Second straight weekly loss for Sensex as private banking, oil & gas stocks tumble

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian equity benchmarks took a second straight weekly hit dragged by weakness in private sector banking stocks primarily, along with oil & gas and IT shares. Broader indices also extended losses to a second week.

Financial results remained in the spotlight. A mixed show by India Inc and bearish foreign institutional investors kept the pressure in the market. 

For the week ended October 29, the Sensex index shed 1,514.7 points to settle at 59,306.9 and the broader Nifty50 benchmark lost 443.3 points to 17,671.7 — falling 2.5 percent each.

The Nifty Midcap 100 fell two percent for the week and its smallcap counterpart slid 1.9 percent.

Highlights of the week gone by

Morgan Stanley downgraded Indian equities over expensive valuations, joining Nomura, turning investors cautious over the recent surge to a series of peaks.

Weak global cues also kept investors on the back foot.

“Global markets turned weak although the European Central Bank decided to keep policy rates unchanged despite inflationary pressure while slow GDP growth in the US tested investors’ confidence,” said Vinod Nair, Head of Research at Geojit Financial Services.

Quarterly financial results of Asian Paints, Hindustan Unilever and Mphasis met Street estimates.  On the other hand, companies such as TVS Motor, JSW Steel and UltraTech fell short of analysts’ expectations.

Back-to-back record highs in the Bank Nifty index, taking it past the 41,000 mark for the first time, were followed by a sharp U-turn on profit booking as Earnings were mostly in line with estimates.

In the medium to long term, the banking sector is expected to perform well, according to Yesha Shah, Head of Equity Research at Samco Securities. Management commentaries from most banks indicated a strong festive season and an optimistic growth outlook, she said.

Globally, Evergrande remained in focus as the financially troubled Chinese developer came close to yet another deadline to pay interest on certain bonds.

Nearly all of NSE’s sectoral indices succumbed to negative territory, with the Nifty Private Bank being the worst hit — down 3.6 percent for the week. The banking and financial services gauges fell 2.8-3 percent, though the Nifty PSU Bank eked out a gain of 0.1 percent.

“With larger banks reporting their Q2 results, Bank Nifty remained a focal point as the majority of these behemoths either beat or performed in line with market expectations. Banks’ PAT increased as interest income increased and asset quality improved, which was partially offset by interest rate reversals, increased slippages, and declining margins,” said Yesha Shah, Head of Equity Research at Samco Securities.

The banking sector is expected to perform well in the medium to long term, as management commentary from most banks indicates a strong festive season and an optimistic growth outlook, she added.

Losses weren’t limited to financial stocks. The oil & gas and IT barometers also tumbled 2.8 percent each. The Nifty Metal fell 2.2 percent.

In the Nifty50 universe, as many as 37 scrips took weekly cuts. Axis Bank, Adani Ports, NTPC, Bharat Petroleum, Coal India and Kotak Mahindra Bank were the worst hit. On the other hand, UltraTech, ICICI Bank, UPL, Asian Paints, Shree Cements and Tata Consumer were the top gainers.

Nifty gainers

Nifty losers 

In the Nifty Midcap 100 and Smallcap 100 packs, Dhani Ibull Ventures, RBL Bank, Coforge, Rail Vikas and Sterlite Tech — down between 8.9 percent and 18 percent — were the top losers. Ramco Cements, Canara Bank, Oil India, Tanla Solutions and Chambal Fertilisers — up 7.5-14.8 percent — were the top gainers. 

Almost 350 scrips on BSE 500 — the broadest gauge on the bourse — declined for the week.

The road ahead

Some 350 companies are scheduled to post their quarterly numbers in the coming week, including HDFC, SBI, Tata Motors, Eicher Motors, Hindustan Petroleum, Bharti Airtel, Aditya Birla Fashion, Godrej Properties and Dabur.

A private survey on manufacturing trends in the country due on Monday will be tracked to assess the pace of economic recovery from the pandemic lows.

Globally, all eyes will be on the US central bank’s decision on interest rates and monetary policy due in the middle of the week.

Also Read | D-Street Diary: IRCTC investors railroaded, perils of F&O, distribution game

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Game Theory: What StanChart’s Tinwalla learnt about business strategy from wildlife photography

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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We live in a world of instant gratification, expecting everything to come to us instantly. However, my interest in wildlife photography has truly helped me relearn the lost art of patience. While we are completely immersed in a ‘right now’ culture, unperturbed Mother Nature continues to offer unique and breathtaking moments to those willing to patiently wait.

