Market Update

RBI:

As widely expected, RBImaintained the status quo on interest rates in its Monetary Policy on December 4, and extended its commitment to maintain an accommodative monetary policy for this financial year and into the next fiscal, to support economic growth which has been severely impacted by Covid-19. The committee raised its growth and inflation expectations, in a clear indication that it won't change its benchmark interest rate soon.

The panel, which cut rates by 115 basis points since the covid-19 outbreak in March, has kept rates on hold since May.

Changes for debt fund investors?

For debt fund investors, there is no significant change at least in the near term however, Portfolio Specialist, shares a debt fund portfolio mix for investors post the RBI's MPC. According to them, a debt portfolio could be allocated in the following manner: "liquid/ultra short term categories can be minimal at around 5% to 10%, short term (including Banking & PSU, Corporate bond funds) at 25% to 35%; moderate credit risk funds at 8% to 13%; medium to long-duration funds (with AAA & AA rated /gilt exposure) – 17% to 25% and long duration funds (gilt) – 12% to 17%."

SEBI: Franklin Templeton Case

The Supreme Court has directed a stay on redemption requests from investors in the debt schemes wound up by Franklin Templeton. Furthermore, the court has permitted Franklin Templeton to call a meeting of unitholders to seek their consent and approval.Unitholders were given 3 options from FT and they have to decide how to proceed with the liquidation of the money which is recovered so far.

The Supreme Court also said that SEBI has a ‘lot to answer for’ and that they will have to take responsibility. The court said that SEBI could have allowed a moratorium of 60 days to Franklin Templeton, but allowed a moratorium of only 10 days.

The court said that much of the confusion was caused due to SEBI’s ‘sketchy’ regulations, and asked the regulator’s counsel if its client was satisfied with the language of its norms which affect even the common man. In its argument, Franklin Templeton’s counsel said that the asset management firm wanted to have a meeting with its unitholders and that it would be able to prove that 95 percent of them would approve the winding up of the schemes. Also, the FT counsel argued that no redemption should be allowed as it would cause a run on the schemes.

The Supreme Court will now hear Franklin Templeton and SEBI's plea next week.

Markets:

India’s GST collection remained above the Rs. 1-lakh-crore-mark for the second consecutive month as consumption picked up amid the festive season after easing of lockdown restrictions. Further, India managed to trim down its heavy trade deficit to USD 9.96 billion from $12.75 billion earlier and clogged better than expected GDP figure with a contraction of 7.5% vs a much higher contraction of 23.9% in the April-June quarter, justifying the recovery mode. Way back at the start of pandemic India was at the bottom of any list amongst major economies in terms of macros but it has witnessed a turnaround and is now relatively well placed on the world map. No wonder the collective wisdom of the Market was far ahead and eventually fundamental numbers started reflecting the same taking markets to justified record highs.

Most Volatile Stocks of the Week:

Tata Chemicals | The stock price was up 28 percent after Promoter Tata Sons acquired 0.7 percent equity stake in Tata Chemicals via open market transaction. Tata Sons bought 18,07,245 equity shares in Tata Chemicals at Rs 420.92 per share on the National Stock Exchange (NSE)

SpiceJet | The share price gained over 26 percent after the government said that airlines in India will be able to sell seats up to 80 percent of their pre-COVID capacity on domestic flights, up from the existing 70 percent, in a further relaxation of restrictions for the sector hammered by the COVID-19 pandemic

Steel Authority of India | The stock was up 18 percent. The company reported a 7 percent growth in its crude steel production during November 2020. Production stood at 1.417 million tonnes in November 2020 compared to 1.328 mt in November 2019.

Cadila Healthcare | The stock rose over 11 percent on reports the drugmaker is expected to introduce its COVID-19 vaccine by March next year if all goes well, according to media reports. The drug firm Zydus Cadila said it has received the approval from the Drugs Controller General of India to start phase 3 clinical trials with its biological therapy PegiHep in COVID-19 patient.

Steel Authority of India | The stock was up 18 percent. The company reported a 7 percent growth in its crude steel production during November 2020. Production stood at 1.417 million tonnes in November 2020 compared to 1.328 mt in November 2019.

Adani Power | The stock surged over 55 percent last week. The company won short-term contracts for the supply of 6,100 megawatts (MW) of electricity in auctions held by the Punjab government for procuring a total of 7,000 MW.