Maruti, Tata Motors, Ashok Leyland top analysts’ playbook as Street pins hopes on monthly sales, festive season

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

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As auto makers gear up to report monthly sales, investors are pinning hopes on the upcoming festive season even as analysts are expecting muted monthly numbers. While the industry continues to struggle against a global shortage of semiconductors and pandemic-hit demand, the ongoing Pitru Paksha period — a fortnight considered inauspicious for initiating purchases — back home is delaying bookings.

What’s in it for investors on Dalal Street?

Despite challenges, auto stocks have been rising in the recent times. The Nifty Auto index — which tracks shares of 15 major players in the auto sector — has risen 34 percent, though lagging behind the headline Nifty50 index’s return of almost 57 percent.

Here’s how the auto pack has performed in the recent past:

Commercial and passenger vehicle makers including Maruti Suzuki, Tata Motors, Bajaj Auto, Hero MotoCorp, Ashok Leyland and Mahindra & Mahindra are slated to post their sales figures for September from Friday.

ALSO READ: September auto sales preview: Street expects mixed bag

High hopes from festivals

Vinod Nair, Head of Research, at Geojit Financial Services, expects the festive  season to revive demand for the sector, also as the economy opens with easing concerns about a third wave of infections.

“Price hikes will take care of material costs and boost the financial conditions, though the semiconductor issue and supply constraints will continue to loom in the medium term,” he told CNBCTV18.com.

And here’s what analysts make of the sector at the current juncture:

Passenger and commercial vehicles

Mahesh Bendre, Senior Research Analyst at IDBI Capital, is most positive on Maruti Suzuki from the auto basket. “The stock has priced in the barrage of bad news in the recent past, be it the lockdown, the chip issue or the imposition of penalty by the Competition Commission of India (CCI),” he told CNBCTV18.com.

He is not so convinced by the prospects of Mahindra & Mahindra and Eicher Motors at the moment. The Mahindra story is all about tractors, a segment likely to record single-digit growth this year. For Eicher, the premiumisation story in the Indian market has reached a saturation point he said.

M&M is among Nair’s three picks from the auto space. 

Dhiraj Agarwal, Co-Head Equities at Ambit Capital, said in an interview to CNBC-TV18 his top picks in the space are Tata Motors and Ashok Leyland. “The entire chip shortage issue, because of which 1-2 quarters of production numbers will look weak, is actually temporary and short term in nature. It will pass,” he said in an interview to CNBC-TV18.

He said the country is seeing a strong revival in demand for CVs. Agarwal believes Tata Motors is a beneficiary of strong power demand globally. Retail demand continues to be very strong for all of its JLR products, he said.

LKP Securities Research Analyst Ashwin Patil likes Maruti Suzuki within the PV segment, followed by M&M. His top pick among CV makers is Ashok Leyland, which he finds better than Tata Motors.

Reliance Securities Head-Research Mitul Shah remains bullish on commercial vehicles. His top picks are Ashok Leyland, Bharat Forge and Ramkrishna Forging.

Two-wheelers/ancillaries

Agrawal likes TVS Motor Company. Patil likes Bajaj Auto despite lukewarm demand in the segment.

Bendre is bullish on Sona Comstart, and suggests avoiding two-wheelers due to disruptions caused by electric vehicle players.

Nair is positive on Motherson Sumi and Wabco.

ALSO READ: TVS is Nirmal Bang’s top bet in two-wheeler space

Chip shortage

Indian auto makers are also bearing the brunt of the chip shortage issue.

Rajesh Menon, Director General of trade body SIAM, expects the challenges surrounding the shortage of chips to continue for some time. He believes investments in semiconductors will take time to meet market requirements.

“The industry has been in touch with a couple of semiconductor suppliers globally and manufacturing is expected to be ramped up… Some of these companies had faced disruptions in later part of 2020 and early 2021 due to natural calamities,” he said.

Agarwal of Ambit Capital is positive that the shortage issue will ease in the coming months.

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COVID-19: 30 medical students of Mumbai civic hospital test positive

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

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As many as 30 medical students of civic-run KEM Hospital in Mumbai have tested positive for COVID-19, a BMC official said on Thursday. One of the MBBS students, who has mild symptoms of the infection, has been admitted to SevenHills Hospital for treatment, said the Brihanmumbai Municipal Corporation (BMC) official.

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The other students are asymptomatic and have been quarantined, he said. All the infected students were staying in a hostel inside the hospital complex located at Parel in central Mumbai, the official said.

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

Evergrande crisis not a Lehman Brothers moment for China, economic slowdown underway: Expert

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

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China continues to be on top of the mind as foreign fund inflows into emerging markets slump. There seems to be a perceived slowdown – the dollar index has gone all the way above 94 – a sign investors are preferring US markets over emerging (EMs).

