Green India to recover soon, on the back of Capital markets
D-Street Buzz | September 2021: Week 1
9 min read
Hello, hope you are doing well!
To sum up Week 1 of September 2021, we will be reading about…
Q1 GDP
RIL plans to go green with clean hydrogen
The euphoria surrounding the current market highs
Snippets of other things that happened
Wrap-up
Switching gears and picking up race
India’s pandemic-induced economy which was running on the reverse gear has picked up the pace for a few months now and this acceleration is also visible by the GDP Q1 numbers that came out last week. Despite a brutal second wave of the pandemic which peaked in April-May, the economy grew at a record pace of 20.1% in April-June 2021 compared with the corresponding period last year, when a national lockdown due to the Covid-19 pandemic had nearly halted all economic activities. The GDP had contracted 24.4% in April-June 2020. This data, released by NSO (National Statistical Office) on Tuesday (31.08.2021) indicates that the economy is bouncing back and moving towards a healthy recovery.
Data related to certain high-frequency indicators such as power generation, fuel consumption, and railway freight for April-May indicated that rebound has been faster after Covid 2.0 than Covid 1.0, said Sunil Kumar Sinha, Principal Economist, India Ratings.
It is worth noting that the real GVA (Gross Value Added) in April-June 2021 was 92.2% of GVA in April-June 2019-20 and the GDP in absolute terms at ₹32.38 lakh crore (constant prices) in the first quarter is still 9.2% lower than the GDP in the same period during the pre-Covid year 2019-20. Pointing to this and the sequential slowdown of 16.9% over the GDP of Rs 38.96 lakh crore in January-March 2021, Aditi Nayar, Chief Economist, ICRA, said, “The sharp YoY expansion in Q1 FY2022 is analytically misleading.”
The pick-up in activity and sustained GST monthly run-rate above ₹1 lakh crore will bring some relief for central government finances but stretched finances are the reason behind the asset monetization program and the government’s inability to cut taxes on fuel or put more cash in people’s wallets by way of stimulus.
The flip side of the GDP growth and the pick-up in economic activity is that it is based on a few big companies and a few sectors doing well. Domestic demand is still weak and contact-intensive sectors are not doing well. The pick-up in vaccination seen in recent days – over 10 million doses a day – must be sustained to revive demand and sustain this kind of economic growth.
Motabhai goes green…
Reliance Industries has begun fostering the environmentally friendly power energy complex in Jamnagar with a venture of ₹75,000 crores, said Mukesh Ambani while talking at the International Climate Summit 2021 on Friday. The work has started on 5,000 sections of land in Jamnagar, which will incorporate assembling units for sun-oriented cells and modules, a battery unit for energy stockpiling, a power device-making production line, and an electrolyzer plant to deliver green hydrogen.
Expressing that Reliance Industries (RIL) "will forcefully seek after" the objective of cutting down the expense of green hydrogen to under $2 per kg a long time before the turn of this decade, executive Mukesh Ambani said on Friday "India can set a much more forceful objective of accomplishing under $1 per kg inside 10 years".
At present, the production cost of green hydrogen is around $3.6-5.8/kg, as per a report by Council on Energy, Environment, and Water. The arranged decrease underway expense of the harmless wellspring of energy could help the nation cut its oppressive oil import charge and salutarily affect the current record.
RIL — which intends to become 'net carbon zero by 2035 — had divulged a uber plan for green and clean energy business in June, saying it would make starting ventures of Rs 75,000 crore out of its inward assets in the thriving region throughout the following three years. RIL shares surged 4.15% on Friday as the chairman announced that the company plans to double the production of cheaper green hydrogen. Moreover, it took Motabhai’s net worth to $92.60 billion after it grew $3.7 billion. He is just $10 billion short of Warren Buffet’s net worth and $7.4 billion short of a century. We are still unaware whether the triple-digit mark is crossed first or the economy touches its target of $5 trillion. But we do know that India will stand to benefit from either or both targets being met.
…and takes the markets for a ride!
Base Camp - ‘Investors, what’s the name of the peak that you’ll have climbed? Over.’
Investors - ‘Mt. 58k scaled. Over and out.’
Buoyed by a rally in the market heavyweight Reliance Industries, Sensex scaled the 58,000 mark for the first time on Friday (03.09.21). The positive macroeconomic data combined with sustained foreign inflow funds have ushered in a festival spirit right before the start of one. The market rally helped to increase investors’ wealth by ₹4 lakh crore in the last two days of trading. Sensex touched its lifetime closing high of 58,129.95 after the index climbed 277.41 points on the final day of trading in the last week. Similarly, Nifty advanced by 89.45 points to its all-time closing high of 17,323.60 on Friday (03.09.21). However, it touched 17,340.10 during one trading session.
