The benchmark stock indices opened the day on a positive note with gains of around 1%, scaling fresh highs in the process as the post-budget rally continues.
Join us as we track the top business news through the day.
FPIs’ holding in NSE-listed cos hit 5-yr high in Dec qtr on robust inflow
India has caught the fancy of foreign investors once again.
PTI reports: “FPIs’ ownership in NSE-listed companies reached a five-year high of 22.74 per cent in December 2020 on the back of huge net inflow of Rs 1.42 lakh crore by such investors in the third quarter.
In comparison, the holding of foreign portfolio investors (FPIs) was at 21.51 per cent in the quarter ending September 2020, according to primeinfobase.com, an initiative of Prime Database Group.
In terms of value, FPIs ownership reached an all-time high of Rs 41.83 lakh crore as of December, 2020, up 29 per cent from Rs 32.47 lakh crore in the preceding quarter, on account of rally in equity markets.
FPIs are the largest non-promoter shareholders in the Indian market and their investment decisions have a huge bearing on the stock prices and overall direction of market, Pranav Haldea, Managing Director of Prime Database Group, said on Monday.
On the other hand, holding of Domestic Institutional Investors (DIIs)– which includes domestic mutual funds, insurance companies, banks, financial institutions, pension funds among others– declined to 13.55 per cent as of December 2020 from 13.94 per cent as of September 2020.
Mutual funds (MF) witnessed their holding declining to 7.42 per cent from 7.65 per cent while that of insurance companies slipped to 5 per cent from 5.17 per cent in the same period.
The holding of LIC –the single largest domestic institutional investor– (across 290 companies where its holding is more than 1 per cent) fell to an all-time low of 3.70 per cent as on December 2020, down from 3.91 per cent as on September quarter. Its holding was at an all-time high of 5 per cent as on June 30, 2012.
Also, the percentage holding of the government (as promoter) in companies listed on NSE hit fresh low of 5.08 per cent as on December 2020, down from 5.10 per cent as on September 2020.
Since June 2009 the holding has been steadily declining from 22.46 per cent due to the government’s divestment programme, not enough new listings as also lackluster performance of many CPSEs relative to their private peers.
The analysis is based on shareholding patterns filed by 1,629 of the total 1,678 companies listed on NSE (main board) for the quarter ended December 2020 till February 4, this year.
According to Haldea, retail holding (individuals with up to Rs 2 lakh shareholding) in companies listed on NSE declined to 6.90 per cent as on three months ended December 2020 from 7.01 per cent in the preceding quarter end as such investors took advantage of the market rally to book profits.
The percentage holding of private promoters in firms dropped marginally to 44.46 per cent as on December, 2020 from 45.38 per cent on September 2020. Since June 2009, private promoter ownership has been steadily increasing. It was at 33.61 per cent on June 30, 2009.
Haldea said that institutional money, though, continues to incrementally get more concentrated to the top 10 per cent companies by market cap, reflecting a heightened risk-off environment The top 10 per cent companies by market capitalisation accounted for 51.27 per cent of overall FPI holding as on December, 2020 (down slightly from 51.80 per cent on September, 2020), 34.05 per cent of overall DII holding (down from 34.86 per cent on September, 2020) and 35.06 per cent of overall MF holding (up from 34.94 per cent on September 2020).”
Indian shares close at record highs, rise for sixth straight day
Another great day for Indian stocks.
Reuters reports: “Indian shares rose for a sixth straight session to close at record highs on Monday, as continuing optimism from last week’s federal budget and strong corporate earnings drove broad-based gains.
A growth-focused and high-spending federal budget, unveiled last Monday, has powered India’s stock market to multiple all-time highs. A COVID-19 vaccination drive that is underway and an upbeat outlook from companies is also aiding sentiment.
The NSE Nifty 50 index ended 1.28% higher at 15,115.80, while the S&P BSE Sensex closed up 1.22% at 51,348.77.
Thirteen of the 14 sectoral indexes closed higher. IT giant Infosys, ICICI Bank and conglomerate Reliance Industries provided the biggest boosts to the Nifty 50.
A recent flood of foreign inflows has also benefited Indian markets, with reports saying that foreign portfolio investors invested a net $1.5 billion into Indian equities during the first week of February.
Among individual stocks, State Bank of India gained for a sixth straight session following well-received quarterly results.
Punjab National Bank slid 5.1% after reporting a fall in profit from a quarter earlier.
Automotive bearing maker SKF India jumped 20% after results showed its profit more than doubled.
Meanwhile, world shares hit a record high amid hopes that a $1.9 trillion COVID-19 aid package will be passed by U.S. lawmakers as soon as this month.”
