:

Captured on TradingView.

The chart shows the percentage return between the start of lock-down in India i.e. 23-03-2020 and 21-07-2020(DD-MM-YYYY). It shows NIFTY Pharma performance in the topmost frame and the top four pharma stocks(by market cap) in the frame below it. On the right is the percentage return in various colour schemes.

It was such that when the entire market fell Pharma came to rise. The following is the price action for 6 months comparing NIFTY and NIFTY PHARMA. As the confirmation for a COVID vaccine is nears you can expect a highly bullish sentiment on Pharma.

Following are the top 5 performers by

Stock %Change in last 3 months Net Profit Qtr Growth YoY %Net Profit QoQ Growth %
Aurobindo Pharma Ltd. 24.18%
48.24%
23%
Biocon Ltd.19.41%
-34.21%
-28.27%
Cipla Ltd.11.86%
-35.14%
 -31.47%
Cadila Healthcare Ltd.6.00% -13.71%
13.47%
Lupin Ltd.4.82%32.35%146.39%
Source:Trendlyne
TABLE 1

You can obtain more fundamental data regarding the stocks given above by clicking here

What can be deduced from the above table(TABLE 1)?

  • Lupin recorded the highest Net Profit Qtr Growth QoQ
  • Whereas, Aurobindo pharma recorded the highest % change in price in the last 3 months. Additionally, it also recorded the highest Net Profit Qtr Growth YoY %

It can be seen that the pharma as a sector overall hasn’t performed well on a YoY basis in terms of profit generation and revenue generation. This could be temporary, yet a very long-lived bubble which was inflated due to uncertainty and volatility in the market surrounded by COVID.

CIPLA rallied when it was announced that it was going to launch its own version of the COVID drug Remdesivir along with its competitor Mylan(Not listed in India).

What are the challenges faced by Pharma?

According to Charu Sehgal, Partner and Leader, Lifesciences and Healthcare, Deloitte India, in an interview with Economic Times, the the industry faces the following issue

  1. Manufacturing units/warehouses not working at full utilisation, due to unavailability of staff.
  2. Non-Availability or disrupted supply of raw materials and packing materials.
  3. Absence of seamless internet data connectivity with staff is creating issues in day to day work.
  4. The marketing staff of pharma companies are having problems generating sales due to lack of logistics and communication channels since they are not able to conduct meetings in-person.
  5. The companies that have operations across the globe are facing issues concerning their operations and staff in those locations. Every country has devised its policies and guidelines.
  6. As with all industries, implementing effective and robust cybersecurity measures is a challenge in the work from home scenario.

What do I take from here?

  1. It is evident that the only entity keeping the pharma market afloat is the COVID-19 Pandemic.
  2. India’s active pharmaceutical ingredient (API) industry is expected to generate $6 billion in revenues by the end of 2020.
  3. India has been meeting more than 20 per cent of the world and almost 50 per cent of the US’s generic drug requirements.
  4. India relies heavily on China for Pharma raw materials, this is about to change after political tensions have given rise to “Aatmanirbhar Bharat” and “Make In India”.
  5. The only major shortfall for the Indian Pharma Market is SCM or Supply Chain Management. Watch out for transport and logistics stocks.
  6. China has been losing credibility and momentum in the global market due to its lack of transparency about the COVID situation in the country.
  7. The Physicians and other doctors were closed so far.The number of surgeries and demand for surgical instruments had reduced. As these avenues open up and the need for other drugs and instrument rises the dependency of Pharma market on COVID shall decrease.
  8. According to Research and Advisory firm Firm Nirmal Bang: In the US, there is a sharp drop in patients visiting physicians, especially in the ophthalmology and dermatology categories, which should have an adverse impact on Sun Pharma and Glenmark
  9. There was also a substantial decline in hospitalization (non-COVID patients), which should affect injectable sales of Aurobindo Pharma and Dr Reddy’s.

Finally, The demand has slumped since clinics all around the country remain slumped, yet the Pharma Benchmark continues to rise. Once a conclusive vaccine is found and till the time it doesn’t saturate the market you can expect quite some price action.