The dollar on Wednesday surged to a one-year high against major currencies, boosted by increased expectations for a reduction in the US Federal Reserve’s asset purchases starting in November and an interest rate hike, possibly in late 2022.

The greenback also fared well despite an impasse in Washington over the US debt ceiling that threatened to plunge the government into a shutdown.

Is this climbing dollar sign of a slowdown in the Chinese economy? Reeling with crackdowns on big businesses, tech firms, and property firms, and the latest power outages, is the Chinese economy slowing down?

Also Read: Power shortage issue unlikely to significantly impact China’s overall growth: Standard Chartered’s Becky Liu

Despite the Evergrande’s debt crisis, a Lehman Brothers moment for China and its housing market is unlikely, Xinxin Li, Managing Director and Senior China Analyst at Observatory Group said. Because, he said, “we are expecting an imminent government intervention into this debt crisis.”

However, he said, this is still quite an uncertain period for the Chinese economy. Uncertain because “in the past two decades, we have seen this housing market and price always go up, up, and up. We have never experienced a full cycle of the Chinese housing sector,” he said.

On top of this, power shortage could become another major constraint for China’s future economic growth, he added.

China’s efforts to improve conditions in its coal mining industry led to weak supply growth and skyrocketing coal prices. And coal accounts for about 70 percent of China’s energy consumption.

Also Read | Power shortage in China a function of demand, not regulatory crackdown, says EM Equity Strategist Adrian Mowat

Plus, in late 2020, China announced cutting down carbon emissions per unit of gross domestic product (or carbon intensity) by 65 percent.

And in the coming months, the global leaders will gather at the Glasgow United Nations Climate Change Conference. And the whole world is expecting China to make more commitments to energy efficiency and emission cuts. Xinxin Li believes this would slow down the Chinese economy.

“I would expect a significant slowdown in the coming months,” he said.

However, he briefly expects the power shortage issue to resolve in early October. “In early October, China has Golden Week, a one-week long national holiday. We would expect during that period this very tightened energy supply-demand situation will ease a bit,” he said.

But in general, this situation, especially the coal supply will likely sustain the rest of the year, he added.

For the full interview, watch the accompanying video.

Also Read: Indian market a little overextended; positive on financial space: William O’Neil

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

Supreme Court seeks Adani Power’s reply in 3 weeks on curative plea of GUVNL against termination of PPA

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

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The Supreme Court Thursday asked Adani Power (Mundra) Ltd to respond within three weeks to a curative plea of Gujarat Urja Vikas Nigam Ltd (GUVNL) challenging the apex court’s 2019 verdict which had upheld the private firm’s termination of a pact with the state PSU. A five-judge Constitution bench headed by Chief Justice N V Ramana conducted a rare open court hearing of a curative plea in a commercial dispute and took note of the submissions of senior advocates Harish Salve and Mukul Rohatgi, appearing for Adani Power, that some time may be granted for filing the response to the GUVNL.

The respondent (Adani power) sought time to file a reply to the petition. Three weeks’ time has been given for filing the reply and two weeks thereafter for filing the rejoinder (by GUVNL). Put up for hearing on November 17, ordered the bench which also comprised Justices U U Lalit, D Y Chandrachud, B R Gavai and Surya Kant. The top court also ordered the deletion of Consumer Education and Research Society and one Sunil B Oza as parties to the litigation after Attorney General K K Venugopal, appearing for the state company, submitted so.

In a significant development on September 17, the bench decided to hear in an open court the GUVNL’s curative petition which, as per industry estimates, has to pay nearly Rs 11,00 crore compensation to Adani Power. “We have gone through the curative petition and the relevant documents. In our prima facie opinion, there are substantial questions of law raised in this curative petition, which require consideration”, the bench had ordered while listing the plea for hearing on September 30.

Also Read: Supreme Court rejects Adani Gas’ plea seeking authorisation for city gas distribution network in Ahmedabad district

A three-judge bench, in July 2019, had held that the notice of termination of a Power Purchase Agreement or PPA by the Adani Power to GUVNL in 2009 was legal and valid. It had ordered the Central Electricity Regulatory Commission (CERC) to determine compensatory tariff for the power supplied by Adani Power to the state PSU. The verdict had said that the court should give effect to the “plain, literal and grammatical” meaning of the clauses used in a contract.

Adani Power (Mundra) Ltd had signed a PPA with GUVNL in 2007 to supply 1,000 MW power from its project located in Korba, Chhattisgarh. Adani terminated the pact citing non-coal supply by Gujarat Mineral Development Corporation, claiming that the supply of electricity was conditional to coal supply.

The PPA termination notice was challenged by the GUVNL before the Gujarat Electricity Regulatory Commission which had held the termination illegal. The top court had however reversed the findings.