My interest in wildlife photography began about 15 years back when my friend took me for a tiger census activity in Ranthambore. I had volunteered for the activity as it seemed quite exciting, but I didn’t know what to expect.

When we arrived, we were given a pen and a paper and asked to sit for 24 hours on a small machan near a waterhole. It is one of the few water bodies where predators and prey could congregate to drink water on a hot summer day.

The temperature was 46 degrees, and when I started, I was not sure how long I would last. However, as the day passed, my excitement kept me going. It was a feeling unlike any I had quite experienced before. And I almost felt like I could feel the thrill of adventure graze against my skin.

My senses were completed ignited as I strained to listen for the slightest rustle and scan my surroundings for the slightest movement as the anticipation continued to build up inside me.

Despite expecting the tiger to come to drink water, I could not help but be in awe when I finally saw the mighty creature. I don’t think I had seen anything quite as magnificent, and the visual of dominance coupled with grace left me awestruck.

From then on there was no looking back. Since then, I have visited every tiger reserve in India, including the Sundarbans, both on the Indian and Bangladesh side.

The tiger is the apex predator who matches his raw power and strength with an equal amount of intelligence and elegance. This is probably what makes it one of the most remarkable animals in the world.

In fact, for most tourists, being able to spot a tiger is often the sole success criteria of a safari. My endless fascination with the incredible species has often led me to reflect on the behaviour of the mighty beast and how I can take away some important leadership and life lessons from the great creature.

Tigers never attack their prey at first sight

A tiger does a lot of planning and homework, sometimes for hours before launching its final attack. It carefully stalks the prey, taking into account various factors and scenarios before it finally takes any decisive action.

There is an important lesson to learn here. People often feel they need to immediately launch into action or present a point of view. But doing so is a mistake if you are not ready. It is important to start thinking ahead about how you will react to a situation before it happens.

Additionally, good planning and a solid strategy is the foundation for any activity or project you undertake. It is crucial at any phase of your business as it helps you understand challenges better while helping you define specific goals and courses of action.

Sun Tzu said it best in The Art of War: “Know the enemy and know yourself; in a hundred battles, you will never be in peril.

Tigers are fierce predators, able to take down prey twice their size. While most animals prey on animals that are smaller than them, a tiger often aims for large prey like bears, rhinos and crocodiles.

They can do so by first patiently learning enough about their competitors to find the exploitable gap.

Similarly, when going up against competitors, I think it is important not to be afraid to engage with Goliath and explore what are your competitors missing and what their weaknesses are.

Just because your competitor is bigger doesn’t mean they get to dictate how you act and behave. Instead of playing their game, disrupt the space by creating a modified situation that leverages your strengths and exploits their weaknesses.

Tigers are versatile

Tigers can live in a variety of forest and grassland environments. They can live in temperatures ranging from -35 degrees Celsius in Russia to 48 degrees Celsius in India and can adapt to annual rainfall as low as 600mm to as high as 8000mm.

In terms of leadership as well, versatile leadership, consisting of a wide repertoire of skills and behaviours appropriately applied to changing circumstances is important for having engaged employees and helping teams adapt to unexpected changes. If you can’t approach different problems in different ways, you would be at a distinct disadvantage in today’s business environment.

Tigers can adapt, improvise, and think on their feet

Tiger’s normally go for their prey’s neck but alter their tactics when required.

When attacking a crocodile, a tiger will not bite the crocodile since it is covered with armoured skin. Instead, it will attempt to blind the crocodile with its claws and then flip the crocodile on its back so that it can slash its soft underbelly.

Also, when hunting bears tigers have been known to mimic bears prey to lure unsuspecting bears into their jaws.

This concept is also encapsulated in the United States Marines slogan “Improvise, Adapt, and Overcome”. This mindset allows Marines to deal with any physical, mental, or spiritual hardship.

Life is unpredictable, and there are plenty of opportunities for disappointment and difficulties to creep in. That’s why we all need to get comfortable with discomfort by trying new things and challenging our minds and body in different ways.

As my fascination with the mighty cat and the lessons to be learnt from them increased, so did my passion for working towards the cause of co-existence between humans and wildlife and avoidance of conflict, one of the greatest threats to any wildlife species.

I use my photography as a means to increase awareness and clear misconceptions as I work with the forest department to mitigation measures to avoid any undesirable consequences.

