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Morning Capsule: Your pre-market news update

Publish date: 22nd October, 2019

Stocks usually react to news developments. This is why investors and market participants usually keep a close eye on the news. It can give stock ideas and a general sense of a market trend.

Here’s a look at the news flow yesterday:

Sensex rallies past 38,000 as pre-Diwali rally lasts for sixth day in succession

The pre-Diwali euphoria was visible in the market in the previous week as the Nifty and the Sensex gained more than 3.5% during the week giving positive returns for 6 days in succession. The key sentiment driver in the coming week will be the announcement of assembly election results on 24th of October. Exit polls have estimated a decisive victory for the ruling NDA combine.

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Brent crude falls by 99 bps to $58.83/bbl on weak demand concerns

Weak demand continued to be the major concern for oil as the price of Brent crude again dipped below the $59/bbl mark. In the previous week, the oil prices had made a feeble attempt to cross above the psychological $60/bbl mark but that could not sustain. Limited growth visibility from the US-China trade war and the BREXIT uncertainty appears to be hitting oil demand for now.

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US-India trade differences fully sorted out; confirms Piyush Goyal

Commerce Minister , Piyush Goyal, has confirmed that most of the major trade related differences between India and the US have been sorted out amicably. More details are expected over the next few days. This deal is intended to reverse the retaliatory tariffs imposed by both India and the US on each other and also America’s decision to withdraw preferred status given to Indian exports.

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Mutual Funds continue to attract the tech savvy millennials in India

Young India appears to continue to gravitate towards equity and ELSS funds considering its wealth creating potential and flexibility. In the realm of debt funds, most millennials prefer the instant redemption liquid funds more than long term debt funds. According to CAMS data, millennials in the 20-35 age group accounted for 47% of the new mutual fund investors on-boarded.

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NBFCs fall back on securitization as other funding sources dry up; ICRA

According to ICRA, securitization volumes could touch record highs during the current year as creation of pass-through certificates and selling securitized receivables could be the best option for NBFCs to raise funds. Banks have been lending to stronger NBFCs but mutual funds are almost absent in the lending market. NBFC securitization volumes touched Rs.236,000 crore in last one year.

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Boris Johnson confirms that BREXIT will happen on October 31 as scheduled

After the Boris Johnson government narrowly lost the vote in the House of Commons on Saturday, Johnson had sent an unsigned note to the EU requesting for further postponement. However, this puts the entire onus on the EU, which they may not be willing to take. Technically, the UK could be on target to leave the EU on October 31, with or without the BREXIT deal.

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Exit polls predict landslide win for NDA in Maharashtra and Haryana

In the all important state of Maharashtra, the consensus of exit polls has given 164 to 192 seats out of the total 288 seats to the ruling NDA with just about 72-90 seats for the Congress / NCP combine. The exit polls have predicted a similar decisive victory for the NDA in the state of Haryana also. The markets are likely to interpret this mandate as a vote for continuation of the reforms process.

Other news highlights

• The government is planning to invite preliminary bids for 100 per cent stake sale in Air India next month and already some entities have expressed interest in the national carrier, sources said. (BS)
• Tata Steel Europe, a subsidiary of Tata Steel India, has decided to cut 2,500 jobs, or 25 per cent of its work force, in Europe to save $930 mn in costs, Dutch media outlet NH Nieuws reported. (BS)
• Lupin gets US FDA nod for Divalproex Sodium Tablet (250-500 mg). (MC)
• Tata Motors to consider raising funds by way of issue of one or more instruments on October 25. (MC)
• The Enforcement Directorate (ED) is examining a real estate transaction worth Rs 1.21 bn between Essential Hospitality (EHPL), a Dewan Housing Finance (DHFL) associate group firm, and Charak Pharma, an entity controlled by Raj Shroff, son-in-law of Sushilkumar Shinde, former Maharashtra chief minister and ex-Union home minister. (BS)
• Not one but two oil companies - BPCL and HPCL - may go under the hammer this fiscal with state-owned oil and gas explorer ONGC now looking to sell its stake in recently-acquired refiner HPCL to a strategic investor, possibly an overseas oil company, to regain debt-free status of the company existing prior to the expensive buy. (ET)
• Muthoot Finance raised $450 mn by selling foreign currency bonds to international investors across the globe in its maiden issue of such an instrument. (ET)
• A whistleblower complaint against Infosys, alleging unethical practices to boost short-term revenue, has led to a massive sell-off in the company’s American depositary receipts (ADRs). News reports say the whistleblower complaint was sent to the company’s board on 20 September. Still, the board has no adequate response yet for investors after a month has passed. All the company said in a statement to the stock exchanges is that the complaint has been placed before the audit committee and will be dealt with in accordance with its whistleblower policy. (Mint)
• The board of ONGC Videsh (Subsidiary of ONGC) will likely consider a proposal to float its shares at its next meeting in November following a government nudge to do so, people familiar with the matter said. (ET)
• Several existing overseas investors of Ujjivan Financial Services may pick up stake in its banking arm, Ujjivan Small Finance Bank, through the Rs 12 bn IPO the lender plans to launch before Dec. (ET)
• SBI has sought immediate government intervention to salvage gas-based power plants with total capacity of 25,000 mw before some Rs 1 lakh crore loans become non-performing assets. (ET)

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By: Sandhya Kannan, Head – Content