Nifty closes almost flat at around the 11,582 mark on Thursday. The gainers in the Nifty were the stocks from the IT and Pharma space which stand to benefit from a weaker rupee. FMCG stocks across the board were among the major gainers. Rupee ended 43 basis points weaker at Rs.70.11/$. The rupee weakness was led by worries that the Fed may go ahead with a rate hike in September and this put pressure on the Nifty. INR was also hit by strong jobs data from the US and the Fed Chief’s statement that data-driven hawkishness will continue. A strong dollar is not great news for the INR.
Centre to offer subsidies up to Rs.5500 crore for boosting electric vehicles. The government outlay of Rs.5500 crore will be spread over 5 years and will be in the form incentives and subsidies. The subsidy will not only be applicable to electric cars but all kinds of environment friendly vehicles including cars, taxis, buses and two wheelers. The government wants to now move ahead in full steam on its environment friendly vehicles to reduce its dependence on fossil fuels, which is one of the key reasons for the weakness in the rupee as India relies on imports for 75% of its daily oil needs.
Larsen & Toubro has approved its maiden buyback of shares. L&T will buy back a total of 6 crore shares at a price of Rs.1500 per share taking the total value of the buyback to Rs.9000 crore. This will represent 4.3% of the equity of L&T and the share capital will be extinguished to that extent. Normally, buybacks are viewed positively by shareholders as a base. However, there are two views on this front. On the one hand, buybacks extinguish equity and increase the EPS of the company. On the other hand, the markets also downgrade valuations as buybacks are seen as indicative of limited investment opportunities.
Tata Sons increases its stake in Tata Motors for the third time. Tata sons recently added 2.61 crore shares of Tata Motors representing 1.05% stake in Tata Motors. The holding company has been gradually increasing its stake and its stake in Tata Motors has gone up from 25.22% in 2015 to the current level of 33.40%, enhancing its control. The holding company of the Tata group now has a huge war chest received from the buybacks undertaken by TCS and that is being used to shore up its holdings in all companies across the group. Tata Motors is down nearly 60% from its peak levels.
India Ratings points to the need for wage growth to resolve rural distress. India Ratings has made this comment with reference to the government’s plan to double farm incomes by 2022. According to India Ratings, the idea of higher MSP would really work only if it was accompanied by rise in wage levels too, which is currently stagnating. The Modi government has been focusing on doubling farm incomes by 2022 and the assured 150% MSP on cost of production was intended towards that. India Ratings is of the view that MSP would still be an extremely macro approach and it unlikely to trickle down. A better option will be to focus on increasing wages of the farm sector as the impact of such a wage increase will almost be immediate and will directly contribute towards enhancing farm incomes.
RCOM completes the sale of assets worth Rs.2,000 crore to Reliance Jio. The first tranche of the sale included the sale of its media convergence nodes and related infrastructure assets. This is part of the Rs.25,000 crore asset sale plan that RCOM has drawn up to monetize its static and dynamic assets over the next few months. The sale had been held up for some time due to the objections raised by Ericsson which has since been resolved. RCOM has a mountain of debt to resolve and this could be the first step by the company towards that end.