My recommendation to any budding wildlife photographer or nature buff would be to plan a visit to the Kanha and Bandhavgarh National parks. They can offer some of the best tiger sightings, along with some heavenly and diverse landscapes.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Aryan Khan, arrested in cruise drugs case, back home after 22 days in Mumbai prison

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Aryan Khan, son of Bollywood superstar Shah Rukh Khan, walked out of the Arthur Road prison, after spending 22 days in the central Mumbai facility following his arrest during a drug raid on a cruise ship off the city coast.

The 23-year-old, arrested on October 3 by the Narcotics Control Bureau (NCB), walked out of the prison, his home’ since October 8, at 11 am and got into a waiting car, which reached his actual home Mannat in suburban Bandra shortly after 11.30 am.

Half an hour before Aryan came out, his father’s bodyguard got down from a white Range Rover car waiting outside the prison and stood near the facility’s gate. He was seen speaking to policemen posted there. Around 11 am, the car started moving slowly near the prison’s gate and stopped to receive Aryan.

The Range Rover was part of the convoy which left Mannat shortly after 8 am and reached a spot in near the prison around 9 am, where it halted to avoid a traffic jam in the area, an official said. A large crowd of Shah Rukh Khan’s fans had gathered outside the prison since early morning. A sizeable media contingent was also present to cover Aryan’s release from the jail.

Outside the prison, fans and onlookers cheering for Shah Rukh Khan and Aryan and trying to catch a glimpse of the superstar were in for a disappointment as they could not see the actor’s face and had to assume that he was in the vehicle. Outside Mannat, fans across all ages, children, college students and even elderly couple, had showed up to celebrate Aryan’s homecoming. The lane to Mannat’s entrance was jam-packed with crowds. Police and Shah Rukh Khan’s private security had to clear the area for Aryan’s car to move smoothly.

Even after the convoy went inside the bungalow, many fans waited in the hope that Shah Rukh Khan might wave to the eager supporters from the bungalow, as he does annually on his birthday. Among the fans present was a self-proclaimed seer who sat outside the gate of Mannat in the morning to pray for Aryan and “the youth of Maharashtra so that they fall into the trap of drug addiction.” Ahead of Aryan’s release, Mumbai police had increased police presence outside the Arthur Road prison as a precautionary measure to control the crowd, a police official said.

Besides local police, SRPF team was also present and barricades were put up outside the prison, he said. The prison officials collected Aryan’s release order from the bail letter box, which was opened at 5.30 am on Saturday.

Speaking outside the prison entrance, jail superintendent Nitin Waychal had earlier said Aryan would be released between 10 am to 12 noon as other prisoners would also be released along with the 23-year-old. The more release orders, the more time it takes to complete the formalities, he had said.

Speaking to media persons outside the prison, father of Arbaz Merchant, arrested along with Aryan and lodged at the same jail, said his son will be released in evening. Aryan came out of the prison a day after a special court issued his release memo.

He was granted bail by the Bombay High Court on Thursday. Shah Rukh Khan’s actor-friend Juhi Chawla stood as surety for the 23-year-old before the special court, designated to hear cases related to the Narcotics Drugs and Psychotropic Substances Act (NDPS). The HC on Friday afternoon made available its operative order in which it imposed 14 bail conditions on Aryan Khan and his co-accused in the case, Arbaaz Merchant and Munmun Dhamecha, who were also granted bail, stipulating their release on a personal bond of Rs 1 lakh each with one or two sureties of the same amount.

The relief to the trio came just a day before the HC was scheduled to take a two-week break for Diwali. In the five-page order, signed by Justice N W Sambre, the high court said the trio will have to surrender their passports before the NDPS court and shall not leave India without taking permission from the special court.

Also, they will have to attend the NCB office each Friday between 11 am and 2 pm to mark their presence, the HC said. The judge will give a detailed bail order with reasons next week.

Aryan Khan, Merchant and Dhamecha were arrested by the NCB on October 3 and booked under relevant sections of the NDPS Act for possession, consumption, sale/purchase of banned drugs and conspiracy and abetment. Their arrest came a day after the NCB raided the cruise ship and claimed to have seized banned drugs. So far, 20 people have been arrested in the case and two of them were granted bail by the special NDPS court earlier this week.

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Paytm to be among top 50 companies post-IPO worth Rs 18000 crore

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With a post-IPO (Initial Public Offering) valuation of Rs 1,39,378 crore at Rs 2,150 apiece, Paytm will join the elite list of India’s 50 most valuable companies. The proposed Rs 18,300-crore IPO will put Paytm in the 36th position by market capitalisation among listed firms.

