Stock Market Investment Shot, 2nd August 2023

It looks like Byju’s could get some relief as it is in advanced talks with the Manipal group for sale of stake in Aakash Education. The Ranjan Pai owned Manipal group is into education, healthcare, and various other businesses. Byju Raveendran may offload his personal stake in Aakash for around $90 million to Manipal. Raveendran is likely to use the funds to repay the loan to Kempner Capital after facing technical default in May 2023. The funding from Pai will also help Byju’s to release shares of Aakash pledged with Kempner.

With Nirma and Sekhmet already in the race for buying a stake in Glenmark Life Sciences, even PE firm ChrysCapital has joined the race. Glenmark Life Sciences (GLS) is the API (active pharma ingredients) arm of the Glenmark group. The deal is likely to be worth Rs7,000 crore. Glenmark Pharma has an 83% stake in GLS and it may use the proceeds from the sale to reduce its own debt of Rs2,904 crore in the balance sheet. The bidders have already firmed up funding from Japanese and European banks for the purchase.

For the quarter ended June 2023, India’s services trade surplus fell to just $36.4 billion, the lowest in the last 3 quarters. The downturn in developed countries has substantially slowed down exports of services to these countries. The services exports for the quarter stood at $80.8 billion while the service imports stood at $44.4 billion. In FY23, India had seen a sharp surge in service exports to $322 billion as the surplus on services helped to substantially offset deficit in merchandise trade. Computer services holds the key.

The GST mop-up in July 2023 once again remained robust on the back of growth momentum, at Rs1.65 trillion. This is the fifth time that the total GST collections in a month have crossed Rs1.6 trillion. The centre has a central GST collection target of Rs8.1 trillion for FY trillion and that can be easily achieved if the gross GST collections are above Rs1.60 trillion a month. The target for FY24 is 11.9% higher than FY23. GST was introduced in July 2017 and after initial hiccups the collections have picked up sharply in last few quarters.

Telecom data released for May 2023 by TRAI, is again a story of Jio leading on telecom subscription gains, followed by Airtel, even as Vodafone Idea has continued to lose subscribers. For May 2023, while Jio added 3 million subscribers, Airtel added 1.3 million and Vodafone Idea lose 2.8 million subscribers. Jio continues to dominate the telecom sweepstakes in India with 51.96% market share. Airtel has seen its share of the telecom market fall to 28.78% while Vodafone Idea is now left with just 14.42% market share.

In a surprising move, Fitch has downgraded the US credit rating from “AAA” to “AA+.” This is reminiscent of a similar downgrade by S&P more than 10 years ago. Fitch has criticized the ballooning deficit of the US economy and the erosion of governance leading to repeated debt limit clashes in the recent past. Fitch also added that the medium term challenges pertaining to rising entitlement costs were unaddressed. Treasury Secretary, Janel Yellen, termed the downgrade arbitrary and underlined the US strength story.

The Monetary Policy Committee of the RBI is expected to maintain status quo on rates when it meets for the next policy meet between August 08-10, 2023. The last rate hike was in February 2023, when the RBI had hiked rates to 6.5% and it has remained static at that level. CPI inflation in July is expected to scale above 6% on the back of a surge in vegetables inflation. However, being a cyclical issue, the RBI is unlikely to hike rates. However, the commentary of MPC is likely to be hawkish with warnings of more rate hikes.

According to a report by HSBC Global Research, the top IT players in India have seen loss of clients, even as they have been winning major deals. That was one of the reasons for the muted guidance given by the likes of Infosys and Wipro. Amidst spending cuts, some of the discretion and transformation work had stopped. Infosys had lost 2 clients in the June quarter. For Wipro, the total number of active clients fell by 35 to 1,444. HCL Tech also lost 4 high value clients in the quarter. Clearly, tech spending is under pressure.

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