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Low-Priced Stock Below ₹20 Soars 59% in a Week, Sets New 52-Week Record
Equities - May 9, 2020

Market Update 8th May 2020. Cyient locked on Lower Circuit

How the stock market performed on 8th May?

Overall performance:

Indian indices ended higher on 8th May witnessing profit booking during the last hour of trade which pulled the NIFTY below 9,300. SENSEX closed at 31,642.70 up by 0.63% or 199.32 points. NIFTY closed at 9,251.50 up by 0.57% or 52.45 points. However, the S&P BSE Small cap index fell by 48.05 points or 0.45% and S&P BSE mid cap index was up by 0.04% or 4.13 points closing at 11,423.81.

 

Global indices and commodity:

When the Indian market closed, DAX was trading at 10,887.52, up by 128.25 points or 1.04%, NASDAQ was trading at 9,041.42, up by 1.41% or 125.27 points and CAC was trading at 4,537.86, up by 0.95% or 36.45 points.

Currently, Gold is trading at 46,050, down by 111 points and 0.24%, Silver is trading at 43,281, up by 158 points and 0.37% and Crude oil is trading at 1,841 which is up by 7 points and 0.38%.

 

Currency:

At the time of closing of Indian markets, USD was trading at Rs 75.54, down by 0.28%. EURO was trading at Rs 81.89, down by 0.25% and GBP was trading at Rs 93.84, up by 0.17%. Indian Rupee ended higher, 21 paise at Rs 75.55 per Dollar.

 

Sector:

Sector wise, the S&P BSE Finance index declined by 0.37% and S&P BSE Auto down by 1.29%.

At closing, NIFTY BANK fell by 138.90 points and NIFTY IT increased by 0.83%.

 

Top 5 gainers:

HUL increased by 4.89%, closing at Rs 2,089.45, Nestle was up by 3.85% and closed at Rs 17,802.95, Tech Mahindra gained 3.84% and closed Rs 536.20. Dr Reddys Labs closed at Rs 3,984, up by 3.81% and Sun Pharma increased by 3.72%, closing at Rs 469.

 

Top 5 losers:

Cyient fell by 10%, closing at Rs 208.50, RBL bank declined by 7.37% and closed at Rs 119.35, Axis bank declined by 3.85%, closing at Rs 382.05 while, NTPC fell by 3.81% , closing at Rs 87 and M&M decreased by 3.48%, closing at Rs 386.70.

 

Stocks in news:

Most active stocks were SBI, RBL Bank, Yes bank and RIL in terms of volume. Cyient was in news as their stock hit lower circuit today at 10%, closing at 208.50 due to weak revenue growth management guidance for Q1FY21. After US based private equity fund firm, Vista Equity announced to buy stake in RIL’s digital unit Jio, share price of RIL gained 3.64% or 54.85 points and closed at 1,561.80

 

 

India’s borrowing target now raised to Rs 12 lakh crores

 

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Economy, Equities - May 1, 2020

Government may issue tax-free bonds

Government may issue tax-free bonds

Over the past weeks, the COVID-19 pandemic has emerged as a significant global challenge inducing turmoil in the economies. This outbreak is having a severe impact on people, economy and business. Countries are battling and taking every possible measure to combat the spread of corona virus. One of which is the lock down strategy. Lock down is the last resort and has actually helped to save lives. Along with this, it has invited a huge fiscal gap. This fiscal gap will broaden itself once the lock down is lifted. Lock down has hit the earning and spending cycle at an individual level, which will greatly impact future tax collections.

 

Government to raise funds:

Government plans to raise short term funds to fulfill temporary need. They plan to raise this money from the RBI through ways and means advances (WMA). Finance ministry suggested the issue of tax-free bonds. Under this, they plan to raise Rs 10,000 crore by giving multiple installments to ensure its success.. However, Rs 10,000 crore may not be sufficient enough for the anticipated immediate expenses.