Paytm, which was launched in 2009, is India’s largest payments platform in terms of the number of consumers, merchants, transactions and revenue as of March 2021. Its gamut of services includes bill payments and mobile top-ups, Wallet, digital banking and UPI transfers.

It is reported to have over 330 million users, including 50 million active monthly users and 21 million registered merchants on its platform. Its digital banking arm serves 65 million payment bank accounts and holds deposits worth Rs 5,800 crores as of June 2021.

As per the company’s declarations, the total sales for June 2021 stand at Rs 3,186.80 crore. The company is yet to turn profitable and it has posted net losses of Rs 1,701 crore. In terms of debt, its total borrowings stand at Rs 476 crore in June 2021, which is lower than its debt in June 2020, which stood at Rs 544.90 crores.

Analysts say with a valuation of Rs 1.39 trillion, the price to sales will be 47.1x, which looks very expensive.

Of the funds assimilated through IPO, Paytm plans to invest a significant portion in research and development, client and business partner acquisition and customer and merchant retention. About Rs 2,000 crore will be earmarked for new business initiatives, acquisitions and strategic partnerships. And Rs 4,300 will be invested to improve the fintech’s ecosystem.

Also Read | Paytm IPO: CEO Vijay Shekhar Sharma says co may not need capital beyond public offer

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Exclusive: 90% glitches on income tax portal resolved, taxpayers can now file e-returns easily

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Income Tax portal has started functioning properly, as over 90 percent of the glitches on the portal have been fixed, sources told CNBC-TV18 Saturday. Taxpayers can start filing returns on the portal, they said.

Sources said, Infosys will fix the remaining 10 percent glitches in the next 10-15 days, they said. Over 2.25 crore income tax returns (ITRs) in the financial year 2021-22 were filed on the Income Tax e-filing portal as of October 28, 2021. Over 55 percent of these ITRs were prepared using the new IT portal.

The new income tax portal, created by Indian IT major Infosys, has had its fair share of glitches since its launch, prompting finance minister Nirmala Sitharaman to ask Infosys to fix them. Earlier in October, Infosys CEO Salil Parekh had said taxpayers concerns are being “progressively addressed” and that the portal is seeing steady progress.

Also Read | View: New Income Tax portal glitches – Every change is not progress

The Income Tax (I-T) department had launched the new “taxpayer-friendly” portal on June 7. It allows quick refunds, enables interactions, uploads, and any pending actions. The idea was to reduce the processing time for returns from 63 days to one day and ensure that refunds are processed seamlessly.

However, so far, the portal has disappointed taxpayers as they came across over 25 different bugs and glitches. The issues range from long logging in time to the inability to respond to notices.

The company had bagged Rs 4,200 crore in 2019 to develop the portal. It had already developed the Goods and Services Tax portal for nearly 1,400 crores. That portal too had several ‘areas of dissatisfaction’ as the news agency PTI reported in March 2020.

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D-Street Diary: IRCTC investors railroaded, perils of F&O, distribution game

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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“Who got the free pass in IRCTC?” was the most asked question in the market Friday as the wild swings in the stock during the early trading hours led to a handful of traders making a killing and scores of others getting killed. But nearly everyone was certain about one thing: some smart players had access to information the rest of the market did not.

Last week, when IRCTC shares collapsed on heavy volumes after hitting a high of around Rs 6400, the market was abuzz with chatter about some influential players making an opportune exit, and at the same time swinging the stock price through coordinated selling.

By sheer coincidence, if one would like to call it that, plenty of out-of-the-money put options (5000 and 4500 strike) were bought cheaply a couple of days earlier. The buyers of these options were betting on a decline in prices and gain when the stock falls below the strike price. And these traders profited hugely as the options soared nearly 20-fold over the next few sessions when stock price nosedived.

A similar pattern was witnessed again this week when there was heavy interest in deep out of the money put options (800 strike price) hours before IRCTC informed the stock exchange about its decision to split the convenience fee revenues with the Ministry of Railways.

The following morning, the value of these options surged seven-fold as the stock price crashed to Rs 640. Even before the stock had begun its recovery, there was massive action building up in the 750 strike call options.

Buyers of call options are betting the stock price will rise, which it did as soon as the Railway Ministry reversed its decision seeking half of IRCTC’s revenues from convenience fees. The options’ value rose fourfold within a couple of hours, fetching a windfall for traders who had the ‘foresight’ to buy them.

Veteran brokers say the big money in trades based on information not yet public, is now happening through the options market.