Disinvestment will be squeaky clean, says DIPAM Secretary
The government will adopt a ‘squeaky clean process’ for the privatisation of public sector enterprises as per the new policy unveiled in the Budget, said Tuhin Kanta Pandey, the top Finance Ministry official entrusted with steering the disinvestment process.
“For the first time after 2004, you will have a set of privatisations starting with Air India and BPCL as the large ones… We are very clear this has to be squeaky clean process so that no one can question its credibility,” Mr. Pandey told The Hindu on the execution plan for the disinvestment policy that envisages the government exiting a large chunk of the 439 central public sector enterprises (PSEs) in the country.
“We want it to be absolutely squeaky clean and for that, even I won’t know the names of the bidders. We won’t even fix the reserve value till the time financial bids are locked. If someone gets some information on the reserve price somehow, it would make it an unfair advantage for that bidder,” said Mr. Pandey, who is the Secretary for the Department of Investment and Public Asset Management (DIPAM).
Hazards of investing directly in stocks
The sharp increase in asset prices since March last has made many wonder whether investing directly in the stock market is better than buying mutual funds. In this article, we discuss why mutual funds are preferable for goal-based investments.
We are not going to argue that diversification is the important reason to choose mutual funds. Just because a fund holds 30-40 stocks does not mean it is diversified. It is the relationship that these securities have with each other in the portfolio that will determine whether the fund is truly diversified or not. You have no way of knowing the constituents of the portfolio, leave alone how they were created; equity funds disclose their holdings only once every month as per SEBI guidelines. Our arguments are, therefore, based on operational efficiency and behavioural factors.
Consider operational efficiency. Your day job could make it difficult for you to track the market on a continual basis. By this, we mean keeping an eye on corporate developments and macroeconomic variables, all of which drive stock prices. And even if you are able to do this, how will you decide how many stocks to buy for your portfolio?
Equities post retirement may be worth the leap
For most of us, unless we are super rich or super frugal, there is a remarkably high chance that our corpus will evaporate long before we do. The reason is simple. Even a 3-4% inflation annually (if not in living costs, then definitely medical and support costs) will raise the asking rate from your corpus.
A 6-7% return requirement (on your corpus) today can go up to 12% in less than 20 years. That’s not the kind of return any fixed income plan can generate for you.
Result — your corpus depletes, and sometimes rapidly with the occurrence of even a single hospitalisation event without medical cover. This is the primary reason why you need something that still compounds your money sufficiently post retirement. Cut to the chase, you need equity post retirement.
Before we start, please note that I am not suggesting that you start equities in your 60s. It is not impossible to do this, but ridiculously hard to deal with the volatility of equities at a time when your income stream stops. And, the current stock market is not for newbies in their 60s!
Brent approaches $60/bbl as supply cuts, stimulus hopes lift prices
An overview of the oil rally as the world opens up from the lockdown.
Reuters reports: “Oil prices rose on Monday, with Brent futures nearing $60 a barrel, boosted by supply cuts among key producers and hopes for further U.S. economic stimulus measures to boost demand.
Brent crude for April touched a high of $59.95 a barrel and was at $59.85 by 0041 GMT, up 51 cents, or 0.9%. Front-month prices last hit $60 on Feb. 20, 2020.
U.S. West Texas Intermediate crude futures advanced 54 cents, or 1%, to $57.39 a barrel, the highest since January last year.
“A weak U.S. jobs report boosted hopes of further stimulus measures,” ANZ analysts said, adding that energy products and industrial metals benefited from an increased appetite for risk among investors.
A weaker dollar against most currencies on Monday also supported commodities, with dollar-denominated commodities becoming more affordable to holders of other currencies.
Meanwhile Saudi Arabia’s pledge of extra supply cuts in February and March on the back of reductions by other members of the Organization of the Petroleum Exporting Countries and its allies, including Russia, is helping to balance global markets.
In a sign that prompt supplies are tightening, the six-month Brent spread <LCOc1-LCOc7> settled at $2.33 on Friday after hitting a high of $2.44, its widest in a year.
Still, stronger crude prices are encouraging U.S. producers to increase output, while anti-coronavirus lockdowns across parts of Europe and Asia are keeping a lid on fuel demand, analysts said.
The U.S. oil rig count, an early indicator of future output, rose to its highest since May last week, according to energy services firm Baker Hughes Co.”
Rouble hits over 2-week high as rising oil prices outweigh sanction risks
The oil rally is making things easier for Russia’s macroeconomy.
