2019 saw India’s GDP growth slowed down in light of IL&FS crisis and subdued global economy. Reserve Bank of India revised GDP growth to 5% for 2019-20 in its December policy from 6.1% in its October policy. The impact on capital markets was mixed as while the IPO activity slowed down in 2019, the foreign portfolio investors invested in India in a big way. Following is a brief update.
Fund raising through Initial Public Offer (IPO) dropped in year 2019 with 16 companies raising around Rs. 12,365 Crore as against 24 companies raising Rs. 30,959 Crore through IPOs in 2018. This can be attributed to weak financial weather because of which investors preferred only quality stocks and backed IPOs of only high-quality companies. However recent increase in draft IPO filings suggest that companies are optimistic of a more favourable 2020.
Foreign Institutional Investors (FIIs) invested more than 1 Lakh Crore in Indian stocks in 2019 (against a net outflow in 2018). This shows that FIIs are bullish for Indian equities and looking for long term growth in Indian market. Introduction of an additional surcharge on foreign portfolio investors had led to decrease in steady flow of foreign money into India in July and August, however, the surcharge was later withdrawn in September.
Qualified Institutions Placement (QIP) fund raising almost doubled in 2019 from 2018 and was the second highest in last five years. Funds raised through QIP reached Rs. 35,238 Crore in 2019 from Rs. 16,587 crore in 2018. Around 11 companies used the QIP route in 2019, as against 25 in 2018. 2019 was driven by large deals such as Axis Bank’s Rs. 12,500 crore share sale in September and Bajaj Finance’s Rs. 8,500 crore fund raising in November. Additionally DLF raised Rs. 3,200 crore, Godrej Properties raised Rs. 2,100 crore and RBL Bank raised Rs. 2,025 crore through this route.
Trends in Capital Markets:
- Primary market Update:
During December 2019, there were two main board public issues of Ujjivan Small Finance Bank Ltd. (mobilising Rs.746 crore) and Prince Pipes and Fittings Ltd. (mobilising Rs.500 Crore) mobilising total Rs.1246 Crore as compared to one main board issue of CSB Bank Ltd. in November 2019. Ujjival small finance bank Ltd. is a microfinance based NBFC that turned in small finance bank after approval of RBI in 2017. Prince Pipes and fittings is a leading manufacturer of polymer pipes and fittings and competes with players like Supreme industries and Astral polytechnik.
During December 2019, the amount raised through private placement of equity (i.e. preferential allotment and QIP route) stood at Rs. 40,537 crore comparing with Rs. 40,304 crore in November 2019. During December 2019, there were three issues amounting Rs. 2,519 crore of Public Issue of Corporate Bonds comparing with one issue amounting Rs.461 crore in November 2019. Private Placement of Corporate Debt Reported to BSE and NSE increased by 15.2 per cent to Rs. 56,158 crore in December 2019 over Rs.48,731 crore in November 2019.
Funds Mobilisation by Corporates (₹ crore)
2. Trends in Secondary Markets:
a) Capital Markets
At the end of December 2019, Nifty 50 closed at 12,168, increased by 112.4 points (0.9 per cent) over November’s closing. S&P Sensex closed at 41,254 on December 31, 2019, an increase of 459.9 points (1.1 per cent) over previous month closing. During the month, Nifty and Sensex closed its all-time high at 12,272 and 41,682 on December 20, 2019 respectively. During the month, Nifty and Sensex closed its low at 11,857 and 40,240 on December 10, 2019 respectively.
The market capitalisation of BSE stood at Rs.1,55,53,829 crore as on December 31, 2019, increased by 0.5 per cent over previous month and market capitalisation of NSE stood at Rs.1,54,31,967 crore as on December 31, 2019, increased by 0.8 per cent over previous month.
Among select NSE sectoral indices, Nifty IT increased by 4.4 per cent during December 2019, followed by Nifty 100 (0.7 per cent), Nifty Bank (0.7 per cent), Nifty 500 (0.6 per cent), Nifty 200 (0.6 per cent), Nifty Small 100 (0.3 per cent) and Nifty MNC (0.1 per cent). On the other hand, Nifty PSU Bank decreased by 5.4 per cent, followed by Nifty FMCG (2.8 per cent), Nifty Pharma (1.8 per cent), Nifty Next 50 (0.8 per cent), Nifty Midcap 100 (0.7 per cent) and Nifty Midcap 50 (0.5 per cent) during the month.
b) Corporate Debt Market
During December 2019, BSE noted 4,397 trades of corporate debt with a traded value of Rs. 52,392 crore as compared to 4,850 trades of corporate debt with a traded value of Rs. 51,449 crore in November 2019. At NSE, 5,877 trades were noted with a traded value of Rs. 97,560 crore in December 2019 as compared to 6,183 trades noted with a traded value of Rs.1,02,472 crore in November 2019.
c) Institutional Investments
The mutual fund industry saw a net inflow of Rs. 61,497 crore in December 2019 compared to a net inflow of Rs. 54,419 crore in November 2019. During December 2019, mutual funds made a net investment of Rs. 47,298 crore (of which Rs. 45,493 crore investment in debt and Rs.1,805 crore in equity) compared to an investment of Rs.34,574 crore (of which Rs.39,418 crore investment in debt and Rs.4,844 crore withdrawn from equity) in November 2019.