Whatever the reason for the Railways Ministry’s flip flop on revenue sharing with IRCTC, it has once again revived the market’s bugbear about PSU stocks—government shifting goalposts midway through the game. This, unfortunately, comes at a time when the market was beginning to warm up to PSU stocks in the wake of Air India’s successful privatisation.

Leverage – a double-edged sword

Many new entrants to the market are slowly learning—at great cost—that leveraged bets can cut both ways. In a rising market, leveraged trades fetch big gains without the need for too much capital.

But when the market corrects too fast, the gains of the past few months can be wiped out in no time. This holds both for those dabbling in futures and options (F&O) as well as for those punting on mid and small-cap stocks.

Some ads for trading apps claim that investing in the stock market is much easier than deciding which vendor to have paani puri from. But veteran brokers point out it is exactly such decisions (on stocks, not paani puri vendors) that have landed many first-time investors in trouble.

With markets rising one way, Indian ‘Robinhoods’ got bolder and kept scaling up the size of their bets, confident they had mastered the game. Of course, they had run into the occasional bear, but more the tame kinds like those in zoos, circuses and on street corners on the leash of a madari.

This left them ill-prepared for an encounter with the more deadly variety that stock markets are renowned for. Brokers say the mauling in many mid and small-cap shares, not to mention F&O trades, has been so severe that many newbies will not be venturing into the market for a while, some permanently.

As for the survivors, they will be taking more measured bets and are unlikely to be seen or heard on social media platforms for a while.

The great wealth (re)distribution

The steep correction over the last few sessions notwithstanding, Old Monk is of the view a one-way downtrend seems less likely. Technical charts are indicating a distribution pattern, meaning many high-flying names may have peaked out for the time being.

Yet, these stocks won’t just collapse. First-time investors may have finally got to know what the term ‘correction’ means. But they are yet to get acquainted with other market terms such as dead cat bounce, relief rally, sucker’s rally, bear market rally etc, which will be slowly revealed to them over the next many months.

Many stocks that have corrected 25-30 percent from their peaks look attractive compared to what they were quoting a few weeks back. Also, many investors who bought the stock at higher levels will be tempted to average their costs by buying at current prices.

So, these stocks could see a temporary bounce but are unlikely to go anywhere near their recent highs. Given the upbeat mood in global markets, the Indian market too could go past recent highs. But the stocks at the forefront of action could be different from the ones that had a fantastic run so far.

So, choose stocks and strategy with care; the easy money has already been made. Growing one’s wealth hereon will be hard work.

Read the previous D-Street Diary columns here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

US FDA clears Pfizer’s COVID-19 vaccine for children

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The United States Food and Drug Administration on Friday paved the way for children ages 5 to 11 to get Pfizer’s COVID-19 vaccine. The FDA cleared kid-size doses just a third of the amount given to teens and adults for emergency use, and up to 28 million more American children could be eligible for vaccinations as early as next week.

One more regulatory hurdle remains: On Tuesday, advisers to the Centers for Disease Control and Prevention (CDC) will make more detailed recommendations on which youngsters should get vaccinated, with a final decision by the agency’s director expected shortly afterwards.

With this vaccine kids can go back to something that’s better than being locked at home on remote schooling, not being able to see their friends, said Dr Kawsar Talaat of Johns Hopkins University. The vaccine will protect them and also protect our communities.

A few countries have begun using other COVID-19 vaccines in children under 12, including China, which just began vaccinations for 3-year-olds. But many that use the vaccine made by Pfizer and its partner BioNTech are watching the US decision, and European regulators just began considering the companies’ kid-size doses.

Also Read | India may start vaccinating children against COVID-19 from October; all you need to know

With FDA’s action, Pfizer plans to begin shipping millions of vials of the pediatric vaccine in orange caps to avoid mix-ups with the purple-capped doses for everyone else to doctors’ offices, pharmacies and other vaccination sites. Kids will get two shots, three weeks apart.

While children are at lower risk of severe illness or death from COVID-19 than older people, 5- to 11-year-olds still have been seriously affected — including over 8,300 hospitalizations, about a third requiring intensive care, and nearly 100 deaths since the start of the coronavirus pandemic, according to the FDA.

And with the extra-contagious delta variant circulating, the government has counted more than 2,000 coronavirus-related school closings just since the start of the school year, affecting more than a million children.

Earlier this week, FDA’s independent scientific advisers voted that the pediatric vaccine’s promised benefits outweigh any risks. But several panellists said not all youngsters will need to be vaccinated, and that they preferred the shots be targeted to those at higher risk from the virus.

