Stock Market Investment Shot,2nd November 2022

RBI did soft launch of its central bank digital currency (CBDC) for secondary market trades in government securities. A total of 48 trades worth Rs275 crore were executed without hitches. The first such trade entailed SBI selling G-Secs and BOB buying G-Secs using the CBDC (digital rupee). Others like ICICI Bank and IDFC Bank had also participated in CBDC trades on Tuesday. One of the big advantages of CBDC trades is zero settlement risk. Settlement for CBDC trades happens on same day i.e. T+0 rather than on T+1 basis.

The government increased special additional excise duty (SAED) or windfall tax on aviation turbine fuel (ATF) exports and on diesel. At the same time, government also reduced taxes on domestically produced crude oil from Rs11,000/tonne to Rs9,500/tonne. The tax on export of ATR was hiked from Rs3.50/litre to Rs5.00/litre while the tax on diesel exports was raised by Rs1/litre. The windfall tax is a special tax imposed on oil firms to avoid undue benefits amidst rising prices. Windfall tax had been first imposed on 01st July.

The Tata Group will substantially increase employee count at its at its electronics factory, making iPhone components. It currently employs 10,000 workers at its facility in Hosur, Tamil Nadu but plans to increase the manpower by another 45,000 women workers in the next 2 years. The factory produces iPhone housings, which are the cases that hold the device together. Apple is trying to diversify its iPhone manufacturing base beyond China and this offers the start for India to be the next big manufacturing hub.

The stock of Axis Bank fell sharply on Tuesday after more than 1% equity changed hands. The sale deal by Bain Capital had already been announced a day earlier and was syndicated and executed by JP Morgan. In early trades, a total of 38.99 million shares (1.2% of equity) changed hands on the BSE. Based on the FPI net buying, it is evident that there was tremendous demand from global investors. The floor price had been set by Bain capital at Rs888 per share, which was already a 2-3% discount to the CMP of Axis Bank.

Public sector Canara Bank scaled a 3-year high of Rs297.35, gaining 2.5% on Tuesday. The lender had reported strong set of numbers with net profits surging 89% to Rs2,525 crore for Q2FY23. This is the peak level since April 2019. More than a year back, late Rakesh Jhunjhunwala had also picked up a stake in the bank. For the quarter, its NII had grown 18.5% while NIMs were at 2.86%. Asset quality had also improved. Most brokers stay bullish on the stock amidst positive revisions to its earnings estimates of next 2 years.

Adani Ports Q2FY23 net profits increased by 68.5% yoy at Rs1,678 crore, even as the operating revenues grew 32.8% to Rs5,211 crore. This was triggered by 15% cargo volume growth to 86.6 MMT in Q2FY23. However, volumes were lower sequentially due to lower thermal coal imports. It is one of the largest port management services company in India and handles nearly 45-50% of the cargo flow. Its presence is spread across 10 locations with flagship being the Mundra Port, India’s largest commercial hub in Gujarat.

In an interesting trend, corporate borrowers are switching from dollar loans to rupee credit as the former turns expensive amidst a strengthening dollar. The Fed hawkishness has only made things worse with 1-year dollar loan being priced almost 65-70 basis points above a rupee loan. This differential narrows as the tenure extends to around 3 years, but it is still quite expensive compared to rupee loans. This is evident in demand for dollar loans falling by 13.3% in the first half of FY23, compared to H1FY22, on rate concerns.

Google appears to be willing to smoke the pipes of peace as it sopped enforcement of a policy mandating Indian app developers to only use its proprietary Play billing system. This was after CCI objected to the policy as stifling competition. The Play billing policy was to be enforced from 31st October, but that was pre-empted by the CCI order on 25th October. Antitrust regulation is a big challenge for Google globally as it tries to leverage its powerful hold on the smart phone ecosystem to deliver multiple benefits to them.

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