Weekly Market Analysis: Sensex, Nifty fall over 4% on weekly basis; RIL, Airtel, Paytm in focus

Benchmark stock indices fell for the week as investors were worried about the new variant of coronavirus and the Fed’s  plans to taper its bond buying sooner than expected as well as increasing the interest rate due to rising global inflation. For the week, Nifty dropped 4.16% to 17026.45 and the Sensex lost 4.24% to close at 57107.15.

Broader markets were also negatively affected by these developments. BSE MidCap fell 4.14% to 24846.51 and BSE SmallCap lost 2.52% to 28071.41.

Foreign Institutional Investors continued to sell their position in the Indian market. FIIs sold for about Rs 21124.9 crore in the cash segment for the week. Domestic Institutional Investors were net buyers for Rs 10934.7 crore. In addition to the above negative developments across the world, FIIs sold heavily as they believe the Indian market is overvalued.

Among Nifty sectoral indices, the top losers for the week were Auto (-8.4%), PSU Bank (-6.5%), Realty (-6.5%), Bank (-5.1%) and IT (-3.9%). Top gainer was the pharma index which rose 2.3% on a weekly basis.

In Nifty 50, the top stocks that gained were Cipla (8.3%), Power Grid (4.9%), Airtel (3.4%), Divi’s Laboratories (3.2%) and Dr. Reddy’s (1.7%). Top losers were Maruti Suzuki (-11.7%), IndusInd Bank (-10.6%), Tata Motors (-9.7%), Bajaj Finance (-9.1%) and Tata Consumer Products (-7.9%) on a weekly basis.

India VIX, a measure for volatility in the market, rose 40% during the week to 20.80 levels. This means the traders expect extreme price fluctuation in the coming weeks.

Company News

Reliance Industries: The energy company will implement a ‘Scheme of Arrangement’ to transfer the ‘Gasification’ undertaking into a wholly-owned subsidiary. The company said that the transfer will help “unlock the value of syngas” and will help the company to progressively transition to renewables as its primary source of energy. Earlier, Reliance said it has called off its agreement with Saudi Aramco. The fallout was due to valuation differences, Reuters reported. RIL and Saudi Aramco had signed a non-binding Letter of Intent in August 2019 for a potential 20% stake sale in RIL’s oil-to-chemicals business to Saudi Aramco.

Airtel: The telecom company raised tariffs by 20-25% for subscribers for a range of services with effect from November 26. The company believes this will improve their Average Revenue Per User and enable significant investments in network and spectrum. Separately, Airtel said it has conducted India’s first 5G trial in the 700 MHz spectrum band in partnership with Nokia. The trial was conducted on the outskirts of Kolkata and it also marked the first 5G trial in the eastern India.

Paytm: Shares of the fintech company recovered during the week ahead of its quarterly result. However, the share price was volatile during the week. The company is expected to release its quarterly results data on Saturday (November 27, 2021). Meanwhile, some of the anchor investors in Paytm’s IPO added to their stakes in the fintech company, Bloomberg reported. BlackRock and Canada Pension Plan Investment Board were among anchor investors in the IPO that bought more Paytm shares on Tuesday and Wednesday, according to sources.

Vodafone Idea: The telco raised its telecom tariffs by at least 20% from November 25, following bigger rival Airtel’s announcement. The company said this will help the company to improve its average revenue per user and will help address the financial stress in its balance sheet.

TVS Motor Company: The two-wheeler maker has signed a Memorandum of Understanding (MoU) with the Tamil Nadu government for investment in future technologies and electric vehicles. TVS Motor will invest Rs 1,200 crore in Future Technologies and EVs in the next four years. The investment will focus on design, development and manufacturing of new products and capacity expansion in EVs, the company said.

Larsen & Toubro Ltd: The infrastructure behemoth has signed an MoU with Tamil Nadu Government to establish 90 Mega Watt capacity data centres and associated units in Kanchipuram, near Chennai, over the next five years. L&T expects to employ around 1,100 people in the project. Tamil Nadu government will provide uninterrupted power supply and other infrastructure support.

ITC: The company has confirmed that it is developing a nasal spray for COVID-19 prevention for which it has initiated clinical trials. It has been developed by ITC Life Sciences and Technology Centre (LSTC), Bengaluru. ITC is planning to market it under the Savlon brand. Separately, the conglomerate said in an exchange filing that it will acquire a 16% stake for Rs 20 crore in Mother Sparsh, a premium ayurvedic and natural personal care start-up in the direct-to-customer space. The company added that it has recognised the significant potential of naturals and Ayurveda and ITC has taken this strategic step forward to invest in this segment.

Indian Overseas Bank and Central Bank of India: Shares of the lenders rose on Wednesday after reports that the two financial institutions are likely to be privatised. The Centre has shortlisted CBI and IOB for divestment, according to a report by CNBC TV18. However, in an exchange filing, state-run Indian Overseas Bank said that it has not received any communication regarding privatization from the government. IOB closed 13.64% higher and Central Bank of India jumped 10.46% on Wednesday.

Tarsons Products: The company had a good stock market debut on Friday, even as the broader markets plunged. Shares of the company closed higher at Rs 818.40 as against its issue price of Rs 662. It opened at a premium of Rs 682, 3% higher than its issue price.

Global Markets

The US markets plunged after a new and potentially deadlier coronavirus variant weighed heavily on investors’ optimism of a global economic recovery. In addition, Treasury yields rose during the week. Moreover, the minutes of the recent Federal Open Market Committee (FOMC) meeting, released on Wednesday, also showed that a few policymakers advocated for a quicker taper. 

Separately, President Joe Biden said that he is planning to reappoint Jerome Powell as Federal Reserve chair. For the week, the Dow plunged 1.97%, the S&P 500 slumped 2.2% and the Nasdaq tanked 3.52%. 

In Asian markets, Japanese equity indices also closed lower on news reports of rising coronavirus cases. However, the Japanese government’s record $490 billion stimulus package announcement in the previous week is likely to provide some support. 

Japan Services PMI rose to 52.1 in November, up from 50.7 the previous month. Japan Manufacturing PMI rose to 54.2 in November, up from 53.2 in October. Nikkei fell 3.3% for the week, while Topix was down 2.91%.

Chinese markets fell as tensions between Beijing and Washington deteriorated over the status of Taiwan as well as trade issues. The U.S. Commerce Department blacklisted a dozen Chinese companies for allegedly supporting the Chinese military and modernization of its army. China’s property market also continued to be under stress.  

Profits at China’s industrial firms in October rose at a faster pace, the country’s statistics agency said, amid rising raw material prices. Profits in October rose 24.6% year-on-year to 818.7 billion yuan, the official data showed.

For the week, the CSI 300 index fell 0.6%, Hang Seng dropped 3.87% and Shanghai Composite index inched up 0.10%.

Oil prices plunged on concerns over surplus supply and rising COVID-19 cases affecting demand. The U.S. is expected to release millions of barrels of oil from strategic reserves in coordination with other large consuming nations in a bid to cool prices. Brent Crude prices fell to $72.72 and WTI Crude was down to $68.15.