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Think Ahead with EZWealth – 22 Oct 2021
[/vc_column_text][vc_separator][vc_column_text]India’s benchmark indices declined for the third consecutive day on Thursday, led by losses in index heavyweights Reliance, Infosys, and TCS, amid investors’ concerns over high valuations and the impact of inflation on corporate profits and economic recovery. A rally in banking shares helped offset some losses.
Domestic institutional investors (DIIs) have sold shares worth about Rs 9,000 crore in the last nine trading sessions and FII have sold shares valued close to Rs 4,482 crore.
Market observers said retail investors continued to remain strong buyers in the market in a bid to ‘buy the dip’. However, they were not able to offset the massive selling by DIIs and FPIs over the past few days. If the markets continue to correct, retail investors, too, could turn sellers, adding more downward pressure to the market, experts said.
Moreover, concerns persist about the impact of the rising commodity prices on the profitability of firms. Brent crude was trading at $84.37 a barrel on Thursday, hovering near its three-year high. Also, rising bond yields — both domestically as well as in the US — have made the risk-reward unfavourable, said analysts.
Globally, inflation, supply chain challenges, and concerns about Evergrande kept investors on tenterhooks. The Volvo Group warned investors that global semiconductor shortage and supply chain issues would hinder its production. At the same time, Nestle and Procter and Gamble told investors that they could raise the product prices to tackle higher costs.
There was some volatility in the Asian markets after Evergrande disclosed that its plan to sell its properties services division was unsuccessful. The stock had resumed trading after a two-week suspension on Thursday.[/vc_column_text][vc_single_image image=”68067″ img_size=”large” alignment=”center” css=”.vc_custom_1634868843492{margin-top: 10px !important;margin-right: 10px !important;margin-bottom: 10px !important;margin-left: 10px !important;border-top-width: 1px !important;border-right-width: 1px !important;border-bottom-width: 1px !important;border-left-width: 1px !important;border-left-color: #000000 !important;border-right-color: #000000 !important;border-top-color: #000000 !important;border-bottom-color: #000000 !important;border-radius: 1px !important;}”][vc_single_image image=”68068″ img_size=”large” alignment=”center” css=”.vc_custom_1634868889565{margin-top: 10px !important;margin-right: 10px !important;margin-bottom: 10px !important;margin-left: 10px !important;border-top-width: 1px !important;border-right-width: 1px !important;border-bottom-width: 1px !important;border-left-width: 1px !important;border-left-color: #000000 !important;border-right-color: #000000 !important;border-top-color: #000000 !important;border-bottom-color: #000000 !important;border-radius: 1px !important;}”][vc_column_text css=”.vc_custom_1634868914979{margin-top: 11px !important;margin-right: 11px !important;margin-bottom: 11px !important;margin-left: 11px !important;border-top-width: 3px !important;border-right-width: 3px !important;border-bottom-width: 3px !important;border-left-width: 3px !important;border-left-color: #dd3333 !important;border-left-style: solid !important;border-right-color: #dd3333 !important;border-right-style: solid !important;border-top-color: #dd3333 !important;border-top-style: solid !important;border-bottom-color: #dd3333 !important;border-bottom-style: solid !important;border-radius: 3px !important;}”]
Headlines Today
[/vc_column_text][vc_column_text]1) A moderate improvement in the coal supply from multiple sources, coupled with lower power demand due to decreasing temperatures, has helped in avoiding a serious electricity supply shortage situation. However, analysts feel that higher-than-average power demand and over-dependence on coal-based power plants will make it difficult for electricity generating stations to maintain comfortable levels of fuel inventory in the near future.
“Coal stocks are unlikely to improve to the previous level of 15-18 days inventory anytime soon,” the latest report by CRISIL Research said. Higher coal usage in July-September, power plants not stocking enough before the monsoon and low alternative supply of coal have been the reasons for low fuel stock levels at power plants, which resulted in the electricity supply deficit rising to as high as 114.5 million units on October 7. Coal shortage also led to daily average power prices at the spot exchanges rising to prohibitively high levels of around Rs 15 per unit. With the abatement of the rains, supply improved with more railway rakes ferrying the fuel to power plants.
“Improvement in the availability of rakes and trajectory of power demand in March-May will be the key monitorable as coal stocks at thermal power plants will take time to top the 10-15 days mark,” CRISIL said. Temperatures begin to soar in the March-May period, “therefore, a build-up in coal inventories before end-February is crucial,” the analysts added.
