‘Local relationships matter more in tier-2, 3 markets’

Brokerages are going heavy on tech, but digital cannot come at the cost of physical, says Ajay Menon, MD and CEO (Broking and Distribution), Motilal Oswal Financial Services. In an interview to Siddhant Mishra, he says a super app for clients is on the cards, while the franchise model is also thriving and helping onboard more clients. Excerpts:

The capital markets business, of which broking and distribution (B&D) is a part, recorded a 63% YoY jump in net profit. What were the key factors?

Distribution revenues also rose 19% YoY on a strong distribution AUM of Rs 22,000 crore; we are focused on scaling up significantly as it provides stable trail income. Our approach to expanding our client base has been to focus on quality customers and building upon our distribution business.

What was the rationale behind hiving off B&D operations into Glide?

The rationale was predominantly to comply with the NSE circular stating that the broking entity (B&D business) is not permitted to engage in any business other than that of securities.

Given that Motilal Oswal Financial Services is the parent company and holds a stock broking licence,it cannot have Motilal Oswal Home Finance or Motilal Oswal Finvest as subsidiaries.

As a result, the hive-off led to the broking business being transferred to a subsidiary called Glide, via a slump sale. Further, this gives the group flexibility to expand into newer segments/line of businesses.

As far as technology is concerned, what are the plans in the offing?

We’ve been paying special attention to our digital journey since the last seven years. We’re working on new developments in distribution, and planning new app launches.

To build on our strong physical base, we built our technology in-house. We’re among the few to have our own trading software and in-house development team.We have an app that is separate for investors and traders. In addition, we are coming up with a super app for taking care of all client investment needs. We are ‘phygital’ in our business model, because we’re not digital at the cost of physical.

How have partnerships with distributors and franchise partners helped tap tier-2 and 3 markets?

Our franchisee model, and the network we’ve built has been our base over the years. It has helped foster an entrepreneurial spirit among partners. Our promotors were themselves sub-brokers and have kindled this spirit among the entrepreneurs to develop the franchisee model across the country.

In tier-2 and 3 markets, this helps because our partners have local relationships, which play a more important role.

Our marketing team works with these partners and helps them onboard clients. With the backing of Motilal Oswal’s research and marketing skills, they are able to sell more asset products, including broking.

At a time of easy access to information, what relevance does the advisory model still hold?

Advancements in tech have led to ease of trade, which facilitates faster execution. But what to buy or sell is what investors always want to know, which is where advisory comes into play.

Some take the help of friends, or their internal network. When it comes to MO, they get research-backed advice from an appointed advisor — backed much more by data and analysis.

They stand to build a better portfolio once they analyse it from a long-term perspective. However, a DIY (do-it-yourself) approach is more of a trial-and-error, where one could go wrong and has to learn from mistakes.

What are your growth and expansion plans?

Our research and advisory model is our strength, and there are few brokerages in this space. We’ll see more customers seeking such advice during volatile and changing markets.

We are building our franchise network and aligning with smaller brokers who lack the digital and research capabilities because it’s a win-win with them leveraging our tech and us leveraging their local relationships.

Besides, our product distribution is also in focus as there are huge cross-selling opportunities like PMS, mutual funds, wealth management, etc, for HNI clients.

Entry of new investors has pushed up participation in markets. Is that encouraging, given that most of them also end up losing money?

Many entered during the pandemic, when they had a lot of free time. Also, it was at a time when markets were booming and technology was at its best. However, considering the attention span and mindset of youngsters, they have a short-term approach. While they had the risk appetite, they didn’t have the money.

However, the stock market has seen many different phases. The good thing about the current phase is the strength of digital and exponential growth of new people entering, which has pushed up participation and volumes.

On the flip side, they are trying to trade too much and have too short a horizon. Those for the long haul will stay and be a part of the growing equity cult.

India diesel exports to Singapore set for highs in Aug, drop for Europe

India’s diesel exports to Singapore are set to hit a 19-month high in August and exceed 330,000 metric tons, boosted by cheaper freight costs and low inventories in the Asian oil hub, traders and analysts said.

The country’s exports of the fuel for August to Europe, on the other hand, are poised to fall to their lowest this year, according to one shiptracker, as shipments to the east are more profitable, but that situation may not last.

India is on track to ship between 330,000 and 439,000 tons of diesel in August to Singapore, shiptracking data from Refinitiv, Vortexa and Kpler showed.

The volume is the highest since January 2022, said Serena Huang, Vortexa’s head of Asia-Pacific analysis.

