Morning Scan: All the big stories to get you started for the day

Morning scan.

#1. Bulls rule Dalal Street, rally takes Sensex valuation to two-year high

The recent rally in India’s stock markets has pushed the valuation of Sensex to a two-year high, which is presently trading at a trailing price-to-earnings multiple of 25.2X, up from 23.7X in December last year and the highest since January 2022, when it was at 26.9X. The gauges current price-to-book value is 3.7X, the highest since November 2021. This rise in valuation follows a nearly three years of steady decline when corporate earnings grew much faster than stock prices.

Why it’s important: Most of the gains in equity valuation has come in the past two months after a sharp reversal in US treasury yields that saw overseas investors rush into emerging markets. The high valuation could presage a period of slower earnings growth.

#2. India consolidates position as fifth-largest equity market on relentless rally

India’s share in global market cap has hit a record 3.8 percent, Bloomberg data sahow, consolidating the country’s position as the fifth biggest equity market, just behind Hong Kong. The difference between Hong Kong and India has narrowed sharply to $500 billion compared with $1.9 lakh crore a year ago. India’s market cap is up 0.52 percentage point in 2023.

Why it’s important: A sustained domestic market rally has lifted benchmark indices by as much as 16 percent this year, reflecting optimism over the country’s long-term growth prospects.

#3. Assets of India’s mutual funds surge by 24 percent between January and November

The assets under management of the Indian mutual fund industry have risen by as much as 24 percent to Rs 49.05 lakh crore in November against Rs 39.62-lakh crore in January. The net inflows into mutual funds so far this year more than doubled to Rs 25,616 crore last month against Rs 11,373 crore in January.

Why it’s important: The significant rise underscores the interest of India’s middle-class savers to participate in the huge rally in the equity markets that led to a substantial jump in inflows, which are expected to continue.

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#4. Promoters of Adani Green Energy to infuse Rs 9,350 crore via preferential warrants

Adani Green Energy will raise Rs 9,350 crore by issuing preferential warrants to promoters to achieve its target of 45GW of eco-friendly energy capacity by 2030. Its board has approved a preferential issue of 63.14 million warrants to promoters at Rs 1,480.75 each. The infusion would be used to retire debt and hasten capital expenditure, the company said.

Why it’s important: India is rapidly becoming a global leader in renewable energy and Adani Green is back on track to make the most of it by swiftly expanding its business operations after a market setback earlier in the year that saw its stock price decline by nearly 80 percent.

#5. Apple in advanced discussions with component makers Aequs and Rayprus

Apple is in advanced talks with parts makers such as India’s Aequs Group and Taiwanese camera and lens maker Rayprus Technologies. Aequs makes high-quality toys, consumer durables and aerospace parts in India, US and France while Rayprus is an arm of Taiwanese contract manufacturer Foxconn and makes high-quality precision camera and lens solutions. Apple is also in preliminary talks with local firm Dixon Technologies.

Why it’s important: The latest development shows that Apple is making concerted moves to deepen its manufacturing operations in India in order to diversify supply chains away from China.

#6. Dish TV India shareholders oust company board, two new members join

Shareholders of Dish TV India have rejected the candidature of its remaining four independent directors. Over 71 percent of shareholders voted against appointing them at an extraordinary general meeting, the firm said in a regulatory filing. As many as 13 directors have been fired from Dish TV by shareholders since September 2021, when Yes Bank, the then-largest investor, raised the banner of revolt.

Why it’s important: India’s third-largest satellite television provider have been facing charges of poor governance from shareholders, who have Shareholders have raised concerns around its recent investments and the composition of the board. Dish TV denies any wrongdoing.

#7. Start-ups secure Rs 1.5 billion in December but funding winter might not be over

December was the busiest month of 2023 for risk capital investors, who announced over $1.5 billion in funding, which tops January’s $1.4 billion, data compiled until December 26 by Tracxn showed. However, most industry watchers would be cautious about terming it the end of the funding winter.

Why it’s important: Start-up funding in India in 2023 remains at a seven-year low. The funding environment is expected to remain sluggish going into the new year.

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#8. Regulator may allow alternative investment funds to pledge share in investee firms

The Securities and Exchange Board of India is considering a plan to allow alternative investment funds to pledge their shares in investee companies. If a special purpose vehicle operating a project seeks a loan, banks insist on promoters pledging shares as security. If an AIF is promoter or controlling shareholder, this is difficult unless the fund can pledge the shares. Currently there are restrictions on this.

Why it’s important: Till recently, the regulator was not in favor of AIFs pledging securities of their portfolio companies with banks. It may now allow pledging for legitimate purposes.

#9. European regulator hosts meetings to resolve impasse over clearinghouse oversight

The European Securities and Markets Authority has held meetings over the past few days with German and French regulators to resolve an oversight impasse involving India’s primary bond clearing house, following London’s lead in protecting the interests of lenders from continental Europe, such as BNP Paribas and Deutsche Bank, which operate in Mumbai’s globalized sovereign debt market.

Why it’s important: The European regulator in October 2022 derecognized the Clearing Corporation of India after the Reserve Bank declined to allows rights of overseas audit and inspection. ESMA might now be on the verge of changing its tune.

#10. Current account deficit declines to 1 percent as merchandise trade deficit narrows

India’s current account deficit fell to 1 percent of GDP in the fiscal second quarter, down from 3.8 percent a year ago. The decline was largely due to a narrowing of the merchandise trade deficit from $78.3 billion in the second quarter of 2022-23 to $61 billion in the three months to December, Reserve Bank data showed.

Why it’s important: the deficit is expected to rise again in the December quarter. It is expected to remain in the range of 1.5 to 1.6 percent of GDP unless commodity prices rise sharply.