2) Time is running out for China Evergrande Group to avoid default. The embattled real estate giant has until this weekend to pay an $83.5 million bond coupon, a situation made more pressing by the recent collapse of talks to sell a stake in a unit for $2.6 billion. Speculation about a default has been swirling for months, stoking credit-market contagion among other cash-strapped developers and eroding confidence in a Chinese real estate market that by some measures accounts for more than a quarter of the economy.
If Evergrande fails to pay before the grace period ends, the consequences could be severe. Ratings agencies would likely label it a default, and the delinquency may trigger cross defaults on at least some of the company’s $19.2 billion outstanding dollar bonds. The bond in question, an 8.25% note due March 2022, was indicated at 24.6 cents on the dollar Thursday, Bloomberg-compiled data show.
3) The government is likely to pump capital in public sector banks during the last quarter of the current financial year to meet the regulatory requirements. The government in the Budget 2021-22 has made an allocation of Rs 20,000 crore for the capital infusion in the state-owned banks. The capital position of banks would be reviewed in the next quarter, and depending on the requirement, the infusion will be made to meet the regulatory needs.
In the current fiscal so far, all 12 public sector banks have posted a profit, which is being ploughed back to bolster the balance sheet of the banks, sources said. Going forward, they said, the rise in stressed assets would determine capital requirement. If numbers are anything to go by, the sources said, the financial health of public sector banks are showing gradual signs of improvement across the spectrum.
4) The Cabinet Committee on Economic Affairs (CCEA) on Thursday approved Gati Shakti, or the national master plan for multimodal connectivity, which includes the institutional framework as well as the implementation. There will be a three-tier system for monitoring: empowered group of secretaries (EGoS), network planning group (NPG) as well as a technical support unit (TSU). The approval comes a week after Prime Minister Narendra Modi launched the master plan in the national capital.
EGoS will be headed by Cabinet Secretary and will comprise secretaries of 18 ministries. The head of the logistics division will be the convenor. The panel will also ensure efficient transportation of bulk goods on the requirement of various ministries such as steel, coal, fertiliser, among others. Gati Shakti — a digital portal — is a governance tool, aimed at developing the multimodal transportation system in the country. However, it is currently in beta mode and is expected to be launched soon.
5) The government has set an “aspirational” target of $100 billion for textiles and garment exports over the next five years, the textile ministry said on Thursday. It called on the industry to take advantage of a global market shift where China is pruning its market share in the labour-intensive segment.
India’s textiles and allied product exports stood at just $30.4 billion in FY21, down 10% from a year before due to the Covid crisis. In the first five months of this fiscal, such exports jumped by 87% on year to $16.6 billion, aided by strong economic recovery in key markets such as the US and the EU.
Earlier this month, the Cabinet approved a scheme to incentivise investments in setting up mega textile parks to build scale in the fragmented sector. It followed a Rs 10,683-crore production-linked incentive scheme for man-made fibre products and technical textiles. Export tax refund schemes like the RoDTEP and RoSCTL have also been launched in recent years to improve the country’s export competitiveness.
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Stocks in the news
[/vc_column_text][vc_column_text]Results on October 22: Reliance Industries, HDFC Life Insurance Company, Yes Bank, Apollo Pipes, Bharat Seats, Crompton Greaves Consumer Electricals, Dodla Dairy, Federal Bank, Gland Pharma, Hindustan Zinc, Inox Leisure, Jubilant Pharmova, Kajaria Ceramics, Kirloskar Ferrous Industries, Kwality Pharmaceuticals, Mahindra Holidays & Resorts India, Omkar Speciality Chemicals, Polycab India, ABB Power Products and Systems India, PVR, Steel Strips Wheels, Subros, Sundaram-Clayton, Supreme Industries, Tata Consumer Products, Tata Elxsi, and Zenotech Laboratories will release September quarter earnings on October 22.
Reliance Industries Ltd has received share holders’ approval to appoint Saudi Aramco Chairman Yasir Al-Rumayyan as an independent director on the firm’s board. Reliance Industries said on Thursday the resolution to appoint Rumayyan received more than 98 per cent of the votes polled.