(With text input from PTI)

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

Here’s a list of midcap stocks that buzzed in trade on Thursday

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

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In the ‘Midcap on our Radar’ segment, Agam Vakil gets a list of midcap stocks that buzzed in trade on Thursday.

On the positive side, the likes of Bajaj Hindusthan, Banari Sugar as well as Balrampur Chini advanced with good volumes, rising around 2-5 percent.

IRB Infra, Tata Investments and Puravankara hit fresh 52-week highs.

On the downside, Graphite India, Sonata Soft and Munjal Showa fell between 2.5 and 4 percent.

Watch video for more.

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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

Amish Mehta to take over as MD & CEO of Crisil from October 1

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

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S&P-owned domestic rating firm Crisil on Thursday announced the elevation of Amish Mehta as the new Managing Director and Chief Executive Officer with effect from October 1 in place of Ashu Suyash. Suyash has decided to step down to set up her own venture, the company said in a statement, adding that the change is in line with an announcement to this effect by the company board in July 2021.

In his new role, Mehta will steer the company’s Indian and global businesses, and their efforts to deliver high-quality analytics, opinions and solutions to corporations, investors, financial institutions, policymakers and governments.

“I feel very excited to lead this outstanding global organisation in its next phase of growth. Crisil’s mission of making markets function better will continue to be central to our strategy. Our commitment to sustainability and analytical excellence will remain the core guiding principles as we explore new growth opportunities in benchmarks, analytics, and insights. Leveraging our strong customer relationships, deep domain expertise and highly skilled global talent pool through continued investments in data and technology will be the key to becoming future-ready. I look forward to working closely with all our stakeholders to create value,” Mehta said.

Mehta has more than two decades of leadership experience across industries and joined Crisil in October 2014 as President and Chief Financial Officer. In July 2017, he was elevated as the President and Chief Operating Officer, responsible for the Global Analytical Centre, India Research and SME, Global Innovation and Excellence Hub and Corporate Strategy.

As the Chief Operating Officer, he led its acquisitions and change agenda while creating a growth path for the businesses managed. Mehta is a chartered accountant and was the CFO of Indus Towers prior to joining Crisil. Before that, he was with BP/Castrol India, EY and ExxonMobil India.

(With input from PTI)

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

DDMA denies permission for Chhath Puja at public places, river banks in Delhi

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

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The Delhi Disaster Management Authority (DDMA) on Thursday said no Chhath celebrations will be allowed at public places and river banks in the national capital, and fairs and food stalls will not be permitted during festivals amid COVID-19.

The authority said restrictions on large gatherings and congregations have been relaxed only to the extent of celebration of festivals till November 15.

“Fairs, melas, food stalls, jhoolas, rallies and processions will not be permitted during festivals in Delhi. Chhath puja celebration shall not be allowed in public places and people are advised to celebrate the same at their homes,” the DDMA said in official order.

“All event organsiers will have to obtain requisite permissions from the district magistrate (DM) concerned for organising festival events, well in advance. No permission shall be granted by DMs or authorities for conducting any event in containment zones,” it added.

The DDMA clarified that no standing or squatting will be allowed at festive events and only sitting on chairs with social distancing will be permitted. “It may be noted that restrictions on gatherings and large congregations imposed earlier are being relaxed only to the extent of allowing celebrations of upcoming festivals till November 15,” it added.

(With inputs from PTI)

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

Sebi rolls out ‘swing pricing mechanism’ for open-ended debt funds; here’s what it means for investors?

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

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Capital and commodities markets regulator Securities and Exchange Board of India (Sebi) has recently decided to introduce a ‘swing pricing mechanism’ for open-ended debt mutual fund schemes. The new framework, to be applicable from March 1, 2022, is aimed at ensuring fairness in the treatment of entering, exiting and existing investors in mutual fund schemes, particularly during the market dislocation.

While the new norms speak of debt fund investors’ interest, the term may look new to many and hence it’s important to understand the mechanism in detail.

So, what exactly is meant by it and how will it affect debt funds?

Swing pricing generally refers to a process for adjusting a fund’s net asset value (NAV) to effectively pass on transaction costs stemming from net capital activity to the investors concerned.

Often, the exit of large investors during a market panic leads to a significant drop in NAVs. As a result, investors who remain invested in the fund are at a disadvantage. To penalise investors who are going out that day, the AMC will adjust the NAV downwards and ensure that the trading costs are borne by the exiting investor.

Speaking at length to CNBC-TV18, Prateek Singh, Founder and CEO at LearnApp.com said that under this mechanism, the fund will adjust the NAV up or down to effectively pass on the transaction costs arising from investors moving in and out of the scheme.

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“Also, AMCs are required to mention in their Scheme Information Document (SID) when the swing pricing framework will be triggered. So, when it is triggered (be it a normal time or market dislocation), both the incoming and outgoing investors shall get NAV adjusted for swing factors,” Singh said.