During December 2019, FPIs invested a total of Rs. 2,762 crore in the Indian securities market compared to an investment of Rs.22,999 crore in November 2019. Of the total investment in December 2019, FPIs invested Rs. 7,338 crore in equity and Rs. 40 crore in hybrid securities compared to an investment of Rs. 25,231 crore in equity and Rs. 126 crore in hybrid securities during November 2019. FPIs withdrew of Rs. 4,616 crore from debt securities in December 2019 compared to Rs. 2,358 crore withdrawn from debt securities in November 2019.
d) Portfolio Management Services
As on December 31, 2019, AUM of the portfolio management industry increased marginally by 1.4 per cent to Rs.17.9 lakh crore from Rs.17.7 lakh crore in November 2019. Of the total, AUM of fund managers of EPFO/PFs contributed Rs.13.2 lakh crore (i.e., 74 per cent of total AUM).
e) Trends in Substantial Acquisition of Shares and Takeovers:
During December 2019, three open offers with offer value of Rs.349 crore was made to the shareholders as against three open offers with offer value of Rs.10 crore made in November 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:
Eris Lifesciences Ltd., acquired trademark ‘Zomelis’ and its associated trademarks from Novartis AG, based at Basel Switzerland for Indian pharmaceuticals market with effect from 10th December 2019 for a consideration of $13 Million. This trademark has been used for marketing an oral anti-diabetic drug promoted in India. The acquisition of this trademark is expected to provide a head-start to Eris visà-vis other branded generic players after the scheduled expiry of the related patent in December 2019 in the Indian Market.
Adani Electricity Mumbai Limited (AEML) and a subsidiary of Qatar Investment Authority (QIA) have signed definitive agreements for the sale of a 25.1% stake in AEML to QIA. The total QIA investment in AEML will be approximately INR 3,200 Crore ($450 million). AEML has significant market share in Mumbai and has two 250 MW coal based power plants. This transaction will deleverage balance sheet of AEML and provide equity for further capex.
Lenskart, Indian eyewear retailer, has raised US$275 million from SoftBank Vision Fund, a subsidiary of SoftBank. Funds will be used for expanding the business. The all-time raise of Lenskart has increased to $456 million after SoftBank’s investment and its valuation is now over $1.5 billion.
Global Economy:
The global economy is slated to grow at its slowest pace in a decade in 2019 – largely as a result of US-China trade war dampening business confidence, investment, manufacturing and trade worldwide. Though in a positive development USA and China have reached a Phase One trade deal whereby USA will delay indefinitely the new tariffs that were set to take effect in December on Chinese imports and reduce the existing tariffs.
The World Bank expects global growth rate to slow down to 2.5 per cent in 2019, while IMF has forecasted it to be 3.0 per cent, reflecting weaker-than-expected trade and investment during 2019. However in the month of December, global equity markets rallied on the back of optimism over global trade outlook and accommodative monetary policy.
Global Equity Markets:
In the USA, the Dow Jones Industrial Average index and S&P500 index rose by 1.7 per cent and 2.9 per cent respectively in December 2019, while technology heavyweight Nasdaq composite index rose by 3.5 per cent. France’s CAC40 index rose by 1.2 per cent and Germany’s DAX index rose by 0.1 per cent. Amongst other developed markets, Hong Kong’s Hang Seng index rose by 7 per cent followed by UK’s FTSE100 index (2.7 per cent) and Japan’s Nikkei Index (1.6 per cent). Amongst the major emerging economies, Brazil’s Ibovespa Index went up 6.8 percent and China’s Shanghai composite Index went up 6.2 percent in December 2019.
Global Debt Markets:
Global bonds sold off in December 2019 as investors risk appetite increased on signs of a potential easing of trade tensions between the US and China as well as an agreement between the UK government and European Union over Brexit. The yields on the most of the government bonds increased.
Acknowledgements: RBI Bulletin (www.bulletin.rbi.org.in), SEBI Bulletin (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
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