JSW Steel today reported highest ever consolidated net profit of Rs 7,179 crore in the quarter ending September 30, 2021, up 350 percent from same period last year on increased revenue. The company also reported highest ever quarterly revenue from operations at Rs 32,503 crore and highest ever quarterly operating EBITDA of Rs 10,417 crore. Net sales of the company stood at Rs 31,909 crore in the September quarter, up 71 percent from corresponding period last year and up 12 percent from preceding quarter. Saleable steel sales for the quarter stood at 3.83 million tonne (Indian operations excluding JVs), an increase of 10 percent sequentially. The company enhanced exports by 22 percent sequentially to partially offset the fall in domestic demand due to seasonality, said the company release. With regard to stake in BPSL, the company said it exercised the conversion option of its Optional Fully Convertible Debenture (OFCD) held in Piombino Steel Limited, the SPV holding 100 percent of the shares of BPSL. Due to this conversion of the OFCD’s into equity, JSW Steel now holds a controlling stake of 83.28 percent in BPSL through the SPV, effective from 1st October 2021.
Tata group hospitality firm Indian Hotels Co Ltd (IHCL) on Thursday said it’s losses for the September quarter narrowed year on year on the back of recovery of demand, especially in leisure destinations. Consolidated net loss at the owner of Taj, Ginger, Vivanta among other brands reduced to Rs 130.92 crore against a net loss of Rs 252.09 crore in the year-ago period. The South Asia’s biggest hospitality chain said it got approval from its shareholders to raise Rs 4,000 crore from Rs 3,000 crore approved earlier in August this year. The enhanced fundraising plan includes a rights issue to the existing shareholders of the company for an amount of up to Rs 2,000 crore, followed by the qualified institutional placement (QIP) of equity shares for up to Rs 2,000 crore. The fund raise is aimed at making IHCL a zero debt company. Company’s consolidated net debt at the end of September quarter stood at Rs3571 crore, down from 3671 crore in the June quarter.
In an effort to increase its presence in the electric mobility space, TVS Motor Company said on Thursday that it has decided to set up a new subsidiary for the electric vehicle segment. The board has approved the incorporation of a wholly-owned subsidiary to undertake its electric mobility business, the company said in statement. TVS is also planning to come up with an investment of around Rs 1,000 crore in the EV space, said K N Radhakrishnan, Director and Chief Executive Officer, TVS Motor Company. At present, TVS has only one product in the category, iQube. TVS iQube, launched in January 2020, is currently available in 33 cities across the country.
The Bombay High Court on Thursday asked the board of Zee Entertainment Enterprises (ZEE) to consider the requisition notice of its largest shareholder Invesco to convene an extraordinary general meeting (EGM). The court, while making such a suggestion also asked the parties to propose a date and name of some neutral chairperson to conduct the EGM.\
LIC Housing Finance‘s net profit for the September quarter fell 69 per cent at Rs 248 crore as compared with Rs 791 crore in the year-ago period even in line with a fall in net interest income amid the pandemic-led disruptions. The mortgage lender’s net interest margin for the quarter dipped to 2 per cent as against 2.20 per cent in the June quarter, reflecting a fall in lending rates. Profit before tax fell 69 per cent at Rs 309 crore over Rs 1009 crore. The company’s total income for the quarter was lower at Rs 4715 crore as compared with Rs 4982 crore during the same period last year. The net interest income was Rs 1173 crore as against Rs 1238 crore.
The Indian Energy Exchange (IEX) on Thursday posted a nearly 75 per cent jump in consolidated net profit at Rs 77.38 crore for the September quarter, mainly on the back of higher revenues. The consolidated net profit of the company stood at Rs 44.33 crore in the corresponding quarter of the previous fiscal, it said in a BSE filing. Total income rose to Rs 122.30 crore in the quarter from Rs 78.71 crore in the year-ago period. The board in its meeting on Thursday recommended a bonus issue of equity shares in the proportion of two shares of Re 1 each for every one existing share of Re 1 each held by the shareholders as on the record date.
State-owned GAIL (India) Ltd will build India’s largest green hydrogen plant in the next 12-14 months, as it looks to supplement its natural gas business with carbon-free fuel. Hydrogen is the latest buzz for meeting the world’s energy needs. Hydrogen can be produced in three different ways through coal gasification (brown hydrogen), deriving it from methane in natural gas (blue hydrogen) and using renewable energy to produce green hydrogen. Green hydrogen is the cleanest of all with zero carbon emission. It will be double the size of the one announced by state electricity producer NTPC.