In this way, a fund can pass on to first movers the cost associated with their trading activity and protect existing shareholders from dilution. This reduces the possibility of a vicious cycle wherein falling prices prompt more investors to bail out, putting further pressure on the NAV.

Will there be an exemption to this mechanism?

All the open-ended debt schemes (except overnight funds, Gilt funds and Gilt with 10-year maturity funds) will have to incorporate the provision. It will be made applicable to all unitholders at PAN level with an exemption for redemptions up to Rs 2 lakh for each mutual fund scheme for both normal times and market dislocation.

When will it be applicable?

In the case of debt funds, the mechanism will be a hybrid framework with a partial swing during normal times and a mandatory full swing during market dislocation times for high-risk open-ended debt schemes.

This means that when a fund managing certain assets get a redemption request from a large institutional investor, the fund house will first tap into its liquid reserves to meet the redemption request. Swing pricing may get invoked based on the threshold set by the AMC or the industry.

The fund manager will sell the securities in the market. However, the fund manager may not get the desired price for liquidating the security, especially when the market for the underlying security is illiquid. Additionally, the fund will incur trading/transaction cost which will eat up the fund’s return, reflecting in the NAV.

How will investors benefit from this?

According to Singh, the move will discourage large investors from sudden redemptions and protect investors in case of such an order.

ALSO READ | With Nifty soaring to new highs, here’s how to chose new mutual funds

“The swing pricing rules will ensure that long-term investors in debt schemes will not be affected by some large investors redeeming their investments,” he told CNBC-TV18.

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

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

New auto-debit rules to kick in from October 1, payments body seeks extension for ‘smooth transition’: Report

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

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The Payments Council of India (PCI) has urged the Reserve Bank of India (RBI) to not implement the new auto-debit rules from October 1. The payments body has sought an extension of one or two months for “smooth transition” to new norms, according to a report by The Hindu Business Line.

“We have written to the RBI for a short extension of one or two months to ensure a smooth transition to the new norms. All ecosystem players have been working hard but it will take some more time,” PCI Chairman Vishwas Patel was quoted as saying.

He, however, added that the new auto-debit rules are “very positive and consumer-centric.”

The change in norms was to come into effect in March this year, but the RBI extended the deadline till September 30 after banks and payment gateways requested more time to comply with the new rules. However, some major private banks have already gone live with the new auto-debit rules.

The objective of the new auto-debit rules is to enhance customer safety during digital transactions.

Under the new rules, introduced in 2019, any auto-debit payment, including the use of the debit card, credit card, Unified Payments Interface (UPI), and Prepaid payment instruments (PPIs), will not be allowed without customer’s approval.

ALSO READ | Auto-debit payment rules to change from October 1; here’s what customers should do

For example, if customers have subscribed to an OTT platform that costs Rs 10,000 for six months after paying it online using a debit card, then after the expiration, the OTT platform automatically deducts Rs 10,000 from the account and extends the subscription for another six months.

At present, this process takes place without the consent of the customer. This automatic transaction is prevented only when the customer cancels the subscription before the due date.

However, under the new auto-debit rules, payment platforms will need to inform customers in advance about recurring payments of Rs 5,000 or more. Instead of deducting the money automatically, they will need to send the customer a one-time password (OTP). So, if they don’t feed in the OTP, money from their account won’t be deducted to extend the subscription to the OTT platform.

In technical terms, this is called introducing an “Additional Factor of Authentication” (AFA) as transactions no longer remain automatic and take place only after authentication from the customer. However, the new auto-debit rules are not applicable to transactions lower than Rs 5,000.

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

Centre exempts COVID-19 vaccine from customs duty till December 31

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

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The government has exempted customs duty on COVID-19 vaccines for three months till December 31, which will boost domestic availability and make them cheaper.

In a notification dated September 29, the Central Board of Indirect Taxes and Customs (CBIC) said the exemption would come into force on October 1, 2021, and remain in force up to December 31, 2021.

Earlier in April, the government had exempted basic customs duty on the import of COVID vaccines for three months. Following the conclusion of the three-month period, COVID-19 vaccines import attracted 10 percent duty.

Also Read: How to verify COVID-19 vaccine certificate: A step-by-step guide to do it on CoWIN website

The exemption from import duty would help keep low the cost of overseas vaccines that are being eyed to supplement domestically made shots of Covishield and Covaxin.

Currently, India imports Russia made Sputnik V vaccine. India has granted Emergency Use Approval to five vaccines – Serum Institute’s Covishield, Bharat Biotech’s Covaxin, Russia’s Sputnik V, Moderna and Johnson & Johnson.

Also Read: One in three coronavirus patients gets at least one long-COVID symptom: Study

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