Stock Market Investment Shot, 13th June 2023

CPI inflation for the month of May 2023 fell to a 2-year low of 4.25%, very close to the RBI target rate of 4%. This was largely led by food inflation falling from 3.84% to 2.91% over the previous month. Consumer inflation had stood at 4.7% last month and the consensus had already pointed to around 4.34% on a higher base effect. However, concerns over food inflation for the full year remain due to a delayed monsoons, which could impact cropping and thus food inflation. RBI has been on a rate pause since February 2023.

It was a double blessing for Indian economy as IIP growth for April 2023 also showed a sharp rebound to 4.2%, compared to just 1.1% IIP growth in March 2023. In terms of the break-up of IIP, manufacturing IIP bounced back sharply to 4.9%. While mining growth tapered to 5.1%, it was a contraction in electricity output by -1.1% that was a concern. It remains to be seen if manufacturing sustains the pick-up since most of the high frequency indicators like GST collections, e-way bills and PMI manufacturing were in positive.

SEBI has debarred Subhash Chandra and his son Punit Goenka from holding any senior key position in any of the group companies. It may be recollected that between FY19 and FY23, the promoter shareholding had dropped sharply from 41.62% to 3.99%. This was based on allegations of diverting assets of Essel group companies. Meanwhile, SEBI has given Chandra and Goenka a time frame of 21 days by which they can submit their objections, if any. The role of the promoters had been a bone of contention with Invesco.

Rakesh and Shobha Gangwal are likely to pare their stake in Indigo Airways (Interglobe Aviation) by up to 8% and the deal is expected to be worth Rs7,000 crore. Between them, the Gangwal family held 16.22% stake in Interglobe Aviation and had been consistently paring their stake in the company over the last one year. Rakesh Gangwal, one of the co-promoters, had resigned from the board of Interglobe Aviation last year and had committed to gradually reduce his stake in the company over 5 years. The stock fell sharply.

Generally, Goldman Sachs has been the one to call bull rallies in oil, but this time around they have slashed their forecast for oil prices by 10%. Goldman has cited weak demand from China as well as a supply glut from Russia and other countries as the reasons for the price target cut. It had original set a Dec-23 target of $95/bbl for Brent Crude but has since slashed it to $86/bbl. However, that is still nearly 30% higher than the current market price of Brent Crude. Crude prices have been down, despite supply cuts by KSA.

According to the Fintech Association, digital lending volumes have risen 131% to 73 million in FY23. The total value of digital loans disbursed in FY23 stood at Rs92,848 crore. In the year, the ticket size of digital disbursements has also gone up sharply by 150%. Most of the digital lenders have been reducing reliance on outsourcing and increasingly depending on its own employees for customer support and loan recovery. More importantly, lenders have also increased their risk management requirements to protect quality.

In a surprising move, Bajaj Housing Finance has extended the tenure of home loans to 40 years at a time when 30 years is the longest tenure offered currently. The EMI works out to Rs733/lakh in a 40-year loan. This would only be available for salaried employees who are new home buyers. Bajaj offers home loans to salaried individuals and to professionals at 8.5%. Generally, these loans are given between the age group of 23 and 75. It remains to be seen how maturity mismatch is handled in such long tenure loans.

Franklin Templeton appears to be finally getting out of the mess it had got into in 2020 when it had to unilaterally freeze redemptions on six of its debt funds. Now it has confirmed that it will extinguish units in five out of these six schemes. With the latest payout, the fund would have paid Rs27,109 crore to unit holders, which ranges between 100% and 113% of the value of funds invested. The good thing is that the investors have, at least, got back their principal although damage done to the fund image may be huge.

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