Nifty 50 refuses to get into the Diwali mood, ending the day down 0.5%
Welcome to another edition of the Aftermarket Report. We’ve made several changes to this edition.
What’s new in this new format of the edition?
Improved structure of stories
A new section called “management chatter.”
Corporate actions calendar
We’re still experimenting with the format and what data points to cover. So, if you have any feedback, do let us know in the comments.
Market Overview
The Nifty 50 index closed 0.55% lower at 24,205.35, primarily dragged down by weakness in IT stocks. Broader market indices also felt the pressure with selling momentum despite advances outnumbering declines today, with 1,817 stocks in the green compared to 938 in the red on the NSE. However, the magnitude of the declines in the stocks that sold off outweighed gains from advancing stocks, contributing to the negative closing for the index.
Tijori is an investment research platform, and they have constructed niche indices for various themes and sub-sectors. They help you get a sense of the market performance of narrow slices of the market.
Event in focus
The U.S. election will take place on November 5th, and it’s the biggest event moving the markets right now. You might wonder, Who’s going to win? Well, nobody knows. If you look at the polls, Donald Trump and Kamala Harris are neck and neck. The election is pretty much a coin toss.
What’s happening in India
PPFAS CIO Rajeev Thakkar Highlights Market Risks, Urges Caution on High Valuations and Advises SIPs for Young Investors
What
Rajeev Thakkar, Chief Investment Officer at PPFAS which runs India's largest flexi-cap fund, spoke to the Economic Times and shared some fascinating insights. \
Highlights:
Expects returns in the single digits and thinks debt will compete with equity
High valuations are the biggest risk for markets
Thinks that the valuations of private sector banks are still attractive
Young people should continue investing through SIPs
Nifty IT Hits Two-Month Low Amid Global Tech Sell-Off, Election Uncertainty, and Foreign Fund Outflows
Nifty IT—3.44% in the last month.
What Happened?
The Nifty IT index dropped for the third day in a row, closing at 40,191.95, the lowest since mid-August.
Why?
There are increased worries about rising global economic uncertainties and a potential slowdown in tech spending
Mixed results from U.S. tech companies have led to growth concerns, and there's been a sell-off across tech-linked sectors globally.
The upcoming U.S. election and the uncertainty are another factor since policy changes could affect Indian tech companies directly.
Foreign fund outflows have also been putting pressure on IT stocks
SEBI Unveils New Proposals to Boost Management and Appeal of REITs and InvITs for Investors
What’s the announcement?
SEBI issued a new consultation paper with proposals designed to make Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) easier to manage and more attractive to investors.
The Key highlights
REIT and InvIT sponsors can now transfer locked-in units within their sponsor groups, which gives them more freedom to manage assets internally.
To support sustainability, REITs may soon invest directly in facilities like renewable energy plants and waste treatment. This adds eco-appeal for tenants looking for green options.
To hedge financing risks, REITs and InvITs may get the go-ahead to use interest rate derivatives.
What’s the key impact?
This is especially helpful for infrastructure projects with long financing needs. The proposals also broaden the kinds of assets REITs can include. Think data centers, certain hospitals, and affordable housing—all strong sources of income and growth.
Aditya Birla ARC Exits India
What?
Aditya Birla Asset Reconstruction Company (ARC), a partnership between Aditya Birla Capital and Varde Partners, recently announced its decision to close its India operations. Following similar exits by global fund-backed ARCs like Arcion Revitalization (Apollo Global and ICICI Bank) and Lone Star India, the company will now focus solely on managing its existing portfolio and will no longer acquire new distressed assets.
What is an Asset Reconstruction Company (ARC)?
ARCs purchase Non-Performing Assets (NPAs), or bad loans, from banks, helping them clear these from their balance sheets. By taking over these troubled loans, ARCs work on recovering as much value as possible through different strategies, allowing banks to focus on their main business without worrying about these bad loans.
Why are private ARCs facing challenges?
The government-backed National Asset Reconstruction Company Limited (NARCL) provides a safer choice with 85% of the payment guaranteed in secure receipts, making it more attractive than private firms that pay fully in cash.
Bad loans have reached a 12-year low, meaning fewer assets are available for purchase.
The 2016 Insolvency and Bankruptcy Code (IBC) promotes quicker settlements, which limits the flow of distressed loans.
Cipla Surges on FDA Clearance for Goa Facility, Paving Way for Key Abraxane Generic Launch
Cipla—0.45%
What happened?
Cipla Ltd.'s stock saw a strong rebound on Thursday, achieving its best single-day gain since July 2023. The jump followed the U.S. FDA's conclusion of its inspection at Cipla’s Goa facility with a 'Voluntary Action Indicated' (VAI) status. This clearance resolves long-standing compliance issues at the plant and opens the path for Cipla to launch the generic version of the cancer drug Abraxane.
What does it mean to the company?
The FDA’s VAI status is a crucial milestone for Cipla, enabling the anticipated launch of the Abraxane generic, which has been delayed due to compliance hurdles since 2019. Citi Research noted that the approval for Abraxane hinges on the Goa facility’s clearance. Nuvama’s report highlighted that the Abraxane generic launch could yield Cipla a revenue opportunity of approximately $120 million, a timely boost as the company navigates supply and competitive pressures in other drugs like Lanreotide and Albuterol.
What’s happening globally
The Bank of Japan Maintains a Steady Approach to Monetary Policy
What Happened?
The Bank of Japan (BoJ) kept its key short-term interest rate unchanged at 0.25%, the highest level since 2008.
Why This Decision? After two rate hikes earlier this year (March and July), the BoJ is holding back on further adjustments
What’s the context?
