Indian Economic activity remained subdued in the month of November 2019. Gross domestic product (GDP) growth moderated to 4.5 per cent year-on-year (y-o-y) in Q2:2019-20, extending a sequential deceleration to the sixth consecutive quarter. Real GDP growth was weighed down by a sharp slowdown in gross fixed capital formation (GFCF), cushioned by a jump in government final consumption expenditure (GFCE).
Contraction in output of eight core industries – which constitute 40 per cent of the index of industrial production (IIP) – extended into the second consecutive month in October and became more pronounced. The Index of Industrial Production (IIP) revived in November 2019, as it grew by 1.8% YOY, followed by a continuous contraction for three months starting in August 2019 till October 2019. CPI inflation rose to 7.35% in December 2019 compared with 5.54% in November 2019. Rupee appreciated against the dollar in December 2019 to close at Rs.71.28 compared to Rs.71.77 in November. Yield on 10-year government bond increased by 9 basis points from 6.46% in November 2019 to 6.55% in December 2019.
Trends in Capital Markets:
- Primary market Update:
During November 2019, there was one main board public issue of CSB Bank Ltd. mobilizing Rs.410 crore as against two main board public issues of Indian Railway Catering and Tourism Corporation Ltd. (IRCTC – mobilising Rs. 638 Crore) and Vishwaraj Sugar Industries Ltd. (mobilising Rs. 60 Crore) in October 2019 mobilising total Rs. 698 Crore. There was no rights issue as against two rights issues amounting Rs.235 crore in October 2019.
During November 2019, the amount raised through private placement of equity (i.e. preferential allotment and QIP route) stood at Rs. 40,304 crore comparing with Rs.621 crore in October 2019. During November 2019, there was one issue amounting Rs.461 crore from the Public Issue of Corporate Bonds comparing with three issues amounting Rs.973 crore in October 2019. During November 2019, Private Placement of Corporate Debt Reported to BSE and NSE increased by 3 per cent to Rs. 48,731 crore over Rs. 47,318 crore in October 2019.
Funds Mobilisation by Corporates (₹ crore)
a) Capital Markets
At the end of November 2019, Nifty 50 closed at 12,056, increased by 178.6 points (1.5 per cent) over October’s closing. S&P Sensex closed at 40,794 on November 30, 2019, an increase of 664.8 points (1.7 per cent) over previous month. During the month, Nifty and Sensex closed its all-time high at 12,151 and 41,130 on November 28, 2019. During the month, Nifty and Sensex closed its low at 11,840 and 40,116 on November 13, 2019.
The market capitalisation of BSE stood at Rs.1,54,75,077 crore as on November 30, 2019, increased by 0.4 per cent over previous month and the market capitalisation of NSE stood at Rs.1,53,15,478 crore as on November 30, 2019, increased by 0.4 per cent over previous month.
Among select NSE sectoral indices, Nifty PSU Bank increased by 6.5 per cent during November 2019, followed by Nifty Bank (6.3 per cent), Nifty Pharma (4 per cent), Nifty Media (2.7 per cent), Nifty Midcap 100 (2.4 per cent), Nifty Midcap 50 (1.8 per cent), Nifty 200 (1.3 per cent), Nifty 500 (1.3 per cent) and Nifty Small 100 (1.2 per cent). On the other hand, Nifty FMCG decreased by 4.2 per cent, followed by Nifty IT (3.6 per cent), Nifty MNC (2.9 per cent) and Nifty Next 50 (0.6 per cent) during the month.
b) Corporate Debt Market
During November 2019, BSE noted 4,850 trades of corporate debt with a traded value of Rs.51,449 crore as compared to 4,133 trades of corporate debt with a traded value of Rs.50,078 crore in October 2019. At NSE, 6,183 trades were noted with a traded value of Rs.1,02,472 crore in November 2019 as compared to 5,692 trades were noted with a traded value of Rs.1,00,001 crore in October 2019.
c) Institutional Investments
The mutual fund industry saw a net inflow of Rs. 54,419 crore in November 2019 compared to a net inflow of Rs. 1,33,482 crore in October 2019. During November 2019, mutual funds made a net investment of 34,574 crore (of which Rs. 39,418 crore investment in debt and Rs.4,844 crore withdrawn from equity) compared to an investment of Rs. 45,485 crore (Rs.3,437 crore in equity and Rs. 42,048 crore in debt) in October 2019.
During November 2019, FPIs invested a total of Rs. 22,999 crore in the Indian securities market compared to an investment of Rs. 16,069 crore in October 2019. Of the total investment in November 2019, FPIs invested Rs. 25,231 crore in equity and Rs. 126 crore in hybrid securities compared to an investment of Rs. 12,368 crore in equity and Rs. 31 crore in hybrid securities during October 2019. FPIs withdrew Rs. 2,358 crore from debt securities in November 2019 compared to Rs. 3,670 crore in debt securities in October 2019.
d) Portfolio Management Services
As on November 30, 2019, AUM of the portfolio management industry decreased by 3.1 per cent to Rs. 17.7 lakh crore from Rs. 18.2 lakh crore in October 2019. Of the total, AUM of fund managers of EPFO/PFs contributed Rs. 13 lakh crore (i.e., 73.6 per cent of total AUM).
e) Trends in Substantial Acquisition of Shares and Mergers & Acquisitions:
During November 2019, three open offers with offer value of Rs. 10 crore was made to the shareholders as against four open offers with offer value of Rs. 13 crore made in October 2019. Of the three, one open offer was for change in control of management, one was Consolidation of Holdings and one was Substantial Acquisition.
Mergers & Acquisitions and Private Equity Key Deals:
Patanjali Ayurved has taken over soya food brand Ruchi Soya for Rs.4350 Crore through an insolvency process. The acquisition was completed by infusing equity of Rs.1100 crore and debt of Rs.3250 crore. This acquisition will help Patanjali acquire other soya bean oil brands as well as edible oil plants. Insolvency proceedings were initiated against Ruchi Soya in December 2017 on application of DBS Bank and Standard Chartered Bank.
US asset manager T Rowe Price led a financing round through which the digital payments company Paytm has raised $1 billion. Existing investors SoftBank and Ant Financial have also infused $200 million and $400 million respectively in the company. Hence taking the total amount raised to $3.5 billion. SoftBank’s investment came with a condition for Paytm to go public in five years from the time of completion of the transaction. If the condition is not met, SoftBank can sell its stake to a rival company. The valuation of Paytm has now reached close to $16 billion.
Global economic growth is slowing down due to the ongoing geopolitical tensions, uncertainty surrounding the trade deal between the U.S. and China, which has disrupted supply chains, reduced investment, rattled financial markets, etc.
Global Equity Markets:
The developed markets continued to post better returns, compared to those of the BRICS nations. There was fall in the closing values of various indices in November 2019 except UK FTSE 100 Index which increased by 2.21% in November as compared to the previous month. Performance of various stock indices is given as under.
Global Debt Markets:
Central Banks of many economies have reduced the policy rate during 2019. Bond Yields for the developed nations are on a moderate upward trajectory from September 2019.
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