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Indian households invest only 14% in equities, lowest globally; US families invest the most at 45%

Exposure to equity markets, as a part of the total financial balance sheet of Indian households, stood at just 14% at the end of financial year 2019, lowest among major economies. Brokerage and research firm Motilal Oswal, in a recent report, noted that while exposure to equity markets as a part of household financial assets is lowest in India, American households had the highest exposure at 45%. The only other countries even close to the United States of America were Spain and Canada. With the high exposure, dividend income now contributes 7% to the personal income in the United States.

“American households are unique with regards to their exposure to the equity markets. Total financial assets of US households amounted to $94 trn (or ~440% of GDP) at end-CY19,” the report said. Along with having 45% of their financial assets invested in equity markets, American households invest close to 32% of their assets in long-term or retirement assets, similar to insurance and pension entitlements. Only 14% of their household financial assets were held in the form of deposits and 7% were invested in debt securities.

The report showed that the exposure to equity markets in the United States has been inching higher with each year since 2008. “The share of equities in household financial assets has risen almost continuously from its near all-time trough of 33% in 2008 to 45.5% in 2019, marking the highest rate since 1972,” the report said. Talking about the US Fed’s new monetary policy, the report added, “it seems pretty clear that the US authorities – fiscal as well as monetary – are now committed to boosting the household sector, and have conclusively left behind inflationary worries.” Although Motilal Oswal added that higher inflation in the US is unlikely in the imminent future, it did note that an unexpected resurgence in inflation could alter the reality.

On the other hand in India the household exposure to equity markets is similar to that seen in countries like Japan, Singapore, and the United Kingdom. The S&P BSE Sensex is down over 6% since the beginning of this year while stock markets in the United States are trading with gains year-to-date.

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IndiGo, SpiceJet shares fly as govt increases passenger cap; airlines still far from breaking even

IndiGo, SpiceJet saw share prices surging over 4% on Thursday morning as investors reacted to the increased capacity for domestic airline carriers to 60%. The Government of India’s Civil Aviation Ministry increased the allowed passenger capacity to 60% from the 45% it had permitted in June this year. Shares of IndiGo jumped to trade at Rs 1,304 per share, up from its closing price of Rs 1,248 on the previous day. SpiceJet, the other private listed carrier was trading at a high of Rs 53.7 per share, after having closed at Rs 50 apiece in the previous day.

Although the capacity has been increased to 60%, analysts say the aviation industry is still far from returning to normalcy. “Although 60% capacity is better than where they were a few months back, the ramp-up has been slow,” Paarth Gala, Research Analyst at Prabhudas Lilladher told Financial Express online. He added that airlines operated between the capacity of 25%-30% for a long time and have only recently started utilising around 35% capacity.

“While this move is sentimentally positive for Airline companies we believe that demand will remain muted in the near future and is expected to pick up post the festive season and maintain a neutral rating on the sector,” said Jyoti Roy, DVP- Equity Strategist, Angel Broking. After restarting the aviation industry in May, the passenger traffic has been inching higher with each passing week. According to analysts at ICICI Securities, weekly average daily fliers in the week ending August 29 crosses the 1 lakh mark. “These are early trends and should improve going ahead at a rate that would depend upon the trajectory of Covid-19 impact,” ICICI Securities said in a report. The brokerage firm added that the average daily passenger has risen from 64,000 in June to 1 lakh at the end of August and average daily passenger per departure has risen from 90.4 to 99.6.

The slow ramp-up in the industry that is one of the worst hit by the pandemic has not yet helped the airlines break-even. “The sooner Airlines reach the 60% capacity the better they will be when it comes to managing their costs,” Paarth Gala added. Analysts across the board remain bullish on IndiGo in the sector with its increasing market share and better financial performance. In the first quarter of this fiscal year, IndiGo reported a net loss of Rs 2,844 crore, with cash burn of close to Rs 40 crore per day during the lockdown due to high fixed costs in the sector.

Year-to-date the share price of IndiGo is still down 4.3% after having surged 50% from its March lows. SpiceJet is still struggling, being down 55% since the beginning of this year.

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Sebi directs 3 entities to disgorge Rs 2.33 cr in the fraudulent trade case

Capital markets regulator Sebi has directed three entities to disgorge over Rs 2.33 crore of ‘wrongful gains’ made by them by indulging in manipulative trading in the shares of Urja Global Ltd and Sampada Chemicals Ltd.

Chetan Dogra and Chetan Dogra HUF will jointly and severally disgorge about Rs 2.15 crore of wrongful gains and Shraddha Entertainment Pvt Ltd will disgorge Rs 18.05 lakh of wrongful gains, according to Sebi’s order passed on Monday.

The regulator ordered entities to disgorge the amount, along with an interest of 12 per cent per annum.

Besides, Chetan Dogra (noticee 1) and Chetan Dogra HUF (noitcee 2) have been barred from the securities market for a period of one year and Shraddha Entertainment Pvt Ltd has been banned for six months.

These directions come after Sebi found that these entities have violated PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms.

The Securities and Exchange Board of India (Sebi) had conducted an investigation between October 2010 and March 2011 into the scrips of Urja Global and Sampada Chemicals.

During the investigation, it was found that noticees are connected entities and noticee 1 and noticee 2 had executed artificial and manipulative trades in the scrip of Urja by way of synchronized trades, reversal and self trades that led to the creation of artificial volumes in the trading of the scrip of Urja.

Further, it was noted that the three entities played an instrumental role in the price rise in the scrip of Sampada during the period of January 2011 to March 21, 2011, and have participated in 33.18 per cent of total such trading instances that led to the price rise in the scrip.

Sebi in its order said, “In my view, noticees did not conduct their trades as genuine investors of the securities market and rather were motivated by certain extra-commercial illicit intentions while trading in the shares of these two companies.”

Therefore, the watchdog concluded that the entities have executed manipulative trades in the scrip of Urja and Sampada with the intention to manipulate the market or to defeat its mechanism and thereby have violated the PFUTP norms.

Also, the regulator observed that these entities have made unlawful gain through their manipulative and unfair trades in the scrips of Urja and Sampada.

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Five companies garner Rs 882 cr via NCDs in April-July

As many as five companies have raised Rs 882 crore through retail issuance of non-convertible debentures (NCDs) in the first four months of the ongoing fiscal to strengthen their balance sheets.

In comparison, companies had collected Rs 4,177 crore through this route in the April-July period of 2019-20, data with markets regulator Securities and Exchange Board of India (Sebi) showed.

The funds have been mopped up to strengthen balance sheets, which might have been impacted due to the coronavirus pandemic, retire existing debt and to support working capital requirements, market experts believe.

According to the data, as many as five firms — Muthoottu Mini Financiers and Muthoot Fincorp, Kosamattam Finance, KLM Axiva Finvest and Sakthi Finance — have mopped-up funds totalling Rs 882 crore through retail issuance of NCDs in the current fiscal till July 13. NCDs are loan-linked bonds that cannot be converted into stocks and usually offer higher interest rates than convertible debentures.

Individually, Kosamattam Finance raised Rs 297 crore as against a target of Rs 150 crore. While, Muthoottu Mini Financiers mopped up Rs 198 crore, Muthoot Fincorp raked in Rs 160 crore, KLM Axiva Finvest raised Rs 124 crore and Sakthi Finance garnered Rs 102 crore.

In the entire fiscal 2019-20, companies had raised Rs 14,984 crore.

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