Market Recap for November 23, 2020





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After initial weakness, the markets bounced back with support from heavyweight Reliance Industries (+2.9%) and top IT stocks such as Infosys (3.1%), TCS (2.5%) and HCL Tech (2.3%). Most sector indices ended the day in the green. However, profit-booking in large financial stocks such as HDFC (3.5%), ICICI Bank (-2.4%) and Axis Bank (-1.7%) restricted the overall gains. The market breadth was positive as 36 of Nifty50 stocks advanced during the day.

Here are the top stories of the day...

CCI gives nod for Reliance-Future deal

Shares of Reliance Industries (2.9%) surged and those of Future Group companies such as Future Retail and Future Lifestyle hit the 10% upper circuit after the Competition Commission of India (CCI) cleared the proposed acquisition of certain businesses of Future Group by Reliance Industries. However, it must be noted that the Delhi High Court decision is still pending and is crucial. Last month, the Singapore International Arbitration Centre (SIAC) had passed an interim order in favour of Amazon, mainly barring Future Retail from taking further steps to dispose of its assets.

Financial stocks cheer RBI's banking proposals

An RBI working group has proposed changes to the ownership structure of private banks. It has proposed raising the limit on the promoters’ stake from 15% to 26%. The panel has also suggested considering large non-banking finance companies (NBFC) and industrial houses to apply for banking licences, albeit after strengthening relevant regulations. Allowing promoters to increase their stake would mean more 'skin in the game’ for the promoters. Further, the entry of new players would make the banking system competitive and better for the customers. A direct impact was seen on the shares of IndusInd Bank (+3.7%), where there is scope for increasing the promoters’ stake. Further, Equitas Holdings and IDFC were locked in the 20% upper circuit. Small finance banks such as Equitas SFB (+12.7%) and Ujjivan SFB (+19.8%) saw shares spike along with higher volumes.

Ethanol turns sweeter for sugar companies

The Food Ministry has approved loans of 12,500 crore to 185 sugar mills and distilleries to add capacities for ethanol production. This amount is over 3 times the loans sanctioned for ethanol projects in the last two years. Ethanol is a biofuel produced by sugar companies that is blended with petrol. This move can trigger several benefits for all the parties. First, sugar companies will be able to increase ethanol production leading to higher overall revenues. Better financial position of sugar companies could eventually help to lower cane price arrears for farmers. Second, lower dependence on sugar exports as excess sugarcane will be diverted to ethanol production. And third, higher blending (current rate is 5%) with petrol reduces import dependency on crude oil. Oil marketing companies are targeting 10% blending by 2022 and 20% by 2030. Shares of large sugar companies, such as EID Parry (+4.7%), Triveni (+4.0%), and Dhampur Sugar (+4.0%), saw gains today. 

Closing bell

The week has started on a positive note for the markets with most sectoral indices registering gains. The RBI panel’s proposal to grant banking licences to industrial houses and large NBFC paves the way for more competition in the banking sector. While this is good for the customers, in general, but may not be great news for the incumbent banks. Consequently, the large banks saw some profit-booking today.

That's all for today. 
We'll be back tomorrow!
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Investment in securities markets are subject to market risks; please read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Past performance is not indicative of future results. Details provided in the above newsletter are for educational purposes and should not be construed as investment advice by Commerce Insiders group. Investors should consult their investment advisor before making any investment decision.

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