RIL’s m-cap has gone past ₹15 lakh crore has the shares jumped over 4.12% on Friday. The last one lakh has just been added over a span of three months. THREE MONTHS! Is this the speed of light defined in the books of RIL? Maybe, yes. Investors of RIL have gained over 20% this year making them wealthy, if not healthy or wise. Given the global cues, we can definitely say that the festivities have already kicked in (Literally: Paryushan- The festival of forgiveness) but their duration may be questioned. But for now, we would just like to have some sweets (capital appreciation) and dance to the tunes of evergreen Bollywood songs (RILs shares).
The Foreign Exchange Reserves surged to a lifetime high of $633.558 billion after it rose by $16.663 billion. The increase in special drawing rights (SDR) holdings has been the major reason behind the rise in reserves. The IMF allotted $12.57 billion to India on August 23, 2021, according to the RBI. However, foreign currency assets (FCAs) dipped to $571.6 billion during the last week. Gold reserves were up by $192 million to $37.441 billion.
What else happened?
GST-ified: The cheer for real GDP growth of 20.1% for the April-June quarter was muted owing to the fact that real GVA (Gross Value Added) in April-June 2021 was 92.2% of GVA in April-June 2019. But what will bring some cheer about the sustainability of growth is the goods and services tax (GST) numbers for August which came out last week. GST collections were at ₹1.12 lakh crore, the second month in a row when they exceeded ₹1 lakh crore. That’s as clear a sign as any about the pick-up in economic activity. Similarly, e-way bill generation for August exceeded the 60 million mark for the second straight month. It is worth noting that the GST collection in July 2021 was ₹1.16 lakh crores, so August numbers have come with a dip of 3.44%. If you account for rising inflation, then it’s clear that the consumption volumes have fallen much more.
Making life easier: On Thursday (02.09.2021), eight Indian banks announced that they will roll out a system called Account Aggregator (AA) to enable consumers to consolidate all their financial data in one place. The goal is to let the individual get access to all his financial information in one place, making it possible for banks, tax authorities, insurers, and other finance firms to aggregate data of customers — who have provided their consent — to get a better understanding of their potential customers, make informed decisions and ensure smoother transactions.
Now comes the hard part: After Bajaj Finserv, The Kamath brothers’ founded, India’s largest brokerage firm, Zerodha, received in-principle approval from SEBI to start its asset management company (AMC). Zerodha had applied for a license to start mutual fund operations in India in February 2020, just before the onset of the COVID-19 pandemic in the country. With Zerodha's entry into the mutual fund space, India will now have close to 41 mutual funds. Indian mutual funds currently manage assets worth more than Rs. 35 lakh crore.
"So, we just got our in-principle approval for our AMC (MF) license. I guess now comes the hard part," Nithin Kamath said in a tweet.
To wrap it up…
Finally, India’s services sector is finding its way back up after being laid low by the restrictions on mobility imposed in the wake of the second wave. August saw the IHS Markit India Services Purchasing Managers Index (PMI) come in at a robust 56.7, up from 45.4 in July. This was not surprising but will reassure investors that the second wave’s effect is behind us. The market cap for Tata Group surpassed $300 billion where TCS was the top contributor with 52% while Tata Steel Ltd (16.22%), Tata Motors Ltd (6.75%), Titan Co. Ltd (5.07%), and Tata Consumer Ltd (4.1%) followed suit. Similarly, the market cap for ICICI Bank crossed ₹5 trillion (Not used to applying ‘₹’ before 5 trillion) as its shares rose 35% this year. It touched a lifetime high of ₹734.80 on Wednesday (01.09.21) making it the sixth most valuable company in the country.
Before we conclude this blog, we would like to inform our readers that it has been an amazing journey churning out financial news, week in and week out, for the last year.
FinWeek turned one this week and we are elated to share our joy with you all, our amazing readers. Thank you for sticking with us!
Our motive has been to scrub out the news that at times have been best and not so good as well. We have been through every emotion, be it the current market euphoria or the difficult times created by the unseen villains. We are not sure if we have touched you in some way or another but as well-wishers, we would like to create awareness during this month about financial well-being and crucial lessons that will pave the way for a wealthy life. To do the same, we will discuss 4 financial virtues this month, with our readers that might help in stepping up that investment game.
Week 1 | LESSON #1: Set Goals
It is very important to have a goal in mind and work towards it, be it financial or personal. The journey will mold and shape you into being the person you wish to be. Be it a house or your retirement, that dream tour, or that luxury car that you would like to drive (yes, we know a car is more of a liability and not an asset; but the heart wants what it wants!). Carefully define them and figure out how much you’ll have to save so that you can have a fool-proof plan to achieve it. The money-management skills comprise mainly smart planning, a good strategy, and an understanding of the basics of finance. Remember every goalpost has a goalkeeper but that does not stop you from scoring some wonderful goals. Start as soon as you can and we are sure that you’ll be able to achieve them.
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Sources: Moneycontrol, The Boring News Co., The Economic Times, Tech Crunch, and The Print.
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