Stock Market Investment Shot,12th October 2022

The IMF in its latest World Economic Outlook report has cut India’s GDP forecast for FY23 by 60 bps to 6.8%. This has been driven by weak GDP growth in the June quarter and risks of tepid global demand. In its July WEO, IMF had already cut India’s growth forecast for FY23 by 80 bps. It has pegged FY24 GDP growth at 6.1%. World GDP growth for 2022 has been maintained at 3.2% but it has been lowered to 2.7% for 2023. IMF expects global inflation to rise from 4.7% in 2021 to 8.8% in 2022, but likely to fall in 2023.

In the latest round, the DGH is offering 26 blocks for prospecting and producing oil and gas in a mega offshore bid round. In addition, 16 areas for prospecting coal-bed methane (CBM) are also being offered. These 26 blocks cover an aera of 2.23 lakh SQKM through international competitive bidding. Out of these 26 blocks, 15 are in ultra-deep-water, 8 in shallow sea and 3 blocks are on land. Since 2016, seven rounds of bidding are done and 134 exploration with production blocks awarded across 19 sedimentary basins.

As the world gets more uncertain, gold is most likely to make a comeback as an asset class. Especially, the global surge in inflation has forced investors to look for safer options like gold. The only thing that has held back this demand for gold is the strength of the dollar, since gold is denominated in USD. Gold prices in the international prices has ranged around $1,700/oz. While, strong dollar is hardly conducive to gold buying, investors expect this cycle of dollar strengthening to end and gold buying may then look attractive.

Indian sugar stocks have once again come into the limelight gaining as much as 13% on a rather tough day for markets. For instance, Ugar Sugars rallied 13%; while others like Renuka Sugars, Uttam Sugar, Dalmia Bharat, Dhampur Sugar and Triveni Engineering rallied between 2% and 5%. Higher sugar realizations are likely to keep OPMs above 13% in Q2FY23 too. Ethanol realizations are also expected to be robust. The robust exports of sugar in the last marketing cycle, almost reduced the sugarcane dues to farmers to zero.

RBI has been selling dollars from its reserves via state run banks and also conducting buy/sell swaps to limit rupee fall. After getting perilously close to Rs83/$, the rupee gained strength to Rs82.32/$ on the back of RBI intervention. RBI normally conducts buy / sell swaps to sterilize its intervention in the spot market. When the RBI intervenes in the currency markets by selling spot dollars, it not only increases the supply of dollars, but also tightens the supply of rupees in the money markets and tightens the liquidity.

According to Himanshu Mody, CFO of Suzlon Energy, the company may pare its debt by Rs584 crore, once the Rs1,200 crore rights issue gets fully subscribed. Suzlon has total debt of Rs3,200 crore on its books and Suzlon plans to pay down its entire debt in the next 8 years. The stock is currently trading at Rs7 per share. Suzlon promoters (Tanti group) will be fully subscribing to the rights entitlements. The CFO has stressed that Suzlon would become leaner and meaner post the issue, without further promoter dilution.

As telecom companies go ahead with their aggressive 5G plans, the missing link is ensuring that smart phones are 5G compliant in terms of hardware and software. Towards this end, DOT and MEITY officials will meet representatives from Jio, Airtel, Vodafone Idea, Apple, Samsung, Oppo and Vivo to arrive at a workable solution. The FOTA upgrade has to be released for all 5G handsets. Smartphone users with 5G ready phones are unable to use these services in top metros of Delhi and Mumbai where 5G is launched.

With TCS already reporting results and other IT company results on the anvil, analysts expect things to get a lot more challenging from here on. Europe accounts for a third of IT revenues and this region is likely to see deep IT budget cuts. US markets may still be stable as they try to use technology to cut down costs. For now, the pandemic surge in IT spending is done and dusted. And of course, the lag effect of the cross currency headwinds cannot be ignored. Competition is emerging from the likes of Deloitte and Accenture.

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