Reuters reports: “The Russian rouble firmed to a more than two-week high against the dollar on Monday, helped by rising oil prices and generally more positive sentiment that outweighed concerns about new possible sanctions over jailed Kremlin critic Alexei Navalny.
At 0748 GMT, the rouble was 0.5% stronger against the dollar at 74.27, its highest since Jan. 22.
Against the euro, it strengthened 0.7% to 89.30, earlier hitting its strongest since Jan. 21.
Brent crude oil, a global benchmark for Russia’s main export, was up 1.2% at $60.06 a barrel, reaching a more than one-year high.
Current conditions should allow the rouble to strengthen to 74 versus the dollar and possibly beyond that level, said Dmitry Polevoy, head of investment at Locko-Invest.
Nationwide protests over Navalny, who was jailed last week for almost three years for parole violations he calls trumped up, have pressurised the rouble in recent weeks.
However the threat of imminent sanctions against Russia eased after the EU’s foreign policy chief said no formal proposal had yet been tabled, during a rare visit to Moscow last week.
“For Russia, domestic political risks are on the rise, though protest activity may have died down temporarily, while the sanctions risk has been largely shrugged off,” said BCS Global Markets in a note.
In Russian stock markets, the dollar-denominated RTS index gained 1.9% to 1,459.0. The rouble-based MOEX Russian index was 1.4% higher at 3,438.6. Both the indexes rose to their highest since Jan. 21.”
India confident of keeping 2021/22 borrowing costs below 6% levels – sources
Here’s how much the government expects to pay on its loans.
Reuters reports: “The Indian government is confident that it can obtain funds for its massive 2021/22 borrowing programme at below six percent, as the central bank has given assurances that it will provide liquidity, two senior officials told Reuters.
Holding policy interest rates unchanged at record lows on Friday, Reserve Bank of India Governor Shaktikanta Das assured investors that its stance on liquidity remained accommodative and that the government’s 12.06 trillion borrowing programme for the fiscal year starting April would be managed in a smooth and orderly manner.
“RBI has assured us that the borrowing for 2021/22, yields will be comfortable and we expect it to not top 5.9% for the fiscal,” one of the two sources said.
He added that the government’s long-term average borrowing cost is expected to be between 5.8%-5.9% in the fiscal year starting April.
Despite the pledge from the RBI, bond yields had surged on Friday as investors had been hoping for a more clarity in the form of a bond purchase calendar. Yields on most bonds however retreated later on Friday, following the debt auction results.
“The RBI has shown that it will not blink as was evident in the auction results,” a second source who asked not to be named as he was not cleared to discuss the matter publicly said.
The central bank sold only 90 billion rupees of bonds versus 310 billion it had set out to sell on Friday, with underwriters to the auction buying 88.1 billion rupees worth of the paper, after the market demanded higher yields.
“The RBI has done whatever the market has needed and wanted all of last year, so they need to trust the central bank. There is no question of an open market operations (OMO) calendar,” the source added.
RBI’s OMOs are dependant on its dollar buying interventions in the foreign exchange market, as it would automatically release rupee liquidity and not a tool to tame bond yields, thus providing a calendar is not feasible, the source explained.
The RBI did not immediately respond to queries while the finance ministry declined to comment.”
Diamonds to regain pre-pandemic sparkle in 2022-2024
Diamond jewellery demand will recover to pre-pandemic levels between 2022 and 2024, with China leading the way, a report commissioned by the Antwerp World Diamond Centre predicted.
Demand recovery will diverge depending on lockdown policies, government support, and the extent to which retailers manage to shift sales online, said the report by consulting group Bain.
The diamond industry was already under stress before 2020, but although the COVID-19 pandemic exacerbated this, the report said it is well placed to recover.
“We strongly believe that the industry is in very good shapefor a strong rebound,” Olya Linde, a partner at Bain, said.
China’s diamond jewellery demand will recover fully this year, while in India it will only recover by end-2023 or 2024, with the U.S. expected to recover by 2022-2023.
Modi urges farmers to end protests over agriculture laws
The Prime Minister continues to push for an end to farmer protests.
Reuters reports: “Indian Prime Minister Narendra Modi on Monday urged farmers to end their over two-month long protest against agricultural reforms, assuring them that a mechanism of floor prices for key crops would remain in place.
Demanding the repeal of three new farm laws that they say will hurt them to the benefit of large corporations and allow the government to discontinue buying food grains at a minimum support price (MSP), tens of thousands of farmers have been camped on the outskirts of Delhi since late 2020.
“MSP was there. MSP is there. MSP will remain in the future,” Modi told lawmakers.”
China issues new anti-monopoly rules targeting its tech giants
China’s market regulator released new anti-monopoly guidelines on Sunday that target internet platforms, tightening existing restrictions faced by the country’s tech giants.
