Month: December 2021

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Investment via P-notes drop to Rs 94,826 cr in November

Investments in Indian capital market through participatory notes (P-notes) dropped to Rs 94,826 crore till November-end after hitting 43-month high in the preceding month.

P-notes are issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be a part of the Indian stock market without registering themselves directly. They, however, need to go through a due diligence process.

According to Securities and Exchange Board of India data, the value of P-note investments in Indian markets — equity, debt and hybrid securities — was at Rs 94,826 crore by November end as compared to Rs 1,02,553 crore by October end.

The month of October saw the highest level since March 2018, when P-notes had invested to the tune of Rs 1,06,403 crore. Abhay Agarwal, Founder and Fund Manager, Piper Serica, a Sebi-registered PMS, said there was a net sale of more than Rs 8,000 crore in November in the equity segment by P-note holders reversing the October inflow of more than Rs 5,000 crore. This is consistent with the FPI sales that have been seen in the current quarter to lock-in their gains for the year.

“We expect to see a negative number in the month of December also. There was a marginal net inflow in the debt segment, but the number is too small to read much into,” he added.

At the end of September this year, the investment level was at 97,751 crore, Rs 97,744 crore by August-end. The figure for July was revised to Rs 85,799 crore from Rs 1,01,798 crore posted earlier.

Prior to that, investment level was at Rs 92,261 crore by June-end, Rs 89,743 crore by May-end, Rs 88,447 crore at April-end and Rs 89,100 crore by March-end.

Of the total Rs 94,826 crore invested through the route till November, Rs 84,915 crore was invested in equities, Rs 9,605 crore in debt, Rs 306 crore in hybrid securities.

P-notes flows have been volatile over the last four months in line with the volatility of the global and Indian markets. Divam Sharma, Co-founder, Green Portfolio, a Sebi-registered PMS, said that November 2021 has witnessed slight change in course of FPI inflows and this negative trajectory has also continued in the month of December 2021.

The key reasons for FPI withdrawal from equity markets include expectations of monetary tightening by federal banks, high inflation levels, uncertainty around Omicron variant spread, and higher valuation levels in equity markets, he said.

“This is also considering that most FPI’s go on year-end holidays for 2-4 weeks and had lightened positions before their vacations. This is a global trend as emerging markets across the globe along with developed markets have witnessed selling in November and December,” he added.

The assets under the custody of FPIs declined to Rs 52.24 lakh crore in November-end from Rs 53.6 lakh crore in October-end. Piper Serica’s Agarwal expect the net flows to be anemic in the near future till FPIs start deploying their 2022 allocations. There are no big IPOs slated in the near term so the primary market inflows from P-note holders will be weak.

“At the same time, market valuations have become quite reasonable after the recent correction. If the Omicron cases do not lead to national level lock downs and CPI inflation does not cross 6 per cent we expect the flows to be positive in the next quarter,” he added.

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Reliance Industries’ Sensex weightage may increase, TCS, HDFC Bank weights could be reduced

Reliance Industries Ltd’s (RIL) weightage in the benchmark S&P BSE Sensex could be increased by 0.68% by the end of this month, said Abhilash Pagaria of Edelweiss Alternative Research. The Mukesh Ambani’s led oil-to-telecom conglomerate may see as much as $75 million in inflows helped by such a change in its index weightage, Edelweiss added. While RIL’s weightage may be increased, the brokerage firm said that index heavyweights such as Infosys, HDFC Bank, ICICI Bank, Housing Development Finance Corporation (HDFC), and TCS could see their respective positions be trimmed.

Reliance Industries weight to go up
Reliance Industries weightage change will be impacted for an ad-hoc implementation of shareholding change. The largest listed private company in the country had announced a rights issue earlier last year, and the shares issued in the rights issue were recently converted to fully paid-up equity shares. “In the recent announcement S&P Global has notified us and the participants that they will be making the adjustments on Dec 29, 2021. This will lead to an inflow of $75mn which is 0.3 ADV impact,” Edelweiss said. RIL weight in Sensex, post this, could increase to 12.5% from the current 11.8%.

The change in weight on Sensex is also likely to act as a catalyst for a change in the upcoming Nifty rebalancing as well. “Likewise we believe, Nifty Indices will implement the revised shareholding on its forthcoming rebalance on Dec 30, 2021. The estimated inflow is of approximately $170 million,” they added.

Facing the axe
While RIL weightage increases, that of Infosys, HDFC Bank, ICICI Bank, HDFC, and TCS could go down, according to Edelweiss. Infosys weight is expected to come down to 10.4% from the current 10.5% and that of TCS is anticipated to be brought down to 5.8% from 5.9%. This is likely to result in an outflow of $9 million and $5 million respectively.

Private lenders, HDFC Bank and ICICI Bank may also see a reduction in weight, resulting in $8 million and $7 million outflows. Mortgage lender HDFC is predicted to see its weight drop to 7.3%, resulting in $6 million in outflows.

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Axis Bank to raise up to Rs 5,000 cr by issuing bonds

Axis Bank on Monday said it will raise up to Rs 5,000 crore by issuing bonds. In April this, the board of directors of Axis Bank had authorised it to borrow/raise funds in Indian currency/foreign currency by issue of debt instruments, perpetual debt instruments, AT 1 bonds, infrastructure bonds and Tier II capital bonds among others up to an amount of Rs 35,000 crore.

“We now wish to inform you that the bank proposes to raise funds by issuing senior unsecured taxable redeemable non- convertible debentures of Rs 10 lakh each for cash at par with base issue size of Rs 2,000 crore and green-shoe option to retain over-subscription of Rs 3,000 crore thereby aggregating up to Rs 5,000 crore,” Axis Bank said in a regulatory filing. Stock of Axis Bank traded at Rs 663.25 apiece on the BSE, down by 3.74 per cent from previous close.

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RBI discusses private cryptocurrencies, central bank digital currencies at board meet led by Shaktikanta Das

Reserve Bank of India’s Central Board of Directors today discussed various aspects relating to Central Bank Digital Currency and Private Crypto Currencies. The Central Board of Directors of the Reserve Bank, led by Governor Shatikanta Das, met today in Lucknow to hold the 592nd meeting of the Board. “The Board reviewed the current domestic and global economic situation, evolving challenges and remedial measures,” a statement by the central bank said. “The Board also discussed various aspects relating to Central Bank Digital Currency and Private Crypto Currencies,” it added, without divulging details. The meeting was attended by Deputy Governors Mahesh Kumar Jain, Michael Debabrata Patra, among others along with Debasish Panda, Secretary, Department of Financial Services.

The central bank’s board meet comes at a time when the government is expected to soon bring a bill regulating private cryptocurrencies. Earlier last month, RBI Governor Das had expressed concern over cryptocurrencies, saying there are “far deeper issues” involved in virtual currencies that could pose a threat to the country’s economic and financial stability. “When the RBI, after due internal deliberation, says that there are serious concerns on macroeconomic and financial stability, there are deeper issues, which need much deeper discussions and much more well-informed discussions,” RBI Governor had then said.

The government was expected to introduce a bill regulating cryptocurrencies in the winter session, however, that may be now postponed. The Finance Minister had said that the bill will be introduced in the House after approval from the Cabinet.

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