The IIP for the month of March 2020 came in at (-16.5%), which was much worse than anticipated.
March only had one week of lockdown. The negative IIP was driven by deep cuts in manufacturing and
in electricity generation with mining almost flat in March. The early indications of weak IIP numbers
were already there in the core sector number which constitutes 42% of IIP. Interestingly, the
government did not announce the CPI inflation rate for the month of April due to limited activity and
could be an indication that it may even skip announcing IIP for April in the month of June.
Reliance stock corrected by over 5% on Tuesday as it was the last cum-date for the rights issue. From 13
May, the stock goes ex-rights with 14 May being the record date for the rights issue. The rights
adjustment factor will be 0.99061 and this factor is applied across all option strikes of the stock. For
example, the strike price of RIL 1000 option will automatically stand modified to RIL 990.50 option. This
adjustment factor will be uniformly applied across all the strike prices from the ex-date of 13 May. RIL is
also talking to General Atlantic and Saudi Sovereign Fund for additional sale of stake in Jio Platforms.
Vedanta Ltd plans to delist from the stock exchanges in India. Vedanta plans to delist its shares from all
the stocks exchanges in India where the stock is listed. Currently, public shareholding in Vedanta is to
the tune of 49% and Vedanta proposes to offer Rs.87.5 per share to the public shareholders. This is
marginally below the closing price of the stock on 12 May. While Vedanta Resources PLC holds 51.06%
in Vedanta Ltd, public holds the balance 48.94%. At the delisting price proposed by Vedanta, the total
value of shares to be purchased from the public will be close to Rs.14,800 crore.
The Prime Minister addressed the nation at 8 PM on 12 May but gave no details about the lockdown
extension. While the economy has started chugging along, it may still take some to reach full capacity.
However, the PM also used the opportunity to announce a massive Rs.20 trillion reforms package for
agriculture and industry. While details of the package were not divulged, the PM emphasised that the
implementation of the reforms package will be spread out. Finance Minister, Nirmala Sitharaman, will
provide a daily briefing on the specifics of the economic reforms package from 13 May onwards.
Morgan Stanley expects global growth for the year 2020 to contract by (-3%) due to the lag effect of
COVID-19 and the subsequent shutdown. Morgan also expects India to grow at 0% in 2020 but expects
growth to bounce back to 7.7% in FY21. That will make India the fourth fastest growing economy in Asia
after the Philippines, Malaysia and China. They also expect the Morgan Stanley Emerging Markets Index
to dip by 12% from the current levels. In terms of stocks, Morgan sees ICICI Bank and TCS as the two
conviction picks in the Indian large cap space. However, Morgan Stanley has also focused on the need to
keep India’s fiscal deficit in check and ensure that structural reforms are combined with the fiscal
stimulus so that the economy gets long term traction. Global inflation is expected at 2% in 2021.
Nestle managed to positively surprise the street with its March quarter numbers. Net profits for the
March quarter were higher by 13.2% at Rs.525 crore with the growth in profits largely driven by lower
corporate taxes. Revenues were also up by 10.7% at Rs.3325 crore. Both net profits and revenues were
higher than analyst estimates. However, cost pressures ensured that the operating profit margins (OPM)
shrank by 130 bps to 23.8%. Nestle is one of the few FMCG companies that has managed to sustain
double digit sales growth. The costs took a hit on higher cost of dairy products.