Stock Market Investment Shot, 8th July 2022

Tata Sons chairman N Chandrasekaran confirmed that Tata Power will spend Rs75,000 crore to expand its renewable energy capacity in next 5 years. Tata Power will spend Rs10,000 crore in FY23 and Rs14,000 crore in FY24. Green energy already comprises 34% of Tata Power portfolio and the plan is to make it 60%. It is not just the Tatas, but even Reliance and the Adani group are ramping their clean energy portfolios and targeting green fuels. Tata Power has already got strategic investments from Blackrock and Mubadala.

According to a recent note by Morgan Stanley, the inflation risk in India and many Asian economies may have already peaked. In the next few months, Morgan Stanley expects inflation to surprise on the down side. This easing of inflation is likely to be driven by weak demand, easing supply-chain disruptions and falling commodity prices. However, they expect services inflation to stay firm. In India, the real triggers for inflation were oil and food and they may still pose a worry. This is likely to have a bearing on RBI

Auto companies in India are on a roll, with the S&P BSE Auto index hitting record highs. In the auto sector; M&M and Tube Investments touched life-time highs. Since April 2022, the auto index has surged 15.5% at a time when the benchmark Sensex has fallen -7.6%. The strong auto sector show has been driven by a pick-up in monsoon momentum, cut in excise duties on fuels, lower input costs, fall in global crude prices and an impetus for new vehicle sales, including the EV shift. Bullishness is across the board
for auto stocks.

Akasa Air, the airline venture promoted by Rakesh Jhunjhunwala has got the operator certificate. Akasa plans to induct 18 aircraft into its fleet by end of FY23. It has been one of the most awaited low-cost airlines to enter the business and it enters at a fairly tough time for the sector. The AOC, entitles the airline to open flights for sale and sets the tone for starting commercial operations. A total of 72 aircraft will be delivered to its fleet over the next 5 years. Akasa Air (airline code QP) took delivery of its first 737 MAX.

Vedanta announced plans to fully acquire the 1200 MW power plant, Athena Chhattisgarh Power, for Rs565 crore. Vedanta, as per the regulatory filing, will acquire 100% of the paid-up capital of Athena and will entirely be a cash transaction. This acquisition will take care of the power requirement for Vedanta Aluminium Business. In May 2019, Athena was admitted under CIRP for initiation of liquidation process.
In Q1FY23, aluminium output of Vedanta grew to 565,000 tonnes while mined metal was 252,000 tonnes.

CRISIL estimates that IT services sector could see 12-13% revenue growth in FY23. Despite headwinds, the weak rupee and strong demand for new age technologies like AI, cloud computing and IOT will sustain double-digit growth. Top line growth would have still moderated by 700 bps against the 8-year average. OPM is expected to soften by 200 bps to 22% in FY23. Rising employee and travel costs and the impact of attrition costs could impair OPMs. The new age digital business are likely to cross 50% revenue share.

The stock of Rajratan Global Wire touched a record high of Rs847 in line with the positive sentiments surrounding auto ancillary stocks. The stock is up 48% in last 2 weeks on strong business outlook.
Rajratan is the largest manufacturers of bead wire; a tyre auxiliary. It currently has production capacity of 72,000 TPA. In FY22, its net profits more than doubled to Rs124.33 crore while revenues grew 63% to
Rs893 crore in FY22. Rajratan got a big boost after China withdrew export rebate of 13% on value added steel products.

Mahindra & Mahindra has just raised Rs1,925 crore with plans to invest $1 billion in the EV business. The EV business of M&M is already valued at around $9 billion. The investment came from British International Investments (BII). The investment will be made by BII in the form of compulsory convertible instruments. M&M has got similar valuations for its EV business like Tata Motors, despite being a late starter in the business. BII investment is intended to significantly accelerate the availability and adoption of EVs in India.

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