It was a day of the Big-3 IT companies announcing their results on 12th January with TCS and Infosys doing better than street estimates but Wipro putting out numbers below street estimates. There was an operating margin contraction of 152 bps in TCS, 192 bps in Infosys and over 430 bps in Wipro. Top line growth of over 20% was visible across all the three IT bigwigs. TCS announced its Rs.18,000 crore buyback of shares in the board meeting. Margin pressure came from higher manpower and sub-contracting costs.
US inflation came in at a 39 year high of 7%, but was actually a tad better than the Bloomberg consensus estimate of 7.1%. In the absence of any negative policy surprise, the global markets actually rallied on 12th January. In fact, with lower than expected inflation, the treasury yields actually tapered to 1.7357%. while the markets are expecting front ending of rate hikes by the Fed, this may be moderated if inflation stays under control in the US. Dollar index touched a 2-year low of 95.117, even as Brent scaled $84/bbl.
Government has assured that Vodafone India and Tata Tele would not become PSU companies despite their decision to convert their AGR interest dues into equity. As pe early calculations, the government will end up with 35.8% stake in Vodafone Idea and 9.2% stake in Tata Tele. Government underlined that the sustained continuance of these two players was crucial to prevent the sector from becoming a duopoly market. The companies will retain the ability to invest so that telecom services can reach far-flung areas.
For the month of December 2021, headline retail inflation came in 68 bps higher at 5.59%, largely along expected lines. Food inflation rose further to 4.05%. However, despite this spike, the headline inflation remains under the 6% outer limit prescribed by the RBI. The spike in food inflation was 218 bps and was led by a low base effect. The higher inflation is likely to induce the RBI to evaluate rate hikes in the coming February and April policies as the US is evaluating 3 to 4 rate hikes of 25 bps each in calendar year 2022.
The index of industrial production (IIP) for November 2021 (normally announced with one-month lag) came in lower at 1.4% compared to 4% in Oct-21. This is largely attributed to the normalization of base effect. Since April this year, the low base effect had made IIP look optically high. However, there is a distinct loss of momentum in November as is evident from the sequential data. In fact, the 8-month cumulative IIP has just fallen below the FY20 pre-COVID levels. Reuters estimates had pegged IIP at 3%.
Indian government is apparently pushing for a valuation of Rs.15 trillion or $203 billion for LIC. According to reports, LIC is expected to file its DRHP for its proposed IPO by the last week of January. The final report on embedded valuation by Milliman Advisors is expected in the region of Rs.4 trillion and market value could be pegged at nearly 4 times the embedded value. This would make LIC the second most valuable company in India, below Reliance. Currently RIL has market cap of Rs.17 trillion and TCS Rs.14.3 trillion.
Adani Green Energy scaled a new high of Rs,1,666 with the stock surging 16% in just 2 days post its Q3 business update. AGEL had guided for 97% growth in sale of energy for the Dec-21 quarter at 2,504 million units with strong contribution from Solar and Wind portfolios. Operational capacity was up 84% at 5,410 MW. The capacity utilization factor (CUF) for solar stood at 21.9% and for wind energy at 18.6%. AGEL is the largest solar player in the world. Its key customers are Solar Energy Corporation of India and NTPC.
The government put disinvestment of Central Electronics Limited (CEL) on hold subject to examination of allegations made by employees. The LOI issued to the winning bidder, Nandal Finance and Leasing has been put on hold. One of the allegations of the Union was that the bidders were inter-related by virtue of common directors in group companies. Also there was a legal case pending against the successful bidder in NCLAT. Employees also felt that a financial services company should not bid for a strategic PSU asset.