Market Pulse | 21st June 2024

ECONOMIC HIGHLIGHTS

INDIA

?Indian shares dip on profit booking but still log third week of gains: Indian shares ended lower on Friday, once again succumbing to profit booking after hitting all-time highs, although they locked in a third straight week of gains powered by a rally in financials and the return of foreign investors. The NSE Nifty 50?fell 0.28% to end at 23,501.1, while the S&P BSE Sensex?lost 0.35% to finish at 77,209.80 but managed to eke out gains for the week. However, the Nifty's 0.15% rise this four-day week was less than the 0.75% it rose last week and its 3.37% surge the week before. The index traded in a sub-300 point for the second week in a row. There will be profit booking near record high levels, especially when valuations across the markets are high, the near-term move will depend on India's budget in July, monsoon trajectory and upcoming earnings season.

?India business activity grew faster in June, job creation at an 18-year high, PMI shows: Business activity in India expanded at a faster clip this month from May thanks to gains in manufacturing and services, according to a business survey that also showed the pace of job creation was at its strongest in over 18 years. Robust gains in both sectors at the end of the first fiscal quarter meant a strong start to India's economy this financial year after it expanded by 8.2% last year - the fastest expansion among major countries - partly led by buoyant manufacturing. HSBC's flash India Composite Purchasing Managers' Index INPMCF=ECI, compiled by S&P Global, rose to 60.9 in June from last month's final reading of 60.5. That marked nearly three years above the 50-level separating growth from contraction on a monthly basis. The manufacturing index showed bigger gains to 58.5 from 57.5 in May while the dominant services industry's reading rose slightly to 60.4 this month from 60.2, adding to the continued expansion in India even as the global economy slows.

?Foreigners buy $10 bln of index-bound Indian bonds since JPM inclusion announcement: Foreign investors have bought more than $10 billion of Indian government bonds that will be included in a widely-followed JPMorgan debt index on June 28, taking their ownership of such papers to a record high. In the nine months since JPMorgan said India's sovereign debt will be included in its emerging market debt index, foreign investors have bought 841 billion rupees ($10.08 billion) of eligible bonds on a net basis. Overseas buyers now own 1.79 trillion rupees of Indian bonds included in the so-called fully accessible route, which allows unfettered foreign purchases Foreigners' ownership of these Indian bonds has risen to an all-time high of 4.45% of the total from 2.77% before the inclusion announcement. Their share of ownership of all outstanding government bonds remains low at 2.4%, below the peak of 4.6% in 2017.

?Indian government's direct tax collection rises 21% y/y in April-June: The Indian government's net direct tax collection rose 21% year on year to 4.63 trillion rupees ($55.52 billion) from April 1 to June 17. On a gross basis, tax collection before refunds grew more than 22% year on year to 5.16 trillion rupees. The government has issued tax refunds of 533 billion rupees in the current financial year that started on April 1, up to June 17, 2024, it added. India's financial year runs from April to March.

GLOBAL HIGHLIGHTS?

?US labor market, housing data point to slowing economy: First-time applications for U.S. unemployment benefits fell moderately last week, while new housing construction dropped to the lowest level in nearly four years in May, suggesting that economic activity remained moderate in the second quarter. The data on Thursday combined with tepid retail sales last month to keep a September interest rate cut from the Federal Reserve on the table. Financial markets are anticipating one or more rate cuts this year despite policymakers' more hawkish outlook. Momentum is ebbing under the weight of the higher borrowing costs engineered by the U.S. central bank. Economic indicators for the second quarter largely point to another slow quarter of economic activity.

?UK markets jolted back to life by rate cut hopes, election buzz: Traders upped bets for a Bank of England rate cut in August, helping to underpin a pre-election rally for UK stocks and government bonds even though the central bank left rates on hold at a 16-year high. After the BoE delivered its widely expected decision it?hinted that it was edging closer to cuts, prompting money markets to place a 44% probability on a move in August, up from around 32% a day earlier. They priced in a 90% chance of a September cut. Investors now widely see rate cuts boosting the UK economy alongside a?predicted landslide in the July 4 general election for the opposition Labour Party, which claims?it can rebuild growth and run the country’s debt-laden?finances cautiously. That's a turnaround for UK markets scarred by the 2016 Brexit vote and former Conservative Prime Minister Liz Truss' under-funded 2022 mini-budget.