The new rules formalise an earlier anti-monopoly draft law released in November and clarify a series of monopolistic practices that regulators plan to crack down on.
The guidelines are expected to put new pressure on the country’s leading internet services, including e-commerce sites such as Alibaba Group’s Taobao and Tmall marketplaces or JD.com. They will also cover payment services like Ant Group’s Alipay or Tencent Holding’s WeChat Pay.
The rules, issued by the State Administration for Market Regulation (SAMR) on its website, bar companies from a range of behaviour, including forcing merchants to choose between the country’s top internet players, a long-time practice in the market.
Rupee rises 9 paise to 72.84 against U.S. Dollar in early trade
The rupee appreciated by 9 paise to 72.84 against the U.S. Dollar in opening trade on Monday following rally in domestic equities.
At the interbank forex market, the local unit opened higher at 72.86 against the U.S. Dollar and climbed further to 72.84 in early deals, registering a rise of 9 paise over its last close.
In the previous session, the rupee gained 3 paise to settle at 72.93 against the U.S. Dollar.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, advanced 0.03 % to 91.07.
On the domestic equity market front, the 30-share BSE Sensex was trading 668.36 points or 1.32 % higher at its record intra-day peak of 51,399.99. Similarly, and NSE Nifty surged 192.55 points or 1.29 % to its lifetime high of 15,116.80.
Hyundai, Kia say Apple deal is off, puncturing investor dream
South Korea’s Hyundai Motor Co said on Monday it is not now in talks with Apple Inc on autonomous electric cars, just a month after it confirmed early-stage talks with the tech giant, sending the automaker’s shares skidding.
The announcement wiped $2.1 billion off its market value, and brought the curtain down on weeks of internal divisions within Hyundai Motor Co Group – parent to both automakers – about the potential tie-up, with some executives raising concerns about becoming a contract manufacturer for the U.S. tech giant.
“We are receiving requests for cooperation in joint development of autonomous electric vehicles from various companies, but they are at early stage and nothing has been decided,” the automakers said on Monday, in compliance with stock market rules requiring regular updates to investors regarding market rumours. “We are not having talks with Apple on developing autonomous vehicles.”
Indian shares hit another record high as post-budget rally continues
Yet another record high.
Reuters reports: “Indian shares rose for a sixth straight session and hit record highs on Monday, as a federal budget-inspired rally continued, with banks and automakers leading broad-based gains.
A growth-focused, high-spending federal budget unveiled last week has powered India’s stock market to multiple all-time highs. A COVID-19 vaccination drive that is underway and strong corporate earnings have also aided the upbeat sentiment.
The NSE Nifty 50 index was 1.20% higher at 15,104.45 by 0450 GMT, while the S&P BSE Sensex climbed 1.27% to 51,377.31. The Nifty 50 had notched a 9% gain last week.
All 14 sectoral indexes were trading higher on Monday. Autos gained the most, rising 2.2%, while banks ICICI and HDFC were the top two boosts to the Nifty 50.
“The optimism from the budget and recent earnings so far is giving a huge boost,” said Saurabh Jain, assistant vice president at SMC Global Securities in New Delhi.
Sectors that powered Indian markets in the mid-2000s — infrastructure, real estate and capital goods — were back in vogue following the federal budget and as the economy returns to normalcy after the shock from the pandemic, Jain added.
Among individual stocks, State Bank of India was set to gain for a sixth straight session following well-received quarterly results. The stock has jumped 46% so far in the last eight sessions.
Punjab National Bank fell 2% after reporting a fall in profit from a quarter earlier.
Shares in NTPC fell as much as 3.4% after a hydropower plant being constructed by the state-run power utility was damaged by an avalanche in northern India. The stock was last down just under 1%.
Meanwhile, other Asian shares also rose amid hopes a $1.9 trillion COVID-19 aid package will be passed by U.S. lawmakers as soon as this month.”
Selling family silver is a lazy allegation, says Sitharaman
Finance Minister Nirmala Sitharaman on Sunday rejected the Opposition’s charge of “selling family assets” through the Budget stress on privatisation, terming it a “lazy allegation”.
All the previous governments have done disinvestment in the past, and the Narendra Modi regime has formulated a clear policy on which companies to be divested and the strategic sectors that not to be touched rather than doing one company sell-off at a time, she said in an address to businesses here.
The Budget proposals to divest stakes, which includes the sale of two public sector banks and a general insurer, have been panned by the Opposition.
“It is not what the Opposition says about selling family silver, it’s not at all,” she said addressing a meeting of business people here.