Buzzkill

Nifty50: 16,584 ▼ 76 (-0.4%)
Sensex: 55,566 ▼ 359 (-0.6%)

Sup, y’all!

And we’re back in the red. 😞 But like they say, what goes up must come down. So take a deep breath and let’s focus on the positives, shall we? UPSC results are out and all the top three spots were secured by women! Yay!  

And talking about girl power, India has joined in the Korean pop wave. Sriya Lenka, an 18-year old girl from Odisha is the first Indian to become a K-pop star and will be a member of the Blackswan group.

• Markets halted their three-day winning streak as inflation in the Eurozone hit 8.1%, its highest level in history. 
• The rising global inflationary pressures continue to put pressure on central banks to raise interest rates. 
• Meanwhile, the market breadth was positive with 27 of the Nifty50 stocks closing in the green.

Among the Nifty sectoral indices, Realty (+2.0) and Media (+1.5%) saw the most gains, while PSU Bank (-1.0%) and Bank (-0.9%) were the top losers

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What’s trending

⭐ Delhivery delivers strong revenue 🚚

The recently listed logistics player reported 107% YoY growth in March quarter revenues to ₹2,072 crore. The growth was largely driven by the express parcel segment. While the company continued to reel under a loss (₹119 crore), it has highlighted that it is well capitalised with cash and investment of ₹2,512 crore and IPO monies of ₹3,846 crore. 

⭐ Aurobindo’s profit dives 👎
Hyderabad-based Aurobindo Pharma reported a 28% YoY decline in net profit to ₹576 crore in the March quarter. Further, revenue fell 3.2% YoY to ₹5,809 crore. The fall in revenue was mainly due to a 4.7% YoY slide in US formulations revenue to ₹2,728 crore. Meanwhile, revenue from active pharmaceutical ingredients rose to ₹913 crore against ₹794 crore. 

⭐ FIIs outflows speed up 💰

Foreign investors continue to be on selling mode in the Indian markets. FIIs/FPIs have pulled out nearly ₹40,000 crore in May 2022, the highest monthly sell-off since March 2020 when the pandemic started. Interest rates hike across the globe, appreciating dollar and rising bond yields in the US have been key triggers for the sell-off. 

⭐ Through the roof 🏡

If you are on the fence about buying a new home, this might be a good time to make that deal. Due to higher demand and increased building material costs, property prices could, reportedly, rise by 7.5% across the country. This is the fastest growth in five years. Meanwhile, the Nifty Realty index has risen 6.1% so far this week. 

⭐ Crude inches higher 🛢

Crude oil prices rose further as the European Union decided to cut 90% of oil imports from Russia by the end of 2022. Brent crude futures reached $122 per barrel. This ban could further tighten crude oil supplies.

In Focus

LIC delivers a mixed bag 😕

India’s largest life insurance company, LIC India, has announced its maiden quarterly result after listing. For the March quarter, net premium income increased by 18% to ₹1.4 lakh crore. Meanwhile, its net profit declined by 18%.

The first-year premium collection, which shows new business growth, was up by 33% to ₹14,663 crore on a quarterly basis. In comparison, the first-year premium growth for HDFC Life was at 7.8% and for SBI Life was at 5.3%. However, these numbers should be taken with a pinch of salt as the fourth quarter of the financial year is generally when taxpayers rush to buy policies to avail tax exemptions.  

For insurance companies, the persistency ratio, which indicates policyholder renewal rate after 1st year, is a better metric to describe business growth. In case of LIC, the 13th month persistency ratio dropped to 69.2% from 73.9% a year earlier. Meanwhile, HDFC Life’s 13th month persistency ratio stood at 86.9%, and for SBI Life it was at 85%.

LIC relies on a network of agents (1.3 million agents) to sell its insurance policies, which has been a key driver for LIC growth over the years. However, high upfront commissions paid to agents and expenses impacts its profitability. In comparison, private insurers are more dependent on bank networks and digital policy sales, which result in lower cost.

The joy of policyholders-turned-investors after the LIC IPO was short-lived as the company’s shares have fallen since its listing and currently trade at ₹810, 15% below the upper end of the issue-price band i.e. ₹949.

Nevertheless, LIC continues to focus on cost reduction and business growth with its dominant market share. To support investor sentiment, the company has announced a dividend of ₹1.5 per share.

IPO corner

From 1 September 2022, if you want to apply for an IPO, you would need to back it up with the required funds. The market regulator SEBI has issued a circular stating that IPO application will be processed only if it is supported by the required amount of money in the applicant’s bank account. The SEBI has made this amendment to ensure subscription numbers aren’t inflated.

Good to know

What are blue-chip stocks?

What Rahul Dravid is to a cricket team, blue-chip stocks are to a portfolio. If you are an investor who prefers not to take many risks and wants to stay invested for the long term, you might want to keep an eye on blue-chip stocks. These stocks belong to the top companies in the country by market capitalisation. These companies have a history of consistent performance, high brand recognition, ability to endure tough times, and financial stability. While these stocks command premium valuation, they are known to give good returns in the long run.

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