The Sensex, on Wednesday 18 August, hit all-time high but later corrected and closed with losses in the second half of trading. The Sensex actually closed 163 points lower at 55,630. Nifty was lower 46 points at 16,569. The correction in the second half was over the uncertainty over the announcement of the Fed minutes. Rate sensitives like banks and realty corrected while metals gave up high values. Mid-caps, continued to remain strong even as VIX cooled to 12.91%. FPIs and DFIs have been net buyers in Aug-21.
The minutes of the FOMC meet announced late on 17th August made it clear that members expected the Fed to start tapering bond purchases by the end of 2021. The members concluded that enough progress had been made towards the inflation and employment goals and it did not warrant an ultra-loose policy for much longer. The general consensus was that tapering should start by end of 2021. However, there was a lot of divergence on the timing and speed of the tapering. Durable inflation was also still debatable.
As RBI lifted the ban on HDFC Bank issuing new credit cards, ICICI Bank was the biggest beneficiary of this 8-month ban followed by SBI Cards. However, HDFC Bank continues to remain the market leader with 1.48 crore credit cards issued. HDFC Bank lost 5.59 lakh cardholders during this period. ICICI Bank added 13.2 lakh credit cards to take its tally to 1.10 crore cards. Even SBI Cards, the second largest player, added 7.49 lakh cards to touch 1.20 cards. HDFC Bank enjoys 28% leadership market share in credit card spends.
HDFC Bank has launched its $1 billion AT-1 bond issue at an all-time low pricing of 3.7%, much lower than the street estimates of 4.125%. The response from the global investors in the US and Europe was the most enthusiastic. Some of the major investors who subscribed to this bond issue include Fidelity, BlackRock and the Government Investment Corporation of Singapore. The book was subscribed 4 times. The AT-1 bond issue was rated Ba3 by Moody’s. SBI is planning the largest single AT1 bond issue at Rs.14,000 crore.
Jubilant Foodworks hit a new high of Rs.4,166 on the back of strong growth prospects. The stock has rallied over 34% just in the last 1 month. In the Jun-21 quarter, Jubilant had seen net profits turn around to Rs.69 crore with EBITDA margins of 24.1%. The Jun-21 quarter had seen revenues more than double at Rs.893 crore. Jubilant is a debt free company. The valuations of the franchisee of Domino’s Pizza has been helped along by leadership in QSR, robust supply chain, supportive environment and a strong risk profile.
Software major Infosys also scaled record highs of Rs.1,755 on 17th August. The market price has now gone above the buyback price announced at Rs.1,750. Infosys is buying back shares worth Rs.9,200 crore. Infosys is scheduled to buyback a total of 2.63 crore shares. Infosys has seen a surge in investor interest after Salil Parekh managed to steady the performance of Infosys and also gave robust guidance for FY22. It has also maintained operating margin guidance of 22-24%, which has gone down well with the markets.
RBI issued revised instructions on safe deposit lockers provided by banks. Customers not having banking relationship with the bank can avail locker facilities after completing KYC. RBI has also added that banks must maintain a branch-wise list of empty lockers on their central computer system. Another contentious issue in lockers has been the accountability of the banks in the case of articles lost from the safe deposit lockers. Bank boards have been asked to approve detailed policy on this front, including damages payable.
In the month of July 2021, fund managers plumped for metal shares while cutting stakes in oil stocks. In July, mutual funds increased their weightage in metals to 3.4%, the highest in 33 months. On sequential basis, MFs increased exposure to metals, cement, chemicals, telecom, and retail. However, they cut stakes in oil, private banks, automobiles and technology. In fact, the weightage of the oil sector in mutual fund portfolios has plunged to a 4-year low of 6.4%. Equity funds saw net inflows of Rs.20,743 crore in Jul-21.