The Japanese economy presents a mixed picture:
Inflation is slightly above the 2% target, running between 2.5% and 3.0% due to higher service prices. Consumer spending is rising, supported by stronger corporate profits and increased business spending.
Exports and industrial production are flat due to global economic challenges. Inflation expectations are rising moderately and inflation is expected to increase gradually.
U.S. Economy Grows at 2.8% in Q3, Slightly Slower as Consumer Spending and Exports Drive Gains
What Happened?
The U.S. economy grew by 2.8% annualized in the third quarter of 2024, a bit slower than the 3.0% in the second quarter. Consumer spending, exports, and federal government spending were the main drivers, while imports, which count as negatives in GDP calculations, also rose.
Key Highlights:
Strong growth across sectors. Consumer spending was strong, led by prescription drugs, vehicles, healthcare, and dining.
Exports rose, with non-automotive capital goods leading the way. Federal spending increased, largely due to defense spending.
The slight slowdown from Q2 reflects a cooling in some areas. Private inventory investment went down. Residential fixed investment fell even more sharply.
Quarterly results
In this section, we'll dive into all the key highlights from today's intriguing results, covering the most impactful performances and standout moments. The numbers are comparable on a year-on-year (YoY) basis.
Tata Power—2.3%
Key highlights:
Revenue from operations came in at₹15,697.67 crore in Q2 FY2024, down from₹15,936.38 crore in Q2 FY2023, showing a slight decrease of 1.5%.
Total income increased to ₹16,210.80 crore in Q2 FY2024 from ₹15,936.38 crore in Q2 FY2023, a 1.7% rise.
Total expenses rose to₹14,082.46 crore from ₹13,558.27 crore, an increase of 3.9%.
Net profit for the period increased significantly to ₹1,093.08 crore in Q2 FY2024 from ₹755.71 crore in Q2 FY2023, reflecting a 44.6% rise.
What's next?
Tata Power anticipates a 30% YoY growth in its solar rooftop business for FY 2025, driven by the PM Surya Ghar: Muft Bijli Yojana initiative.
The goal by 2030 is for 70% of total power generation capacity to come from clean energy sources, indicating a strong focus on renewable expansion.
Management chatter
In this section, we pick out interesting comments made by the management of major companies.
Mahesh Fogla, Executive Director of Patel Integrated Logistics:
Demand is not a challenge. Challenge is the capacity because luckily we are catering to all the airlines starting from Indigo, Air India, Akasa, all the airlines which are operating in India all the foreign airlines also we cater to. So, okay, we have little less challenges, but overall, there are the challenges of the capacity of the airline.
Demand is there but getting the freight in the airline becomes a challenge now. As you know that some of the airlines have been grounded also because of the engine issue and all this, So, that things are there. Otherwise, demand is not an issue. India Aviation sector demand is growing, and airports are growing and what I am expecting now, Indigo definitely one of the major ones. So, if the number of passenger aircrafts increase, which are grounded now, then outlook will further good only. — Link
Manoj Bhat, Managing Director & CEO of Mahindra Holidays & Resorts:
I think the overall environment continues to remain very positive. Industry level ARRs are trending at Rs. 7,000 and the occupancy is at 61% as of August data. So clearly, I think the industry continues to be in a strong place. Even if you look at markers like domestic air traffic etc., I think we are seeing a year-on-year growth of 6%, so everything continues to be from an overall sentiment, overall number of people traveling, it continues to be fairly strong from an industry perspective. — Link
Sumant Kathpalia, Managing Director & CEO of IndusInd Bank:
The microfinance 30-90 DPD (days past due) book increased by 2.1 percentage points during the quarter given the sectoral stress. Gross and net slippages in microfinance business were at Rs 398 crores and Rs 355 crores for the quarter. This implies a net slippage ratio of 0.96% for the quarter.
Most MFI businesses have a recovery of around 7% to 15% depending on the DPD stage. So, early stages will have about 15% to 20% One-year older cases will have about 5% to 7%. — Link
Sundar Pichai, CEO of Alphabet and Google:
We're also using AI internally to improve our coding processes, which is boosting productivity and efficiency. Today, more than a quarter of all new code at Google is generated by AI, then reviewed and accepted by engineers. This helps our engineers do more and move faster.
Philipp Schindler, SVP and CBO, Google: Yes. And to your question on YouTube Shorts, consumption versus monetization, maybe we start with the watchtime. It continues to grow, actually, across YouTube, with particular strength in Shorts and in the living room. Just to give you a number, over 70 billion YouTube Shorts are watched every day. — Link
Satya Nadella, Chairman and CEO of Microsoft:
AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process, helping customers drive new growth and operating leverage.
All-up, our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone. — Link
Mark Zuckerberg, CEO of Meta:
For WhatsApp, the US remains one of our fastest growing countries. And we just passed a milestone of 2 billion calls made globally every day. On Facebook, we continue to see positive trends with young adults, especially in the US. On Instagram, global growth remains strong. We also launched Teen Accounts this quarter, which add built-in protections that limit who teens are messaging and what content they can see. On Threads, the community now has almost 275 million monthly actives. It has been growing more than 1 million sign-ups per day. Engagement is growing too. So we continue to be on track towards this becoming our next major social app. — Link
Calendars
In the coming days, We have the following quarterly results and other major events:
That’s it from us. Do let us know your feedback in the comments and share it with your friends to spread the word.
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From all of us at Zerodha, we wish you and your family a very happy and prosperous Diwali 🪔
Thank you, Zerodha, for your efforts!
Keep the Management Chatter section. Quarterly results and corporate actions can be avoided. Nice work on the whole.