Wednesday, 6th Jan 2021

Brent crude prices crossed the $53/bbl mark on Tuesday after the largest oil producer in the OPEC, Saudi Arabia, agreed to take more cuts in output to keep the OPEC Plus deal going. Both Russia and Kazakhstan, part of the OPEC Plus alliance, wanted to increase oil output by 500,000 bpd. However, fearing that it would depress prices, Saudi Arabia has agreed to take a larger cut in production to compensate for the losses to Russia and the other countries in the alliance. However, the Saudi Oil Minister has sounded a note of warning that the resurgence of COVID in EU may anyways depress oil.

One of India’s leading FII brokers, Credit Suisse, has expressed confidence that Saudi Aramco may revive their deal with Reliance if oil prices stayed above $50/bbl. It may be recollected that in the second half of 2019, RIL and Saudi Aramco had announced an agreement to wherein RIL would sell 20% of its stake in the Oil to Chemicals or O2C business in Reliance Industries to Saudi Aramco for a consideration of $15 billion. Then, the total O2C business of RIL, excluding oil extraction and oil marketing, had been valued at $75 billion overall. However, when COVID struck, the crude prices had crashed sharply and Aramco had expressed second thoughts about the valuation. That had forced RIL to sell its stake in Jio Platforms and Reliance Retail to meet its shareholder commitment of turning zero net-debt by March 2021.

Nykaa E-Retail, the fashion portal launched by former Kotak Mahindra Investment Banker Falguni Nayar, is planning to hit the Indian IPO market this year which could value the company at closer to $3 billion. The exactly size of the issue is not known yet. Nykaa has not finalized its methodology but it looks like a domestic sale combined with an international offering. Nykaa was founded by Nayar in 2012 and lists more than 1200 cosmetic brands on its platforms. The portal logs nearly 55 million visits each month and it receives and processes 13 million orders each month. TPG and Fidelity are among its investors. 

While the Finance Ministry announcement is yet to come, reports suggest that the Union Budget will be announced as scheduled on 01-Feb and the Parliament session would begin on 29-Jan. The budget session will have two parts. The first part of the session will be from 29-Jan to 15-Feb while the second part will be from 08-Mar to 08-Apr. The finance minister, Nirmala Sitharaman, and her team have already commenced the process of talking to trade and industry bodies as well as to industrialists and financial market experts to elicit expectations from the Budget. FM has promised a big-bang budget.

A day after the stand-off between Serum Institute and Bharat Biotech over the Covaxin approval, both the companies have agreed to cooperate and work together to enable one of the biggest medical logistics projects in Indian history. In a joint statement, both the companies agreed to put the COVID inoculation project as the top priority. DCGI had given approval to Serum Institute’s Covishield and Bharat Biotech’s Covaxin. Covishield was jointly developed by Oxford Research and AstraZeneca and will be produced by Serum. Covaxin is indigenous made along with National Institute of Virology and ICMR.

As the results season for Q3 commences with TCS on 08 January, analysts are betting that this could be the best quarter for IT companies in the last 10 years. Most analysts are betting on huge order books, sharp growth in revenues and guidance upgrades in Q3. However, analysts have also cautioned that the operating margins could be negatively impacted by the higher wage costs. In terms of specific players, HCL Tech and Infosys are expected to raise their revenue and margin guidance even as Infosys has been consistently narrowing its market cap ratio with TCS. The estimate is that the revenue guidance in constant currency terms could be anywhere between 2% and 5%. Cross currency moves are expected to benefit IT stocks in Q3. As digital leads, it is expected that retail and transport could make a comeback.

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