For the week ended 02 July, 8 out of the 10 most valuable Indian companies on the Nifty by market cap saw combined erosion in value to the tune of Rs.65,177 crore. Ironically, TCS and HDFC Bank proved to be the drags. Among the big value losers for the week were TCS Rs.20,400 crore, HDFC Bank Rs.18,113 crore, HDFC Rs.5,837 crore, ICICI Bank Rs.5,762 crore, Bajaj Finance Rs.4,615 crore and SBI Rs.3,748 crore. Big gainer for the week Reliance Industries added Rs.15,785 crore and Hindustan Unilever Rs.9,246 crore.
July prepares for a string of IPOs, with IPO offerings of Clean Science & Technology and GR Infraprojects set to open on 07 July. The 2 companies will collectively raise Rs.2,510 crore. Both the IPOs will open on 07 July and close on 09 July with anchor placement on 06 July. While Clean Science will be a Rs.1,547 crore offer for sale by promoters, GR Infraprojects will also be a Rs.963 crore offer for sale by the promoter group. In Jun-21, the IPO collections were Rs.9,923 crore with 5 IPOs but July is expected to set a record.
Foreign portfolio investors or FPIs turned net buyers in Jun-21, infusing Rs.13,269 crore of net inflows as per NSDL data. There was some semblance of normalcy returning to the COVID 2.0 scenario and hopes that growth would get back to track. The Mar-21 quarter results were also above expectations with solid growth on sequential basis. Overall, the FPIs invested Rs.17,215 crore into equities during June while they withdrew Rs.3,946 crore from debt. FPIs had pulled out Rs.2,666 crore in May and Rs.9,435 crore in April.
The uncertainty in the stock markets and the fluid corporate functioning has not dampened the demand for merger and acquisitions. For the first half of calendar 2021, deal street recorded 44% higher M&A deals valued at $49.34 billion. Even the number of deals were 5% higher at 730 in the first half as per Refinitiv data. In the overall M&A scene, cross border deals accounted for one-third the number of deals and 44% of M&A value in H1 2021. Globally, M&A deals in H1 were up a whopping 132% at $2.8 trillion.
LIC IPO may be gathering steam with the government set to invite bids from merchant bankers this month for managing the LIC disinvestment. DIPAM has already appointed actuaries, Milliman Advisors LLP India, to assess the embedded value of LIC ahead of the IPO. It is expected to be announced in the next couple of weeks. All requisite regulatory approvals, including, changes to LIC Act, will be completed by Nov-21. The LIC IPO is critical to the government’s Rs.175,000 crore divestment target for the financial year FY22.
Wall Street scaled life-time highs after jobs data for June showed robust hiring amidst persistent weakness in the labour market. This weak labour data is likely to hold the Fed from raising interest rates any time soon. Nonfarm payrolls increased by 850,000 jobs in Jun-21, but total jobs at 6.8 million is still below the Feb-20 peak. That is a sweet spot for the US economy as it indicates that the labour shortage was easing but not enough justify rate hikes. As Wells Fargo put it, “There were enough jobs to make the US economy and companies look healthy, but not so much that it concerns the Fed to act urgently on hiking Fed rates.
According to a recent report put out by Motilal Oswal, over 60% of Nifty components were trading are at a premium to historical averages. This is determined by comparing the current P/E ratio with the 15-year historical average P/E ratio. Currently, Wipro trades at a premium of 75%, HCL Tech 74%, Asian Paints 73%, BPCL 65% and Divi’s Labs 63%. However, despite 32 Nifty companies trading at premium valuations, several big names like Tata Steel, ONGC, Coal India and NTPC are at deep discount to 15 year average P/E.
Bharat Biotech, the company behind Covaxin, is setting up 4 manufacturing facilities in India to produce a total of 1 billion doses per year. Currently, Bharat Biotech is deploying multiple lines at its existing facilities in Hyderabad and Bengaluru to produce Covaxin. Bharat Biotech’s Covaxin has demonstrated 77.8% effectiveness against COVID-19 and 65.2% protection against the new Delta variant. However, the Covaxin despite being approved by the government, is yet to receive same level of acceptance globally.