Monday, 22nd November 2021

It looks like US front-ending rate hikes could actually happen soon. US Fed governor, Christopher Waller, urged the FOMC to speed up the pace of tapering asset purchases in response to retail inflation scaling to 6.2% in October 2021. Waller has pointed that improved growth and labour conditions make the case for early rate hikes stronger. The Fed has already reduced the taper from $120 billion per month to $105 billion a month and will progressively scale it to zero by mid-2022. US inflation is at a 31-year high level.

After spending over 2 years on the deal, Reliance has decided not to sell 20% stake in the oil to chemicals business to Saudi Aramco for $15 billion. Both parties have mutually agreed to reassess the situation. RIL has also applied to the NCLT to withdraw its application for demerging the O2C business into Reliance O2C Ltd. Between 2019 and 2020, Reliance managed to become zero net-debt by monetizing its stake in Reliance Digital and Reliance Retail. Bernstein estimated the EV of its new energy business at $70 billion. 

The combined market cap of 9 out of the top 10 companies on the Nifty by market cap saw a fall in value of Rs.147,361 crore in the previous week. There were 4 trading days in the week. Reliance led the way down losing Rs.75,962 crore while TCS lost Rs.18,070 crore in value. Among others, HDFC lost Rs.12,321 crore, Kotak Bank Rs.9,816 crore, ICICI Bank Rs.9,410 crore, HDFC Bank Rs.7,904 crore, SBI Rs.6,515 and Bajaj Finance Rs.5,167 crore. Infosys was the sole market leader to make marginal gains for the week. 

The proposal by the Oil Ministry to hive off ONGC’s major oil and gas fields to global companies has met with strong resistance from the officer’s union. They want ONGC to be empowered instead of giving away its prime assets to the private sector on a platter. Oil Ministry had asked ONGC to sell 60% stake in the lucrative Bombay High offshore oil fields to private parties. The union believes that given the sale level of autonomy as the private sector, ONGC can do wonders. ONGC has taken most of the risk of new oil fields. 

The biggest risk to aluminium prices globally could come from a relatively benign stockpile of aluminium in Vietnam. This stock pile is expected to be worth $5 billion and could change the demand supply equation for aluminium globally. In last few months, prices of aluminium has shot up after manufacturers of car parts to beer cans compete for more aluminium even as China throttles supply. This is the last big stockpile of aluminium left in the world. The current deficit of aluminium can be entirely filled by this pile.

Go Airlines of the Wadia group is expected to open its Rs.3,600 crore IPO around 08th of December. The entire IPO would be a fresh issue and will be used by the company to settle debt, outstanding dues to IOCL for fuel, outstanding MRO charges and lease rental dues. Go Air has a market share of 9% in the Indian market putting it at par with the likes of Air India, Spice Jet and Vistara. Go Air has outstanding borrowings of Rs.2,115 crore but the repayment of oil dues and lease rentals are more urgent in nature.

Foreign portfolio investors (FPI) were net buyers in the Indian markets at Rs.19,712 crore the month of November so far, led by inflows of Rs.14,051 crore into equities and Rs,5,661 crore into debt. However, the equity story needs to be understood better. The Rs.14,051 crore of inflows comprised of Rs.(9,128) crore of outflows from the secondary market and a whopping Rs.23,179 crore of inflows into the IPO issues. It was the IPO flows that saved the day. FPIs continue to be wary of India’s inflation and rate risks.

Global funds like Steadview Capital, Pinebridge and Kuber India Fund invested Rs.868 crore through the QIP route in Route Mobile. Incidentally, Route runs a robust messaging and voice application interface. It had recently approached the institutional investors to invest via the QIP route to help them enrich their offerings to customers. It may be recollected that Route Mobile had gone public in September 2020 with their Rs.600 crore IPO subscribed 73.3 times. The stock has given multi-bagger returns on and since listing.

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