?German tax revenues up 2.6% in May: German federal and regional tax revenues rose 2.6% to 61.2 billion euros ($65.77 billion) in May from the previous year, helped by a one-off base effect that boosted income on the federal level. Growth in wage tax and in flat-rate withholding tax on interest and capital gains contrasted with lower revenues from sales tax and corporation tax compared with a year ago. In the first five months of the year, tax revenues in Europe's biggest economy rose 2.8% to 322.3 billion euros. The most recent tax estimates put this year's overall tax revenues 4.1% higher, at almost 864 billion euros.

?Cash is leaving China again, pressuring yuan: A sliding yuan and extensive outflows of money from the mainland into Hong Kong show China's domestic investors are shelving expectations for any immediate recovery in their home markets and fleeing to the closest better-yielding assets. The yuan has dropped to seven-month lows this week, alongside a reversal in equity investment flows into China. Hong Kong's stockpile of yuan deposits has also grown as mainland investors use their limited offshore investment channels to seek higher yields and companies prepare to pay annual dividends, adding to the pressure on the currency. Domestic investors have used the southbound leg to pump 129 billion yuan into Hong Kong. ?

MARKET HIGHLIGHTS

?GMR Power gains 5% to hit record high after subsidiary partners with Bosch Global Software Technologies: GMR Power and Urban Infra shares rose 5% to hit a fresh record high after the company said its subsidiary has partnered with Bosch Global Software Technologies (BGSW) to implement an extensive smart metering project. The project involves the installation, integration, and maintenance of approximately 7.569 million smart meters across the designated regions. To facilitate this large-scale deployment, GSEDPL has established three Special Purpose Vehicles (SPVs).

?FIIs sell shares worth Rs 1,790 crore, DIIs buy Rs 1,237 crore as Sensex, Nifty end trading week lower: FIIs/FPIs net?sold equities worth Rs?1,790 crore while Domestic Institutional Investors (DIIs) net bought equities worth Rs?1,237 crore. According to provisional data from the exchanges, FIIs bought Rs?44,523 crore and sold Rs?46,313?crore. Meanwhile, DIIs picked up Rs?18,604 crore in shares and offloaded equities worth Rs?17,367 crore in the session. In the year so far, FIIs have net sold shares worth Rs 122,064 crore, while DIIs have bought shares worth Rs 234,093 crore at the same time.

?Gravita India soars 15% amid heavy volumes on healthy outlook: Shares of Gravita India hit a new high of Rs 1,581, as they soared 15 per cent on the BSE in Friday’s intra-day trade amid heavy volumes in an otherwise weak market. The buying at the counter was attributed to a healthy business outlook shared by the company. In the past 12 trading days, the stock of one of the largest recycling companies in India has zoomed 72 per cent from a level of Rs 917 touched on June 4. Gravita India clocked lead volume growth of 25 per cent year-on-year (YoY) in Q4FY24, despite Red Sea challenges, and guided to 25-30 per cent YoY growth in consolidated volumes for FY25E.

?RailTel shares zoom 9% on bagging new order from South Central Railway: Shares of RailTel Corporation of India soared 9.2 per cent at Rs 474 per share on the BSE in Friday’s early morning deals. The company’s stock has zoomed 61.3 per cent in the last six months, while rallying 264.29 per cent in the last one year.? The recent stock price jump, however, came after the company received a work order from South Central Railway. The state-owned railway telecommunications company revealed in an exchange filing that the work order worth Rs 20.22 crore is for telecommunication works for provision of IP-MPLS in 523RKM of secunderabad division of South Central Railway. The project will be executed by 18, June 2025.?

?JM Financial stock falls over 5% on SEBI ban from debt public issues amidst lapses: Shares of JM Financial tumbled up to 5.7 percent to Rs 82 per share on June 21, a day after it was directed by the Securities and Exchange Board of India (SEBI) to refrain from accepting new mandates as a lead manager in public issues of debt securities until March 31, 2025, or until further notice from SEBI. The market regulator's order specifies that the restrictions imposed are solely applicable to JM Financial's role as a lead manager for public issues of debt securities. It explicitly excludes the company's involvement as a lead manager to public issues of equity instruments and other activities.

?Vedanta jumps 7% after board approves Rs 1,000-cr fundraise via NCDs: Shares of mining giant? Vedanta rose as much as 6.76 per cent to hit an intraday high of Rs 478.80 per share on June 20, 2024. The rise in stock came after the board approved fundraising worth Rs 1,000 crore via non-convertible debentures (NCDs) on a private pavement basis. The NCDs will be listed on the Bombay Stock Exchange (BSE).

