Month: May 2023

Stocks bleed for sixth day in a row; Rs 3.17 trn wealth wiped out in a day

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Equities took another tumble on Thursday, making it the sixth straight session of a sell-off as investors rushed for the exit. While prices of crude oil have eased and Brent was quoting at sub-$90/barrel, apprehensions that the West Asia conflict could be a prolonged one saw investors take money off the table. Elevated US Treasury yields, the possibility that the US Federal Reserve could yet hike interest rates and a subdued start to the earnings season, added to investors’ fears.

The Sensex plunged 900.91 points to close at 63,148.15. With investor wealth of Rs 3.17 trillion wiped out on Thursday alone, the total erosion of wealth over the last six sessions was a whopping Rs 17.8 trillion. Since the highs of September 15, the Sensex has given up close to 7%.The broader Nifty plummeted 284 points to close at 18,857.25, falling below the psychological 19,000-mark for the first time since June 30. The Nifty has now lost 6.6% since its September peak.

Nilesh Shah, MD and CEO of Kotak MF, said the geopolitical situation, ‘higher for longer’ US rates and elevated energy prices have created uncertainty. “Our valuation was at a premium to peers. Most investors are sitting on profits in India unlike other markets,” Shah said, adding there had been a barrage of bad news over the last few weeks.

He pointed out that in recent months, the market had seen poor-quality stocks outperforming quality. “There was some excess in micro-caps and mini-caps, which needed a correction.”

According to strategists at HSBC Global Research, a sharp rise in US bond yield, in part due to the Fed’s more hawkish policy outlook on better-than-expected economic data, as well as a rise in term premium, is negative for foreign fund flows into emerging markets. “And India is not isolated from this risk despite its strong macro outlook,” they said in a note.

Foreign Portfolio Investors (FPIs), who had sold a net $2.2 billion worth of stocks in September, have sold a net $1.3 billion in October till Wednesday. Provisional data from the exchanges showed that on Thursday, FPIs sold to the tune of Rs 7,702 crore, while Domestic Institutional Investors (DIIs) pumped in a net Rs 6,558 crore. DIIs had bought stocks to the tune of Rs 19,713 crore till Wednesday.

The selling has not been restricted to the larger stocks, but has been broad-based as seen in the advance-decline ratio below 0.7 in five out of the last six sessions.

The BSE MidCap and SmallCap indices slumped 2.2% and 2.9%, respectively, on Thursday, having shed a cumulative 5.9% and 6.2%, respectively, over the past six sessions.

Corporate earnings for the September quarter have been just about in-line with virtually no surprises and a few disappointments. While profits have risen, much of the earnings growth has come from cost-cutting measures and savings, with the increase in the top line very subdued. While the IT pack turned in decent numbers, the guidance was muted suggesting companies have little visibility on revenues.

Delhivery Rating: Reduce – Relying on past track record in network infra

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Operationally, Delhivery is well-positioned to drive a 26% decadal Ebitda CAGR, much ahead of sectoral volume growth prospects. Its diversified customer & business mix should protect it strategically from changes in the industry structure. The CMP does not factor in a growth moderation in e-commerce sector volumes and limitations to the pace of share gains in the PTL (Partial Truckload) business. We initiate with a Reduce rating and a DCF-based FV of Rs 540.

Past decade of investments make Delhivery well-placed to grow market share, margin and TAMWe expect Delhivery to record an Ebitda CAGR of 26% over FY2025-35E, much ahead of the sectoral growth prospects in its current segments. We expect such an outperformance to be driven by a combination of Delhivery gaining market share in its existing lines of work, growing profitability and entering the large-sized Slow Part Truck Load segment. The key hypotheses are: (i) Delhivery’s ability to continue scaling up its presence; and (ii) Delhivery retaining a part of the incremental cost deflation benefits. On scalability, we rely on Delhivery benefitting from and sustaining past track record of investments in network infrastructure and technology.

We expect 26% revenue CAGR over FY2022-25E and FCF generation from FY2026Adjusted for SpotOn, we see 26% revenue CAGR over FY2022-25E. We are ~6% below consensus, as we factor in a moderation in sectoral e-com activity and limitations to how fast Delhivery can grow the PTL business from current scale. We expect adjusted Ebitda margin to improve to 7.6% from 1% over FY2022-25E.

Initiate with REDUCE and a DCF-based FV of Rs 540In our DCF-based FV, we factor in a healthy ~24%/26% CAGR in revenues/service Ebitda over FY2025-35E, 10%/11% over FY2035-45E and 5% terminal growth; corporate overheads growing at a slower 16%/8% CAGR over FY2025-35E/35-45E; and modest improvements in capex intensity and working capital on incremental sales.

Kharif castor sowing rises by over 1,00,000 hectare in 2022-23 season: SEAI

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Kharif castor sowing for 2022-23 season in the country has gone up by over 1,00,000 hectare from 0.74 million hectare to more than 0.88 million hectare due to prevailing higher prices of oilseeds, as per Solvent Extractors’ Association of India (SEAI).

Due to prevailing higher prices of castor seeds, farmers have opted for castor crop over groundnut in Gujarat and Rajasthan – the two major castor seed producing states, said Atul Chaturvedi, president of SEAI.

“Prices of castor seeds in the current month have crossed Rs 1,500 per 20 kg in the domestic market which was around Rs 1,200 per 20 kg in September 2021, “said Shailesh Baldha, Head, Castor Division, Adani Wilmar. According to him, prices of castor oil too are as high as $1,850 (nearly Rs 1.48 lakh) per tonne compared to nearly $1,300 (nearly Rs 1.04 lakh) per tonne last season in the same month.

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The main reason for higher prices of castor is tight supply of the commodity during the current 2021-22 season. Due to this factor, prices of castor oil remained higher despite a dip in exports, Baldha said. As per SEAI, exports of castor oil remained at 4,19,759 MT for the first eight months (January-August) of the current calendar year as against 5,03,420 MT during the same period of year 2021.

Due to recession in China, castor oil exports have plummeted but tight supply kept the prices high globally. With over 40% share in India’s total exports, China is the biggest consumer of castor oil from India. Carry forward stock of castor was less than 1,00,000 tonne in the current 2021-22 season compared to 2,50,000 tonne previous year.

For the upcoming 2022-23 season, carry forward stock is likely to remain even lower. Castor oil and its derivatives are used in many industries, including air-conditioning, air-fuel, pharmaceutical, dyes & chemical, soap, paints, inks, plastic, perfumes, adhesive, paper, lubricants, food, rubber and others. The US and European countries are also importing castor oil from India.

Apart from these markets, India also exports castor oil to Middle East and Latin American countries. India is the largest producer of castor and castor oil in the world with almost 90% share. In India, Gujarat has a lion’s share of 80% in production of castor seed. Apart from Gujarat, castor is being cultivated in Rajasthan, Telangana and Andhra Pradesh in smaller quantities.