“The seasonal lull in India’s gasoline and diesel domestic demand due to the monsoon has seen the country raising its clean product exports for August to date,” she said, referring to refined products such as diesel, jet fuel and gasoline.

Freight costs for the India-Singapore route were around $21 per ton cheaper than the India-northwest Europe route in end-July, compared with $14 a ton in mid-July, data from Sparta Commodities showed, making it more lucrative for sellers to send cargoes east.

Replenishment of stocks in Singapore, where commercial inventories of the fuel remain near eight-month lows, is also driving the flows, said Sparta analyst James Noel-Beswick.

Asia gasoil refining margins have climbed almost $10 per barrel so far in August from July’s average, Refinitiv Eikon data showed, on prompt supply tightness.

Meanwhile, India’s diesel exports to Europe in August could fall to around 320,000 tons, the lowest this year, Kpler data showed.

Diesel imports into Europe in September are expected to fall because demand east of Suez has been stronger and more cargoes will likely remain in the region instead of heading West, one Europe-based trader said.

However, the jump in India’s exports to Singapore could be short-lived as the east-west arbitrage price spread is widening, which could make exports to Europe more profitable again, said FGE analyst Liu Xuanting.

The exchange of futures for swaps (EFS), or the spread between front-month Singapore 10 ppm sulphur gasoil swaps and the corresponding ICE low sulphur gasoil futures contract, widened to an average of minus $42 a ton so far in August from an average of minus $31 in July, Refinitiv Eikon data showed.

And India’s refined products exports will be curtailed from second-half of September as Mangalore Refinery and Petrochemicals Ltd and Reliance Industries Ltd shut some facilities including crude units for maintenance.

Also, Indian refiners are likely to keep stocks before the Diwali holidays in October to meet festive demand, a Singapore-based analyst said.

Proposed tweaks to delisting norms to benefit public shareholders

– By Usha Ganapathy Subramanian and Dr Ranjith Krishnan

Going public is a dream for many businesses as it brings in huge capital at a low cost, enhances visibility and expands investor base. Albeit enabling cheaper sourcing of funds, since public money is involved, the process entails mandatory listing on stock exchanges and compliance with SEBI’s stringent listing norms. However, over time, the company’s promoters may contemplate delisting the company to consolidate their holdings and take the company private again, or the shares may experience low trading activity and lack of market depth much to the dismay of public shareholders. In some cases, the cost of compliance and the perceived burden of disclosures may be felt to outweigh the benefits of listing. The company may also be planning closure and may want to delist. When it comes to delisting, investors’ interests need to be especially safeguarded, because the company’s shares will no longer be traded on the bourses, and investors will be left fending for themselves while finding a buyer to sell their shares or while trying to get their grievances redressed.

Now SEBI is looking at tweaking the present process in its recent Consultation Paper comprising the recommendations of the sub-group of the Primary Markets Advisory Committee, chaired by Shri Keki Mistry. Counter offer is proposed to be allowed if the bids received are higher than the number that could take the acquirer’s POS to at least 75% and the number that comprises 50% of the public shareholding. The counter offer price will also take into account the volume-weighted average price under the RBB instead of on the book value basis, to better reflect shareholders’ expectations. For determining the floor price, the adjusted book value based on an independent valuation is proposed as an additional parameter considering the company will not remain listed if the process is successful. This will add an element of fairness, as in some delisting proposals, the floor price as per the present formula ended up less than the current market price and the promoters may be tempted to use this disparity in their zeal to take the company private. One of the important proposals is to permit fixed price delisting akin to a fixed price public issue for companies with frequently-traded shares to provide the public and the acquirer much-needed certainty while avoiding the exposure to volatile market sentiments. The reference date for the determination of floor price is also proposed to be moved to the date when the first public disclosure is made. Comments on the proposals can be sent in by September 4.

(Usha Ganapathy Subramanian is the practicing company secretary in Chennai; and Dr Ranjith Krishnan is a sustainability consultant in Thane.)

(Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)

Closing Bell: Nifty closes above 19430, Sensex above 65380; Metal, Banks, IT Auto shine, SAIL Soares 7%

Nifty 50 and BSE Sensex ended the week’s last trading session on a steady note. The Nifty 50 closed at 19,435.30, while the Sensex closed the trading session at 65,387.16 led by metals, public sector enterprises and auto. NTPC, JFS, ONGC, JSW Steel and Tata Steel were the top gainers on the NSE Nifty 50, while the losers included Cipla, HDFC Life Insurance, Dr Reddy’s Labs and Nestle India.