?Fertiliser shares rally up to 12%; RCF, Chambal, Coromandel hit 52-wk highs: Shares of fertilizers companies were in demand and rallied up to 12 per cent on the BSE in Wednesday’s intra-day trade on expectations of improved outlook amid hopes of above normal monsoon. Chambal Fertilisers and Chemicals, Deepak Fertilisers and Petrochemicals Corporation (DFPCL), Rashtriya Chemicals and Fertilizers (RCF), Gujarat State Fertilizers & Chemicals (GSFC), Coromandel International, National Fertilizers (NFL) and Paradeep Phosphates were up between 4 per cent and 12 per cent. Of these, Chambal Fertilisers, Coromandel International, NFL and RCF hit their respective 52-week highs.

?HAL shares climb 4% to hit all-time high as Defence Ministry looks to procure 156 light combat helicopters: Shares of Hindustan Aeronautics Ltd. (HAL) jumped over 4% to scale their record high level of Rs 5,479.60 in Tuesday's trade. The defence PSU stock has given multibagger returns in the past one year by rallying nearly 180%. The surge in?HAL's stock price?came after the company informed the exchanges that a?Request for Proposal (RFP) has been issued by the Ministry of Defence for the procurement of 156 Light Combat Helicopters.

SECTOR HIGHLIGHTS

?The IT sector ranked 2nd amongst Nifty Indices, seeing gains of 2.59% recovering from its slump last week. TCS, Infosys, and Tech Mahindra soared post Accenture results.

?Metal Stocks were on the rise this week with the Metal Index gaining 3.32% this week. Jindal Steel, Hindalco, and Hindustan Zinc were the top contributors to the sector.

?Hindustan Zinc share price jumps 4% as Vedanta group co inks zinc supply deal with US battery maker: Hindustan Zinc share price jumped 4 percent in the late morning trade immediately after the Vedanta group company announced that it will supply zinc to the US-based battery maker AEsir Technologies. At 11 am, the stock was up at Rs 676.55. Hindustan Zinc said in an exchange filing that it will be AEsir Technologies' preferred supplier for zinc. AEsir's batteries are used for large-scale energy storage in industries settings. The company's stock has grown nearly 120 percent in the last 6 months, supported by?the proposed demerger, the management focus on deleveraging, and robust earnings.

BUSINESS-INDUSTRY UPDATES

?SEBI clears Ola Electric's ?5,500 crore IPO: Capital markets regulator SEBI (Securities and Exchange Board of India) has given its approval for the initial public offering (IPO) of the country's largest electric two-wheeler maker Ola Electric. This would be the first by an?EV startup in India and amongst the biggest new-age IPOs in 2024. Ola Electric promoter Bhavish Aggarwal will offload 4.7 crore shares through the OFS in the IPO, which is 50% of the total OFS. The firm has exercised the option to raise ?1,000 crore via pre-IPO placement, and in that case, the fresh issue size will be reduced to that extent, it had mentioned in its DRHP.

?Zepto raises $665 million in second funding round in a year: Indian grocery startup Zepto has raised $665 million in an investment round, in less than a year of its last fundraising, underscoring the high demand for services that deliver essentials within minutes. The deal adds heft to Zepto's balance sheet as it competes with Zomato-owne Blinkit and Swiggy's Instamart in a highly competitive market marred by high investments and thin margins. Flipkart is also reportedly preparing to enter into the quick commerce space. The company's gross merchandise value, or the value of total transactions through the platform, has "multiplied year-on-year to a base of $1 billion+" and over 75% of its dark stores are profitable at a core operating level.

?WestBridge Capital sells 1.7% stake in AU Small Finance Bank for ?845 crore: Private equity firm WestBridge Capital divested on Wednesday a 1.7% stake in the AU Small Finance Bank for ?845 crore through an open market transaction. WestBridge Capital, through its affiliate Westbridge AIF I, sold shares of the Jaipur-based AU Small Finance Bank through a bulk deal on the National Stock Exchange (NSE). Westbridge AIF I offloaded 1.30 crore shares, amounting to a 1.75% stake in AU Small Finance Bank. The shares were disposed of at an average price of ?650.08 apiece, taking the transaction value to ?845.10 crore.