Nearly 70 percent of 5- to 11-year-olds hospitalized for COVID-19 in the US have other serious medical conditions, including asthma and obesity, according to federal tracking. Additionally, more than two-thirds of youngsters hospitalized are Black or Hispanic, mirroring long-standing disparities in the disease’s impact.

The question of how broadly Pfizer’s vaccine should be used will be a key consideration for the CDC and its advisers, who set formal recommendations for paediatricians and other medical professionals.

A Pfizer study of 2,268 schoolchildren found the vaccine was nearly 91% effective at preventing symptomatic COVID-19 infections, based on 16 cases of COVID-19 among kids given dummy shots compared to just three who got vaccinated.

The kid dosage also proved safe, with similar or fewer temporary reactions such as sore arms, fever or achiness that teens experience.

Also Read | What happens when the COVID-19 vaccines enter the body? A road map for kids and grown-ups

But the study wasn’t large enough to detect any extremely rare side effects, such as the heart inflammation that occasionally occurs after the second full-strength dose, mostly in young men and teen boys. It’s unclear if younger children getting a smaller dose also will face that rare risk.

Some parents are expected to vaccinate their children ahead of family holiday gatherings and the winter cold season.

But a recent Kaiser Family Foundation survey suggests most parents won’t rush to get the shots. About 25 percent of parents polled earlier this month said they would get their children vaccinated right away.

But the remaining majority of parents were roughly split between those who said they will wait to see how the vaccine performs and those who said they definitely won’t have their children vaccinated.

The similarly made Moderna vaccine also is being studied in young children, and both Pfizer and Moderna also are testing shots for babies and preschoolers.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Paintmakers set to raise prices; right time to add stocks to your portfolio?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Is it a good time to play the recovery theme now? As major paintmakers confirm another round of price hikes to mitigate rising input costs, some say the worst may be behind for the industry.

Positive on the price hikes, most analysts believe the passing on of higher costs to the end consumer should help the paint companies counter recent inflation at least for now. But not many are bullish on the sector as a whole amid alarming valuations.

Asian Paints and Berger Paints confirmed price hikes effective November 12. Nomura said the latest price hike by Asian Paints was larger than its cumulative increases in the past six months. 

The price increases come at a time when the industry has been facing headwinds due to a surge in key raw material, primarily crude oil and its derivatives.

Crude oil has surged 62.8 percent on a year-to-date basis, riding on rising demand amid limited supply.

Here’s how the crude oil benchmark has moved in the last one year:

Paintmakers have lost their appeal on Dalal Street in the recent past.

Indian equity benchmark Nifty50 has risen 27.7 percent in 2021 so far.

Dalal Street was disappointed with Asian Paints’ Q2 show, as its quarterly revenue topped expectations but profit fell short of estimates by a wide margin. The company’s net profit as well as EBITDA performance missed expectations, as its cost of material consumed jumped 72.7 percent.

“In Q2, market leader Asian Paints’ gross margin declined by 966 basis points to 34.7 percent as the company refrained from taking aggressive price hikes in a bid not to spoil the current demand trend in the market. A similar trend was seen in Kansai Nerolac paints also,” Geojit Financial Services Analyst Antu Eapen Thomas told CNBCTV18.com.

Kansai Nerolac posted a 45.3 percent drop in net profit to Rs 92 crore for the July-September period, even though revenue rose 17.1 percent to Rs 1,619.6 crore. Other paintmakers are yet to post their quarterly numbers.

He expects demand to remain robust due to:

• pickup in housing and construction activity
• shorter repainting cycle
• festive season
• urbanisation

Any volatility in crude prices will add pressure on paint companies’ margins, said Thomas. “Due to the unprecedented trend in raw material prices, the input cost as a percentage of revenue was increased to 65 percent compared to 50-55 percent,” he said. The analyst feels Asian Paints’ valuation is elevated, but expects it to moderate on account of margin pressure.

Will the price hikes help investors take their mind off the earnings miss?

Experts see a huge opportunity in paints in the country with the industry expected to register double-digit growth going forward. Demand conditions in decorative paints continue to be robust across segments driven by a recovery in the economy, still struggling against the fallout from the pandemic.

Market veteran Deven Choksey believes the consumer is willing to spend, keeping the demand scenario intact. “That should come in favour of big companies like Asian Paints, where they have got a very strong franchising for retail customers,” he told CNBC-TV18.