It is yet under discussion, as to whether bonds should be sold by a direct public issue or issued via a public sector company. Historically, tax free bonds was sold by National Thermal Power Corporation Limited (NTPC), Rural Electrification Corporation (REC) and Power Finance Corporation (PFC). Further, discussions as to how many number of installments should be provided and other terms and conditions are in process. As per the prevailing marginal tax rates, calculation shows that 5.5%, 10-year tax free sovereign instrument will effectively cost 7.7%.

 

Good news for the retail investors:

Looking at the current scenario, if these bonds are kept open for retail savers and corporations, they will willingly opt for parking their hard earned money into these bonds. After the news of Franklin Templeton freezing 6 of their plans, investors have fear carved in their minds with respect to safe keeping and growth of their capital.

Government will issue these tax free bonds to raise funds for specific purposes. Generally, the funds are raised from debt market by the Central government in the form of weekly securities auctioned by the Central bank. In contrast to last FY target of Rs 4.74 lakh crore, borrowing target of FY21 is marked at a net amount of Rs 5.11 lakh crore.

If retail investors get a chance to participate, this scenario will be the first of its kind and create history. Issuing tax-free bonds to retail savers and corporations will provide them a window of safer investment. At the same time, raising money through these government instruments will over populate the market and increase rates. The CARE estimates reveal that until today, the lock down would have sucked a huge chunk of Rs 1 lakh crore of GST monthly collections.

 

 

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Equities, Market News, Markets - April 30, 2020

Just dial announces buyback of shares

Just dial announces buyback of shares

 

In the meeting held on 30th April 2020, the Board of Directors of Just dial Ltd. company approved the plan of buying back 31,42,857 equity shares (i.e. 4.84% of the paid up equity capital) at the market value per share of Rs. 700. The total amount of buyback of shares aggregates to Rs 220 crores which is nearly 24% of the total paid up equity capital including the reserves and surplus.

Buyback is a process of repurchasing the shares of the company. It is done by paying the market value of shares to the shareholders and reacquiring the shares of the company.

Just dial, incorporated in 1993 provides digital platform to search for different types of services under one single platform.

Share price movement of Just Dial Ltd:

The share price of Just Dial on NSE today was closed around Rs. 404.90 with the surge of 3.82%. While on BSE, it is Rs 406.00, up 4.16% at 16:15pm (IST) at market close. 

Just Dial’s financial performance:

In the financial year 2020-21, Just Dial Limited had a total income of Rs 984.46 crores. It reported a Profit After Tax of Rs. 206.8 crores and had an annualized earnings per share of Rs. 31.93.

 

 

RBI introduces Operation Twist

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Economy, Equities, Market News, Markets - April 29, 2020

Production target makes Coal India stakeholders anxious

Production target makes Coal India stakeholders anxious

Coal India limited (CIL) contributes more than 80% of coal production in India. It is one of the Public Sector Units in India which is into coal mining and refinery. For the financial year 2020-21, CIL was said to produce 710 million tonnes of coal by the coal minister Pralhad Joshi. The COVID-19 pandemic changed the entire scenario. Joshi added that the coal sector was also adversely affected, leading to ample fuel stock and low demand by the power and energy sector. The situation didn’t influence the government to bring down its target of producing 710 million tonne coal. It will help to achieve the goal of producing 1 billion tonne by the year 2023-24.

As on March 31, CIL had a stock of 74 MT. They are required to achieve the target because the government believes that the demand of the energy sector will rise in a few days. Furthermore, there will be low production in the monsoon season. Hence the maximum production will happen at this time, said an official to the media. The CIL stakeholders said that they already have a pile of stock for 30 days. If it produces 710 MT in the financial year 2020-21, it will lead to more pile up of stock, theft, poor quality and environmental pollution. It will further increase the chances of fire break up in the industry.

 

Production target makes CIL stakeholders anxious

The demand for the coal sector would increase after the lock down phase as mentioned by the Union Coal Minister. The minister of railways Mr. Piyush Goyal overlooks India’s opportunity to be a manufacturing hub. By acknowledging both the statements, the shareholders said these things would occur after a gestation period. Even before the pandemic, the situation was not favorable for the power sector due to low demand.