The broader markets settled largely in the green, with Nifty Smallcap 50 and Nifty Smallcap 100 adding 1.61% and 1.17% respectively. Bank Nifty surged 1.02% to settle at 44,436.10. Nifty Metal, Banks, Auto and IT were the leading gainers among the other sectoral indices, while Nifty Pharma and Healthcare index faced corrections.

Weekly Roundup

“Indian equities posted healthy gains this week. Large indices like BSE-30 and NSE-50 gave weekly returns of close to 1%. Indian mid-cap and small-cap indices outperformed the large-cap index. On the sectoral front, BSE Metals and BSE Realty indices saw weekly gain in excess of 5%. Other sectors that gave healthy weekly gains include BSE Commodities, BSE Auto, BSE Capital Goods and BSE Power. On the other hand, the BSE FMCG index posted a negative return. India’s real GDP growth in Q1FY24 came in at 7.8%. In the near term, markets is expected to keep a close watch on the impact of weak monsoons in August 2023 and rising crude oil prices,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.

Nifty 50 technical view

“Nifty has started the September series on a bullish note, as the index has moved above the 21EMA for the first time in several days. This suggests the potential for a bullish reversal. Additionally, the index has broken out of a falling channel, further indicating increasing bullish sentiment. Looking at the higher end of the spectrum, there is now a resistance level at 19,530 points. If the Nifty manages to breach this resistance, it could signal a continuation of the uptrend. On the lower end, there is strong support at 19,340 points,” Rupak De, Senior Technical analyst at LKP Securities.

Bank Nifty short-term target 45000

“Bank Nifty has also witnessed a sharp pullback. It has held on to its 20-week moving average support (44,144) and also closed in the green. We expect the pullback to continue over the next week as well. Daily and Hourly momentum indicator has a positive crossover which is a buy signal. We expect Bank Nifty to target levels of 45,000 from a short-term perspective,” said Jatin Gedia – Technical Research Analyst at Sharekhan by BNP Paribas.

Rupee rises marginally to 82.62 against US dollar in early trade

The rupee traded in a narrow range and appreciated by 1 paise to 82.62 against the US dollar in early trade on Thursday amid a positive trend in the domestic equity market. Outflow of foreign funds and relatively higher crude prices weighed on the domestic unit, according to forex traders. Investors are also awaiting the GDP data for the first quarter of the current fiscal that will be released later in the day.

At the interbank foreign exchange, the domestic unit opened at 82.65 and traded between the peak of 82.58 and the lowest level of 82.73 against the greenback. Later, the rupee was trading at 82.62 against the dollar, registering a gain of 1 paise from its previous close. On Wednesday, the rupee closed at 82.63 against the dollar. The latest US data indicated that the pace of employment growth was less than expected in August, raising hopes for easing of interest rates by the Federal Reserve.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.03 per cent lower at 103.14. Brent crude futures, the global oil benchmark, was trading 0.03 per cent lower at USD 85.83 per barrel. In the domestic equity market, the 30-share BSE Sensex was trading 113.86 points of 0.17 per cent higher at 65,201.11 points. The broader NSE Nifty inched up 18 points or 0.09 per cent to 19,365.45 points. Foreign Institutional Investors (FIIs) were net sellers in the capital market on Wednesday as they offloaded shares worth Rs 494.68 crore, according to exchange data.

How various global indices, commodities affect the Indian stock markets

By Achin Goel

The Indian stock market has been one the outperforming capital markets globally and many economists concur that India will be a bastion of growth for the global economy in the near and medium term. However, bouts of volatility induced by global factors affect Global Indices and the Indian stock market, of which, we shall discuss a few:

The US Stock Market

The US stock market is one of the most important markets in the world, and its performance has an impact on other markets, including the Indian stock market. Why? 1) The US is India’s largest trading partner, therefore, the performance of the US economy has a domino effect on the Indian economy as well and with fear of a recession looming over the US economy Indian markets are bound to witness some volatility; 2) Many Indian companies are listed on US stock exchanges and many US companies have operations in the India, this makes a strong correlation between both the countries; 3) the US dollar is the most important currency in the world which is directly tied with strength of the US economy, and so the DXY can have an impact on the Indian rupee as discussed earlier.

From Feb-20 to Mar-20, when the COVID-19 pandemic caused a global lockdown, the Dow Jones Industrial Average (DJIA) fell by over ~35%, the NIFTY 50 during the same period fell by ~33%. In 2021, when the global economy began to recover NIFTY 50 also gained ~24%, while DJIA climbed ~19%.