ALSO READ: Saurabh Mukherjea explains how one paint maker is crushing competition

Material inflation remains a concern and it remains to be seen whether the company will pass on 100 percent of the higher costs in the coming quarters, said Choksey, who finds the Asian Paints’ valuation reasonable.

How to play paint theme now

Varun Singh, FMCG and Retail Analyst at IDBI Capital, is bullish on both Asian Paints and Berger from the space. He believes the benefit of price moves should be visible from the fourth quarter of FY12.

Thomas remains positive on Asian Paints citing its strong balance sheet, pricing power and network expansion.

Price hikes are inevitable for paint and varnish manufacturers as rising costs take a toll on their margins.

The price hikes are sufficient to take care of inflation up to the second quarter of FY22, Singh said.

For instance, Asian Paints took a price hike to the tune of seven percent in the first half of FY22, well below material inflation of around 21 percent, according to Thomas.

“We expect the current high single-digit price hikes to help to mitigate the inflationary pressure on input costs and add fuels to the stock prices. However, the prevailing valuation is not very attractive which may influence investors to remain cautious in the near term,” he said

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Cyber safety through the golden years: Helping senior adults protect their digital health

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

If you thought online trends were only for the younger generation, you probably haven’t seen the trendy couple on Instagram – mr._and_mrs. Verma, who are keeping it cool in their late 70s!

Senior adults are no longer isolated from the digital world. From being active participants at Zoom calls, to paying bills, ordering groceries, and even banking, they are spending more time online than ever before. Be it adapting to online life out of necessity or curiosity – they have taken a plunge into the digital world, headfirst.

A growing number of seniors are getting to grips with the internet, but for some, the digital world can be a dangerous place. With the increasing time, they are spending online, cyber criminals too are closely following suit. A combination of factors makes this category a lucrative target for fraudsters. Over 50s are known to have savings, are less cyber-savvy, less security-aware, and a lot more trusting than other generations. Many are being swindled of their hard-earned savings, and cruelly phished for their invaluable personal information. Worse, some are unaware of the extent of the danger they face online.

They are particularly vulnerable to social engineering tactics such as emotional blackmail, fear, greed, loneliness, insecurity, confusion, and naivety. Recently, in southern India, an elderly couple was duped for Rs 9 lakh as fraudsters made their way into the couple’s online banking account.

Seniors’ guide to cybersecurity

These vulnerable internet users need additional protection online. Here are easy, yet effective measures they can take to protect themselves on the web.

Think before the click:

Cybercriminals are brilliant con artists and skillful at creating convincing scams. The bad guys have become very proficient at impersonating legitimate institutions and creating a sense of urgency, to which seniors are likely to fall prey. Always check for the web address or URL, as a secure website will have an “HTTPS”. The “s” stands for “secure.” A healthy dose of scepticism and knowing what to look for to identify a scam, are key to surviving the online world.

Share with care:

Social media platforms and other online communities have created more inclusive online lives for seniors and younger folks alike. But bad actors can potentially use information gleaned from social media posts such as vacation and holiday updates, names of immediate family members, or private information like birthdays, home addresses, etc – to build better, more personalised scams.

Watch out for social media scams:

While seniors are increasingly active on social media, they need to ensure that account-privacy settings are ramped up. Beware of online quizzes or surveys that tend to appear harmless. They may contain links to malicious websites, download spyware, malware, and viruses, or worse, the personal data collected from these can be used to perpetrate identity theft.

Maintain strong password etiquette:

Updating passwords routinely is an online privacy gamechanger. While it’s tough to remember all your passwords, consider a password manager that stores then populates the username and password fields every time you log on to a site or app. Better yet, it makes password updating an easy task since you don’t need to do any memorising.

Install software updates immediately:

Updating your software is a front-line defence against identity theft and fraud. Installing software updates (yes, those pesky pop-up notices) is essential in protecting your devices, and networks, thereby securing all banking and healthcare information connected to them.

Learn to identify phishing emails:

Phishing emails can be hard to spot, especially for senior citizens who may be slightly less alert and aware, and sometimes, more trusting. Don’t open webpages through links, or any attachments you receive via text/email, especially from strangers. Look for signs like spelling errors, urgent action, requests for sensitive information and altered email ids.

Given how older adults have been forced to jump into the deep end of the digital pool, they will need to be equipped with skills for survival. Despite how complex the online world may seem, with the right digital hygiene, senior adults can secure their digital health as much as they protect their physical health. All they need to remember is that in the digital world, trust is a good thing, but vigilance is a better one.

