It was a day of all-time high for the Nifty as it closed 1.17% higher at a record level of 11,691 on Monday The rally was almost across the board with stocks ranging from Hindalco to Bharti to Power Grid and private banks keep the Nifty aloft. There was also a generous dose of short covering in the markets being the first day of the August F&O expiry week. Surprisingly, this rally was despite the Indian rupee weakening by 36 basis points to 70.16/$. The rupee weakened following the continuing trade war face off between the US and China as well as the sharp 5% correction in the Turkish Lira.
Paytm may have just have just got a stamp of approval from the world’s greatest investor of all time. Warren Buffett may be close to buying a stake in Paytm. Buffett is expected to take up to a 4% stake in Paytm and it will be his first big investment in Indian ecommerce space. Buffett had been traditionally sceptical of new technology stocks, although currently Apple is his largest holding. Recently, Buffett had almost entirely exited his IBM stake. This shows a distinct shift in the strategy of Berkshire Hathaway both in its approach to technology and also to emerging markets like India.
After mysteriously postponing its results announcement on August 09th, Jet Airways reported a net loss of Rs.(-1323) crore for the June quarter. This is the second straight quarter of loss for Jet Airways and this loss was largely a result of rising fuel charges and competition on fares. The company has made a loss even on EBITDA terms. Jet plans to reduce costs by Rs.2000 crore in next 2 years, though finer details were not available. It is expected that Jet would be drastically rationalizing some of its international routes and also cutting down heavily on employee costs.
The spectre of higher current account deficit is back to haunt India according to SBI. In fact, SBI Research estimates Current Account Deficit (CAD) at 2.8% for FY 2019. The widening of the current account deficit is likely to be driven by a rapid widening of the trade deficit. In the month of July alone, the trade deficit stood at a 5-year high of $18 billion. The trade deficit has been under pressure due to a persistent rise in crude oil prices. Normally, a level of 3% CAD is considered to be a tipping point and in the past it had led to a rapid depreciation in the external value of the Indian rupee.
Tyre companies have taken a price hit on Kerala floods. Tyre companies like Apollo have taken a deep hit due to disruption in their Kerala plants and also because the domestic price of rubber has gone up. Kerala produces nearly 85% of India’s total rubber output. The stock of Apollo is already down by 12% since the Kerala floods. But that has not deterred Apollo from posing an aggressive challenge to the market leadership of MRF. Apollo Tyres plans $1 billion investment to take on MRF. Apollo is eying the No. 1 position in the tyre space, currently occupied by MRF. The broad aim is to cross Rs.20,000 crore revenues by fiscal year 2020. Apollo will be setting up a new plant in the state of Andhra Pradesh and will also be expanding capacity at its Hungary plant, Kerala problems notwithstanding.
The Adani group is quietly making its power moves. Adani Power may be close to acquiring GMR power plant. The 1370 MW thermal plant is operated by GMR group. As part of the deal, Adani Energy will take over nearly Rs.3800 crore out of the Rs.5800 crore that GMR Power owes to financial institutions. In addition, Adani will also assume non-funded liabilities to the tune of Rs.1400 crore. Many power plants are going quite cheap and more such capacities are likely to be up for grabs as the RBI finally takes on the problem of stressed assets in the power sector head on!