Private lender IDBI Bank’s net profit rose by posted 75 per cent rise in net profit at Rs 567 crore in the second quarter ended September 2021 (Q2Fy22), on uptick in the net interest income (NII) and dip in provisions. It had posted net profit of Rs 324 crore for Q2 Fy 21. Its NII rose by nine per cent in reporting quarter at Rs 1,854 crore for Q2 FY 2022. The Net Interest Margin (NIM) improved by 32 basis points at 3.02 per cent on Year-on-Year (Y-o-Y) basis for Q2 FY 2022. Its provisions declined by 12 per cent to Rs 642 crore in Q2Fy22 from Rs 730 crore in Q2Fy21. The provision Coverage Ratio (including Technical Write-Offs) improved to 97.27 per cent in September 2021 from 95.96 per cent in September 2020.
Private sector insurer ICICI Lombard General Insurance reported a net profit of Rs 446 crore in the July – September quarter (Q2) of FY22, marginally higher than the last year’s net profit of Rs 416 crore. But on a sequential basis, the net profit has more than doubled. The general insurer’s gross direct premium rose by 38.72 per cent on a year-on-year (YoY) basis to Rs 4,424 crore in Q2FY22 compared to Rs 3,189 crore in Q2FY21. As the company has merged Bharti Axa General Insurance business with itself, the numbers are not comparable with the previous year’s numbers. The combined ratio, which is a measure of the profitability, of the company in the reporting quarter stood at 105.3 per cent. The insurance company is making an underwriting profit if its combined ratio is below 100 per cent. If the ratio is above 100 per cent means that the company is making an underwriting loss. In Q2FY22, the insurer reported an underwriting loss of Rs 100.73 crore.
Bank of Maharashtra (BoM) on Thursday reported an over two-fold jump in net profit on a year-on-year (YoY) basis in the quarter ended September 2021 (Q2FY22), helped by robust interest and fee income. The state-owned bank’s net profit rose 102.7 per cent YoY to Rs 264 crore from Rs 130 crore, a regulatory filing said. Its net interest income (NII) grew 33.84 per cent YoY to Rs 1,500 crore in Q2. The non-interest income was up 22.61 per cent to Rs 493 crore, which includes recoveries worth Rs 260 crore from exposure to DHFL. The bank’s deposits increased 14.47 per cent to Rs 1.81 trillion and gross advances grew 11.44 per cent to Rs 1.15 trillion on a YoY basis. Its asset quality profile improved with gross non-performing assets (NPAs) declining to 5.56 per cent in Q2, from 8.81 per cent in the year-ago period.
Tanla Platforms on Thursday posted an around 67 per cent increase in consolidated net profit to Rs 136.17 crore for the second quarter ended September. The cloud communications company had posted a net profit of Rs 81.47 crore in the same period a year ago.
Asian Paints Ltd on Thursday reported a 29 per cent decline in consolidated net profit to Rs 605.17 crore in the second quarter ended September 30, on account of higher expenses, especially input costs. The company had posted a consolidated net profit of Rs 851.9 crore in the corresponding period of last fiscal, Asian Paints Ltd said in a regulatory filing. Its consolidated revenue from operations in the second quarter stood at Rs 7,096.01 crore, against Rs 5,350.23 crore a year ago. The company said its total expenses in the second quarter stood at Rs 6,418.17 crore as compared with Rs 4,299.12 crore in the same period last fiscal. Of this, cost of materials consumed was at Rs 4,570.53 crore as compared to Rs 2,646.49 crore in the year-ago quarter, the company said.
VST Industries: The company reported a lower profit at Rs 79.88 crore in Q2FY22 against Rs 88.54 crore in Q2FY21; revenue fell to Rs 360.86 crore from Rs 394.88 crore YoY.
Macrotech Developers: The company reported consolidated profit at Rs 223.36 crore in Q2FY22 against loss of Rs 362.58 crore in Q2FY21; revenue jumped to Rs 2,123.83 crore from Rs 900.76 crore YoY.
Standard and Poor’s (S&P) has upgraded the global ratings for Tata Steel, Tata Motors and Jaguar Land Rover Automotive PLC (JLR) following the reassessment of influence and potential for extraordinary financial support from Tata Sons to group entities. It revised the rating for Tata Steel and its 100 per cent-owned financing subsidiary ABJA Investment Co from “BB” to “BBB-“. The outlook is stable. Also, it upgraded the rating for Tata Motors and its 100 per cent subsidiary TML Holdings from “B” to “BB-“ with a stable outlook. JLR’s rating has been revised from “B” to “B+”. The outlook is stable.[/vc_column_text][vc_separator][vc_column_text]
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