Crude Oil Basket

Crude oil is a major input for many Indian industries, and crude oil prices are a major determinant of the cost of transportation, manufacturing, and other key sectors of the Indian economy. When the price of oil rises, it can have a negative impact on the Indian stock market. Higher oil prices can make it more expensive for Indian companies who import raw materials and squeeze their profit margin. Nevertheless, the impact of the oil basket on the Indian stock market is not always straightforward – if the price of crude oil climbs due to a supply shortage, it could lead to higher inflation, which can hurt consumer spending and corporate earnings. However, if the price of crude oil rises due to strong demand, it could boost economic growth and consequently the stock market. Hence it is important to keep a vigilant eye on the oil price. When the Russia – Ukraine conflict began in early 2022, crude oil prices went above $140 / barrel, which led to a correction of the Indian equity market by ~12% over the next 6 months. However, as crude oil prices stabilized and have gone below the price when the conflict started, NIFTY 50 started going up and is currently at an all-time high.

Freightos Baltic Index (FBX)

FBX is the leading international Freight Rate Index, in cooperation with the Baltic Exchange. During 2022 freight rates were elevated for the first half due to shortage of freight containers. This adversely impacted export oriented stocks since they were unable to deliver their products on time which upset their working capital and profitability. In addition to these, there are other factors that can affect the Indian stock market, such as – US Federal Interest Rate Cycle, International government policies & agreements and much more.

In conclusion, investors should carefully monitor global economic and financial conditions along with prominent global indices, as the Indian stock market is intricately intertwined with the global economy and when global market indices are strong, the Indian stock market tends to do well except for any domestic predicament.

(Achin Goel- Vice President Bonanza Portfolio. Views expressed are the author’s own. Please consult your financial advisor before investing)

Stocks To Watch: Kotak Bank, Infosys, ITC, Hindalco, Maruti Suzuki, Hero MotoCorp, Eicher Motors

Stocks in focus: GIFT Nifty traded 0.03% higher during Monday’s early trading session at 19,553, indicating a flat opening for domestic indices NSE Nifty 50 and BSE Sensex. On Friday, the Sensex closed above the 65,300 mark, while the Nifty topped 19,400 by close. Sectors like metals, energy, automotive, and banking all saw gains, whereas healthcare and pharmaceutical stocks faced some downward pressure.

“Domestic markets made significant gains, buoyed by favourable global cues, a higher-than-expected domestic manufacturing PMI, and positive GDP growth data. This robust economic outlook propelled key manufacturing sectors to lead the rally, while strong sales figures generated increased interest in auto stocks. The positive opening in global markets provided additional momentum for investor sentiment, particularly as US PCE inflation aligned with expectations,” said Vinod Nair, Head of Research at Geojit Financial Services.

IDFC First Bank

GQG Partners acquired a 2.6% stake in IDFC First Bank for Rs 1527 crore, according to bulk deals data from BSE. Cloverdell Investment, the primary public shareholder of the private bank, sold approximately 4.2% stocks at Rs 89 each.

Infosys

India’s second largest IT company Infosys announced that it has completed the acquisition of Danske Bank’s IT centre in India.

Mindspace REIT

Mindspace Business Park REIT has acquired 0.24 million square feet (MSF) of leasable area at Commerzone in Porur, Chennai for a consideration of Rs 181.6 crore, including the transaction cost. The company said that the acquisition will help it to consolidate its ownership in the project

ITC

Diversified group ITC on Sunday said it will invest around Rs 1,500 crore to set up an integrated food manufacturing and logistics facility and a sustainable packaging products manufacturing facility at Sehore in Madhya Pradesh. The two projects spread over an area of nearly 57 acres will give a boost to agricultural and manufacturing sectors in Madhya Pradesh

Hindalco

Hindalco Industries has signed a shareholder’s agreement and power purchase deal with Seven Renewable Power, aiming to acquire a 26% share in SRPPL at a cost of Rs 32.5 lakh. Their objective is to create and manage a captive power facility that will consistently supply 100 MW of renewable energy to its smelter based in Odisha.

Maruti Suzuki, Hero MotoCorp, Eicher Motors

Auto manufacturers are releasing their sales figures for August. Traders will keep an eye on the following scrips.

(With agency inputs.)

NLC India’s first coal-based supercritical thermal power plant coming up in Kanpur | IN PICS

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To meet the rising power demand in India, the NLC India Limited (formerly Neyveli Lignite Corporation Limited) will begin the operation of its first super-critical coal-based thermal power plant soon.

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The NLC India Limited’s first coal-based supercritical power plant – Neyveli Uttar Pradesh Power Ltd (NUPPL) is being built at Uttar Pradesh’s Ghatampur Tehsil.

