Daily Market Updates – Jul 28th 2020

unnamed Daily Market Updates – Jul 28th 2020

 

SEBI has slapped a fine of Rs.1 crore on CARE Ratings over lapses in the RCOM case. This pertains to the default by RCOM on its principal repayment of Rs.375 crore and the interest payment of Rs.9.75 crore. While the default happened in Feb-17, CARE downgraded the rating to Default category in Mar-17. SEBI has observed that CARE had failed to monitor the factors that impact the creditworthiness of RCOM. SEBI also pointed out that CARE did not initiate any action even after RCOM failed to furnish the no-dues statement or NDS even after 1 year. The penalty is also supposed to be a deterrent for the future.

United Spirits reported a 46% fall in net revenues to Rs.3829 crore for the Jun-20 quarter. This was largely on account of a total lockdown for over a month leading to tepid sales. For the quarter, United Spirits reported a net loss of Rs.215 crore. The company also booked an extraordinary item of Rs.75 crore towards the Bar Initiative. Essentially, it was the zero-sales for a full month that impacted the profits of the company. However, United Spirits has reported that on a sequential basis, the months of June and July have started showing growth, which could be good news for the September quarter.

Gold touched high in the Indian bullion market and also in the global market. In the global market, gold crossed $1943/oz, the level last seen in September 2011. In India, the price of gold crossed Rs.53,500/10 gram. The sharp spike in the price of gold globally has been led by the rising uncertainty surrounding the US-China trade war, the likelihood of a prolonged slowdown in growth and consistent debasement of currencies by central banks across the world. Indian gold prices are determined by international gold prices and also by the depreciation of the rupee versus the dollar.

CDSL, the only listed depository in India, reported a 67% jump in net profits to Rs.46.73 crore for the Jun-20 quarter. Total income during the June quarter was up 12% at Rs.86 crore. CDSL has benefited in two major ways during this lock-in period. Firstly, its depository services have continued unabated during this period and that has ensured robust growth in revenues for the quarter. At the same time, there has been a spurt in fresh trading account openings during the lock-in period and since every trading account has to be accompanied by a demat account, CDSL has turned out to be a beneficiary.

In the last 3 months, the one large stock that has clearly outperformed all other asset classes has been Reliance Industries. The stock has appreciated over 140% in the last 4 months since the bottom made on March 24, 2020. This has created a unique situation wherein RIL has virtually become too big a component of the BSE. Consider these numbers. The BSE with almost 5000 listed stocks has a market cap of $2 trillion. Out of that Reliance Industries alone has a market cap of $200 billion and that means one stock accounts for 10% of the market cap with the other 5000 stocks accounting for the balance 90%. Experts concede that never has the skewness in favour of one stock been as high as it has been in the last 3-4 months. RIL is already the most valuable company in India by a huge margin.

FPIs have continued to be net sellers in debt even in July. While yields are higher on Indian bonds, the near default rating is not making investors comfortable. Also, the risk-off money is going to safer markets. To understand that, consider these numbers of limit utilization. In the G-Sec category, only 41% of the available limits are currently utilized. In the SDL category, the utilization is just 1% clearly showing that FPIs are not keen on state paper at all. The utilization in corporate debt is 36%. In each of the categories, the utilization of long term category is still lower.

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