Hello there Espresso Lovers! There is no better day in the week than Saturday, not just because we get to unwind after the long week, but its an opportunity to meet you all as well! And if you thought earnings season is the only time when we get content, meet the week gone by. There is a lot of brew to give you. And therefore, a disclaimer: The episode is a little longer. But no ad breaks! So here we go!
The Aditya Birla Group is back at it again. They did it earlier with the paints sector with Birla Opus, now it’s the turn of the cables and wires business. UltraTech on Thursday launched UltraVolt, its cables and wires division, three months ahead of schedule, and while consumers will now be spoilt for choice, the ones who are sulking are the incumbent players. Mr Kumar Mangalam Birla embodies the spirit of Aa Dekhein Zaraa, kisme kitna hai dum…and implements it as a part of his business strategy too!
Over the last week, KEI Industries, RR Kabel, and Polycab, the incumbent wires and cables companies, feature among the 10 worst performers on the Nifty 500. In fact, RR Kabel and KEI are the top two. Together, these three companies lost ₹25,000 crore in market capitalisation last week. Analysts too are a divided house. Some warn of near-term de-rating for the sector, while some say sentiment is negative, yes, but no significant impact on business. This one isn’t ending anytime soon, so keep your wires and cables…eh…popcorn ready to see how this plays out.
How much does $136 billion mean to you? First of all, it would be difficult to even convert this into Indian currency because we’d have to spend time Googling how many zeroes the figure would have. Okay, let’s rephrase the question. What will you do if someone gives you $136 billion? Of course, you can say Bhagwaan ka dia hua sabkuch hai, Daulat hai, shohrat hai, izzat hai, but how will you spend it? Maybe that’s a question India’s banks will have to answer soon enough.
The RBI’s Forex Mobilization scheme has brought in not one, not two, but a full $136 billion into the banking system, that is roughly ₹13 lakh crore worth of rupee liquidity. And this, despite the RBI closing the window a month ahead of schedule. With this kind of money, there are more questions than answers. How will banks use this money? Will the RBI take any action to flush out some of the excess liquidity? Will risky borrowers now come into play because there is so much money to be used? There is a lot to answer. Here’s CNBC-TV18’s All Things Banking & Finance Ritu Singh explaining the implications to you.
While the street appears to be cheering this, there is one important thing to remember. All of this money isn’t a gift or a donation. It will have to be returned on maturity. That is something that needs to be accounted for. That is something that World Bank Executive Director Neelkanth Mishra also told CNBC-TV18 in this exclusive interaction: not to race your horses, and that this money only buys us some additional time for potential crisis management. Other experts also shared similar views. When we need to know something about the economy, we go to Latha Venkatesh. So here’s her, interacting with Kotak’s MB Mahesh on this and the implications going forward!
Yes, yes, I know we spent too much time on this. But as they say, Paisa bolta hai. So more the money, more the attention. Let’s move on to the other hot topic of the week gone by – IPOs. It almost feels as if people had forgotten that IPOs existed between January and June, but since June, all they remember is “we need to do an IPO.” Everybody wants to do one. On Wednesday, September 9, we will have 10 IPOs open for subscription simultaneously. Read that again. 10. That is including six of those that will open on the same day! I guess now marriage proposals will shift from “Hamara ladki sarkaari naukri karti hai“, to “Hamari ladki ki company ka IPO hone wala hai!” Well, change is the only constant, so why not! How about IPO Shaadi.com?
Well, the last two Fridays have seen two companies debut on Dalal Street that doubled investor wealth on the day of their listing. Tempsens Instruments and ESDS Software. Who said the market is not doing anything? The Primary markets are hot as ever. The average listing premium since August has been 30% to 35%. And it’s not just institutions, retail investors are laughing their way to the bank too. Their average subscription, which was a paltry 7.5x in the first half, has now gone up to 30x. Of course, the real game begins when lock-ins end and numbers are reported, but for now, they too are very much in the money, at least those lucky ones who got allotments in these IPOs. A very popular commercial always began with, “Aur Uncle, kya chal raha hai?” We knew the answer then, we know the answer now too. Just that the answer is a different but obvious one! Here’s us discussing the same on Editors Playbook!
Samir Arora has an idea to stop the supply of paper in the market. Boycott everything for 30 days. He said that in half jest, but on a serious note, he is of the view that the market underperformance cannot always be attributed to FII selling. In fact, FIIs have been net buyers in the last two months. It is this supply of paper, IPOs, Block Deals, QIPs and so on, that is stopping the market from doing well, taking the liquidity towards them. Here’s the complete interaction.
Of course, no episode is complete without Donald Trump – the actor who’ll throw a tantrum if he does not have a dhoom tana na na na shot. His guns are back at the Fed. The August jobs report turned out to be way hotter-than-expected. He still wants the central bank to reduce rates and is hoping for Kevin Warsh to turn around and tell him “It’s done, bro!” But that does not appear to be the case. The probability of the Fed raising rates on September 16, which fell to 50% after Governor Christopher Waller’s dovish remarks, is now back at 60% after the payrolls data. If the Fed does not cut rates, Trump wants to suspend trading with countries with which the US maintains trade deficits. The Next Episode of Saas (Trump), Bahu (Fed), and Interest Rates unfolds on September 16 on an electronic device near you.
We told you earlier about HDFC Bank who just cannot catch a break. Soon after our last episode, its MD & CEO Sashidhar Jagdishan said that he does not want to seek re-appointment for another term, sending the street into a tizzy again. If all the headlines surrounding India’s largest private lender (That position is under threat too) were not enough, this added to it. Some now say this will add to the uncertainties surrounding the bank, while some say this at least gives some clarity on the road ahead for the lender. Nimesh Chandan of Bajaj Asset Management holds it in his portfolio and believes the uncertainties are coming to an end. We’ll let you decide which camp you guys are in.
The next week is set for more action, not just on the IPO front, but for many other things. The global markets will be watching for the US inflation data on Thursday and Friday, the last one before the Fed policy, the European Central Bank announces its interest rates decision, SEBI will issue its consultation paper on CAS, China and Japan will announce their inflation and GDP prints, respectively, while our own weekly expiries, IPOs and listings continue as well. There is plenty to keep track of, and we will do so with utmost sincerity.
For now, we take your leave on this edition of Markets Espresso. Before we do that, here’s wishing everyone a happy Janmashtami and a very happy Teachers’ Day! To all our teachers, we owe our utmost gratitude, and of course, our current biggest teacher – MARKETS! Do tell us how and where we can improve, but do not forget to hit that SUBSCRIBE button, either! Until next week, IPOs ki Jai Ho!
