Midnight News Update – Jul 07th 2020

unnamed Midnight News Update – Jul 07th 2020

The Sensex rallied by 466 points on 06 July led by stocks like HDFC Bank and Reliance Industries. The big trigger for the stock markets came from the announcement that both India and China had chosen to withdraw from the Line of Actual Control or LAC. The markets had been slightly jittery since the Chinese incursions first began in late May but this will go down as a diplomatic victory for India and a sigh of relief for the markets. Of course, there is a major concern in that India has now emerged as the third most COVID infected country in the world after the United States and Brazil, overtaking Russia.

Vijay Sekhar Sharma, the founder of Paytm, will take a 10% stake in Raheja QBE Insurance Company, a unit of Prism Johnson which is part of the Raheja group of Mumbai. This is the first insurance foray of Paytm which owns one of India’s largest digital platforms. In the post demonetization era, these digital platforms got a big boost and they got a second boost from the COVID lockdown. This acquisition will be subject to IRDA approval. Once this is done and dusted, Paytm becomes a licensed insurance policy originator in general insurance and it can use its digital franchise to sell insurance to clients.

Tata Consumer Products now plans to emerge as a full-fledged FMCG company. It may be recollected that TCPL was formed by the merger of Tata Global Beverages and the salt business of Tata Chemicals. The merged entity plans to strengthen its distribution and marketing channels with a view to making its products available across India. The idea is to create a vast portfolio of FMCG products so that TCPL emerges as an integrated food and beverages company. This includes the tea, coffee, Starbucks and salt business and will be adding a plethora of food and beverage products to its portfolio to broaden it.

HDFC Mutual Fund proposes to roll over its closed-ended HDFC Equity Opportunities Fund – Series II by another 18 months. This closed ended fund originally had a maturity period of 1126 days. The scheme has AUM of Rs.955 crore and the unit holders need to give consent to roll over their units by July 13. In the absence of consent, their money will have to be returned to them at the extant NAV. At the end of 1126 days, the NAV of the fund is almost 16.62% down and this could be higher if exit loads and other costs are factored in. The fund has been underlining the merits of staying invested for a longer period.

Asia’s equity valuations as measured by the PE ratio have touched a 10-1/2 year high. The MSCI Asia Pacific Index currently quotes at a P/E ratio of 15.62 as compared to 14.34 last month. This kind of peak valuations was last seen in December 2009. This was more because benchmark indices in markets like India, Hong Kong, Taiwan and Philippines have surged over 6% in the last one month. These steep valuations were driven by a surge in liquidity as well as hopes of an economic recovery in the US and China. In the Asian context, the most expensive markets were New Zealand with P/E ratio of 30.7, India with P/E of 19.3 and Malaysia with P/E ratio of 17.4. For the Indian and Chinese markets, the latest thrust has come from both their armies deciding to withdraw from the Line of Actual Control.

On a day when RIL gained 3%, the overall market cap of Reliance breached the Rs.12 trillion marks. The stock has touched a peak level of Rs.1848, gaining more than 100% from the lows of late March 2020. The latest thrust came after Intel Capital became the twelfth marquee investor in Jio Platforms having invested Rs.1895 crore. With this stake sale, RIL has managed to place 25.07% of Jio Platforms with investors raising Rs.117,500 crore in the process. The markets are celebrating that this combined with the proceeds of the rights issue should be sufficient to make RIL a company with zero net debt in 2021.

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