The coal ministry could have kept realistic targets which may help in keeping the coals at exposed seams. As per the demand, the coal could be extracted from the seams. This would lead to increase in the the cost per ton and decrease in the output per man per shift, said the ministry sources.

The shareholders had a counter statement that the coal productions maximum costs is Rs 1,800 per tonne. The wages and salaries paid to the workers constitutes almost half of the operational cost. An increase in the production target would lead to increase in the compensation paid to the workers of the company. The maximum possible stock which can be produced by CIL is 650 MT if the stock pile up of 125 MT is excluded. Any increase in the production will not be feasible as per the shareholders. Meanwhile, CIL has also taken measures to reduce the operational costs by shifting all of its subsidiary marketing counters from cities to subsidiary headquarters. The CIL officials thought that there are chances for a reduced production target for the financial year 2020-21.

 

 

SEBI and RBI review situation after Franklin fiasco

 

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Banking, Economy, Equities, Market News - April 29, 2020

SEBI and RBI review situation after Franklin fiasco

SEBI, RBI review situation after Franklin fiasco

The RBI and SEBI look to determine the damage from Franklin Templeton’s decision. After their decision to close six debt funds, RBI and SEBI look to contain the fallout from this decision. Franklin Templeton’s decision has raised concerns that investors will withdraw from similar categories across the industry.

RBI’s take on Franklin Templeton’s decision:

The RBI may change rules to encourage banks to borrow more. Through the reverse repo window, RBI may limit the amount it absorbs from banks. The amount may be set at Rs. 2 lakh crore. With banks parking Rs 7 lakh crore from reverse repo, RBI believes there is enough liquidity. To deal with liquidity positions and redemption, RBI officials has communicated with fund managers and banks. One of the proposals was to goad banks to purchase bonds of firms that are investment category. The bonds should not be triple-A rated.

SEBI seeks details from mutual funds:

SEBI also needs information from mutual funds regarding liquidity position and extent of redemption from their debt schemes portfolio. Based on current portfolios, SEBI wants to determine whether mutual funds can handle huge redemption. They also want to know the position of mutual funds regarding debt fund liquidity and days required to liquidate holdings. Debt mutual funds capital is estimated at Rs. 12 lakh crore approximately. According to estimations, Franklin Templeton froze about Rs. 55,000 crore of this credit funds.

Mutual funds approach:

To contain the fallout, mutual funds have also sought help from finance ministry and Niti Aayog for measures. RBI believes there is enough liquidity for fund houses and it is only a matter of channelizing it. However, Fund houses desire to have a separate lending window. The reverse repo rate has already been cut down to 3.75%.

On April 24, mutual funds sold a few top-rated securities assuming the pressure of redemption in the coming days. In the bond market, risk aversion led to yields higher than normal by 20-30 points on April 24.

A few of the large mutual funds persuaded SEBI to boost the borrowing limit. This increase is sought due to the COVID-19 pandemic causing financial markets to freeze as there are sharp outflows. These outflows are from different debt products.

Franklin Templeton stop redemptions:

Following the massive outflows in the last 2 months, Franklin Templeton were compelled to stop redemption. Franklin Templeton has mostly low rated papers in the rest of the portfolio. They only have a select number of buyers in the current market. They have also drained the lending limits in these schemes with banks.

RBI’s inquiry:

RBI inquiry to the mutual find industry is to assess the loan amounts taken from banks. They also need information on the ‘lines of credit’ used by asset management companies and the ‘un drawn lines’. These details are required for March 31 and April 24. To meet the other payout and redemption demands, mutual funds are granted to borrow 20% of their capital from banks. If this limit is exhausted, a raise up to 40% is allowed by SEBI based on merit.

Majority of the mutual funds except Franklin Templeton has not even utilized the 20% limit after RBI pumped money. The money was injected through long-term repo operations (LTRO) in to the system in March.

As of April 23, the borrowings of four mutual funds including Franklin Templeton was Rs. 4,427 crore. On March 31, the assets under debt schemes of the mutual fund industry was Rs. 10.3 lakh crore. This figure is 16% less from the earlier month.

 

 

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