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The NUPPL power plant project received the GOI sanction on July 27, 2016. This is being built in a joint venture with Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd (UPRVUNL). 

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The NUPPL super critical thermal power project is being built in an area of 1013.97 hectares. Of these, the power plant area is 768 hectares and the area for township projects is 68 hectares. 

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The project is being built at an estimated cost of Rs 19406.12 crore. Of this, the total capital expenditure (capex) till June 02, 2023 is Rs 15109.6 crore. 

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The total capacity of the NUPPL thermal power plant is 1980 MW. A total of three units are there (3*660 MW).

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The NUPPL has built a rail siding of 43.2 km long for carrying the coal from Hamirpur railway station to its plant. 

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The NUPPL thermal power project has boosted the local economy. About 1000 contractual manpower have been sourced from Project Affected People (PAPs).

Inox India files draft papers with Sebi for IPO

Cryogenic tank maker Inox India Ltd has filed preliminary papers with capital market regulator Sebi to mop up funds through an initial public offering. The Initial Public Offering (IPO) is entirely an Offer For Sale (OFS) of up to 2.21 crore shares by its existing shareholders and promoters, according to the Draft Red Herring Prospectus (DRHP) filed on Tuesday. Those offering shares in the OFS are Siddharth Jain, Pavan Kumar Jain Nayantara Jain, Ishita Jain, and Manju Jain.

Since the issue is completely an OFS, the Vadodara-based company will not receive any proceeds and all the funds will go to the selling shareholders. Explaining the reason for going public, the company said it is aimed at achieving the benefit of listing equity shares on the stock exchanges and carrying out OFS for the selling shareholders.

The company’s offering includes standard cryogenic tanks and equipment, bespoke technology, equipment, and solutions as well as large turnkey projects that are used in industries such as industrial gases, LNG, green hydrogen, energy, steel, medical and healthcare, chemicals and fertilisers, aviation and aerospace and construction. ICICI Securities and Axis Capital are the book-running lead managers to the issue.

FPIs invest Rs 10,689 cr in August; pace of investment slows

After infusing a staggering amount in Indian equities in the past three months, the pace of inflow from foreign investors ebbed in August with a net investment of Rs 10,689 crore on higher crude oil prices and resurfacing of inflation risks.

Further, markets could remain volatile in the coming week due to macroeconomic uncertainty and rising US bond yields. This has been prompting FPIs to flee emerging market equities, including India, and park funds in haven US securities, said Shrikant Chouhan, Head of Research (Retail), Kotak Securities Ltd.

According to the data with the depositories, Foreign Portfolio Investors (FPIs) invested a net amount of Rs 10,689 crore in Indian equities this month (till August 26).

This figure includes investment through the primary market and bulk deals, which have been gathering momentum recently. Before this investment, FPIs invested over Rs 40,000 crore each in the past three months in Indian equities.

The net inflow was at Rs 46,618 crore in July, Rs 47,148 crore in June, and Rs 43,838 crore in May. Before that, the inflow was Rs 11,631 crore in April and Rs 7,935 crore in March, data with the depositories showed.

The lower quantum of net inflow this month could be attributed to FPIs adopting a wait-and-watch approach ahead of the lined-up event at the Jackson Hole for further insights on the upcoming monetary policy by the US Federal Reserve, Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said. The next Federal Open Market Committee (FOMC) meeting is scheduled for September 19-20.

Additionally, higher crude oil prices and resurfacing of inflation risks, firming up of bond yields in the US, would have led some foreign investors to drift away from riskier markets in favour of greater certainty and better risk-reward profile offered by US treasuries, Srivastava said. Also, the recent rally in the Indian equity markets could have resulted in its valuation going beyond the comfort level of a few investors, he added.

“The pace of FPI investments is influenced by the expectations of the endowments and pension funds that sponsor them. With the US 20-year bond rate at 4.65 per cent, FPIs’ willingness to invest in riskier Indian equities could be dampened, as these funds usually target a return of about 6 per cent, ” Mayank Mehraa, smallcase Manager and Principal Partner at Craving Alpha, said.

This caution is driven by the availability of safer investments offering comparable returns without the higher risks associated with equities. Consequently, while FPI investments continue, their moderation reflects the intricate interplay of global market dynamics, investor preferences, and potential returns, he added.

Apart from equities, FPIs invested Rs 5,950 crore in the country’s debt market during the period under review. With this, the total investment by FPIs in equity has reached Rs 1.37 lakh crore and Rs 26,400 crore in the debt market so far this year. In terms of sectors, FPIs are consistently buying capital goods. And, of late, they have started selling in financials.