Authored by Judith Bitterli, senior vice president of Consumer at McAfee. Views are personal

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RBI Governor Shaktikanta Das gets an extended term for a job well done

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Reserve Bank of India (RBI) governor Shaktikanta Das getting an extension was widely expected but getting it for three years is both well-deserved and a pleasant surprise. Conventionally, RBI governors are appointed for five years, with the government getting an option to review the appointment at the end of three years.

The three-year extension for Das, instead of two, may well be to ensure there is a stable and experienced head in RBI when the central government goes to the polls in the summer of 2024. Had Das’s term ended after two years in Dec 2023, the new governor will barely be three months old when the government goes lame duck—not a welcome situation given uncertainties over the economy and the financial sector look set to continue.

The additional year for Das is also in recognition of the all-around excellent job he has done in hand holding the economy through one of its worst phases in recent times. Governor Das entered RBI at a time when RBI-government relations were at an all-time low. The previous governor Urjit Patel had resigned in a huff after the government issued him a direction under section 7 of the RBI Act, a provision never used hitherto.

Das’s first and most important accomplishment was to smooth out a thorny relation.

The new governor began his innings with a rate cut, which led many sceptics to believe he may be placating Delhi. The subsequent downturn in both inflation and growth in early 2019 proved Das sensed the economy winds right.

If that was beginners’ luck, the subsequent handling of the pandemic was not luck but a mix of intelligence, leadership, and courage. The proactive rate cuts and generous liquidity pumping in March 2020 showed his excellent grasp of the situation, courage, and decisiveness in the face of an unfathomable problem.

The interest waiver for nearly two quarters, the targeted release of liquidity, roping in KV Kamath to identify and resolve stressed sectors, the glide path for recognition and provisioning were all excellent decisions. That Das could lead RBI to take such bold yet measured steps in the middle of the storm speaks to his sagacity.

A bright feather in Das’s cap is the way he managed the Monetary Policy Committee (MPC). Setting the repo rate is the MPCs prerogative. To nullify the repo rate as an operational rate, and make the reverse repo operational, and get the MPC to bless this decision is one of Das’s outstanding successes. It’s not enough to get the policy right. It’s equally important to carry along institutions and people with you.

“Das’s greatest quality is his ability to listen,” said Prof Ananth Narayan of SPJIMR. His constant consultations with various groups – economists, treasury heads, bankers, industrialists reflect his willingness to be advised while retaining the prerogative to decide.

The pandemic and the economy’s challenges apart, there was the worryingly long court battle demanding banks ought not to charge interest during the moratorium period. The solution of asking the government to bear a token amount of the waived interest was a brilliant one. It cast in stone the precedent that banks are custodians of depositors’ money and depositors can’t be asked to bear a borrowers burden.

“His biggest achievement is to have managed the massive government borrowing program in 2020 and 2021,” said HR Khan, former RBI deputy governor who had himself headed the Internal Debt Management Cell at RBI many years ago.

The innovative GSAP or government securities acquisition plan, the humungous purchase of dollars and bonds to provide liquidity to a moribund economy and then to manage that liquidity adroitly all speaks to Das’s grasp of markets and his ability to get the best out of RBI.

His statement, “Yield curve is a public good,” was a bold way to talk down rates to help an anaemic economy.

Governor Das faced a fair share of criticism for his generous dividends to the government and the games RBI had to play in the forward market to garner that dividend. The relation between government and RBI is inherently a conflicting one with both looking at different time frames.

But Governor Das chose his battles. He may have relented on dividends but did not relent on the sovereign dollar bond idea. He got it killed but quietly, out of the glare of public attention.

The handling of the sovereign bond issue is the true mark of a statesman, said a former RBI veteran, who didn’t want to be named. It shows Das’s priority is to get things done right, and not to be seen as the hero who got it done.

Challenges ahead

The coming three years will have their fair share of challenges. Will RBI get it right on the timing of liquidity withdrawal? Will it stop being accommodative at the right time? Will it prevent the country from sliding back into high inflation? Will it be able to nurse the economy back to growth?

And there are challenges beyond monetary policy. Delhi May well be in favour of giving bank licences to corporate houses. Will RBI under Das be able to weather the pressure and convince Delhi of its stand?

Froth in the financial markets, cryptocurrencies and harnessing fintech for the common good without hurting legacy banks are all formidable challenges. Many of these may require international and cross-national agreements, which Das as a former Sherpa of the government may be well placed to negotiate.

As HR Khan put it, “He has proved his mettle as a wartime general; in the next three years he will have to prove his mettle as a peacetime general.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow