*ABM Morning Update*
*REPORTS OF NEW VARIANT, NEW LOCKDOWN MEASURES IN EUROPE PLAY HAVOC ON INDIAN BOURSES LAST WEEK*
*Global markets :*
Stocks fell sharply in a holiday-shortened session Friday in which the Dow posted its worst day (down 2.5%) since Oct 2020. The pandemic and COVID variants remain one of the biggest risks to markets, and are likely to continue to inject volatility over the next few weeks.
The WHO on Friday labeled the omicron strain a "variant of concern." While scientists continue to research the variant, omicron's large number of mutations has raised alarm. Preliminary evidence suggests the strain has an increased risk of reinfection. The variant was first reported to the WHO from S. Africa and has been found in the U.K., Israel, Belgium, the Netherlands, Germany, Italy, Australia and Hong Kong, but not yet in the U.S. On top of Covid developments, investors are also anticipating key economic data to be released this week. The November jobs report on Friday is expected to show solid jobs growth (Exp: +581,000). The ISM manufacturing PMI (to be released on Wednesday) is also expected to be strong.
*Domestic markets :*
The benchmark indices suffered worst trading in 7 months as new virus strain spooks investors. The fears that a new strain could fuel outbreaks in many countries, sent a wave of risk aversion across global markets on Friday. In sync with global markets, Sensex plunged 1,688 points i.e. 2.9% while Nifty erased 510 points.
Sectors impacted by economic restrictions and slowdown were most adversely impacted with Nifty Auto down 4.3%, Nifty Bank – 3.6% while Nifty Realty took a severe hit, as it nose-dived 6.3%. Only silver lining was the pharma space with Nifty Pharma up 1.7%. Increased probability of more tests owing to covid risk, higher medicinal demand & defensive nature of the sector supported the positive momentum in the sector.
RBI stated it has accepted 21 out of the 33 recommendations submitted by a central bank working group on ownership and corporate structure for Indian private sector banks. The cap on promoters’ stake may be raised from the current levels of 15% to 26% of the paid-up voting equity share capital of the bank. The development would be positive for Indusind and Kotak Bank. Former’s promoter have shown interest to increase stake in company which will give confidence to market while for Kotak, clarity emerged that promoter would not be required to reduce stake in future. Meanwhile, RBI has kept on hold to allow corporates to promote universal banks. Besides, on the positive side, Banks can collapse NoFHC structure if they don’t have other group entities.
*Key things to watch out for the week –*
*i) COVID –* Increase in cases of COVID globally, will keep the market nervous. Further market will also react to the WHO comments which classified new variant as ‘variant of concern’.
*ii) Crude Oil Prices & FII Selling -* Oil prices took a big hit during the week, as new COVID-19 variant cases raised fears of demand slowdown when the supply started increasing. The FII selling intensified in the month of November given the valuation concerns and rising expectations of early rate hikes in the US.
*iii) Auto Sales -* Will be keenly watched as chip shortage issue is likely to hit PV sales growth.
*iv) IPO & Listing -* Go Fashion will make a debut on the bourses on Nov 30. Further Star Health IPO opens on 30th Nov.
*v) Economic data –* GDP and PMI data will be released during the week.
*Quote for the day: “I do not think that the exuberance is over yet. All of these banks will continue to print money and what will happen when things get bad, when the markets go down? They will panic and they will print more money. They do not want to lose their jobs. They would do whatever it takes to keep their jobs. It is not good for you and me. It is not good for the world but they do not care about you and me. They care about their jobs. So when things start getting soft or going down, they will print more money and we will have a big rally and that will probably be the last rally.” - Jim Rogers*
*Focus for the day:*
1. US Pending Home sales
2. US Fed Chair Powell testifies
*Key corporate developments/policy actions:*
1. MSCI to drop Adani Port, REC and IPCA from its 4 climate indices. BEL, SRF, Tata Power amongst 6 companies likely to be added.
2. Jio announced an increase in prepaid mobile tariff rates by 20%, similar to peers.
3. Tyre companies to be in focus as Indian natural rubber prices now at an 8-year high, and inching towards the Rs 200/kg
4. MD and CEO Vipin Sondhi of Ashok Leyland has expressed his intention to resign from the posts effective December 31.
5. Tata group is in talks with three states to invest up to $300 mn to set up a semiconductor assembly and test unit.
6. ITC to pick up 16% stake in Mother Sparsh
7. Tega Industries sets IPO price band at Rs 443-453 per share
*Fund Flow:*
FII: (-) Rs 57.86 bn; DII : (+) Rs 22.94 bn
*Stocks to focus :*
Large Cap: Apollo Hospital, Divis Lab, HDFC Bank, HCL Tech, HUL, Infosys, Jubilant Foodworks, L&T, Maruti, Tata Steel
Midcap: Aavas Fin, Amber Ent, Apollo Tyres, Gmm Pfaudler, Poly Medicure, Sumitomo, Vaibhav Global, Varun Beverages