Market recap for 10 December 2020

Nifty50 13,478 ▼ 50 (-0.3%)

Sensex 45,959 ▼ 143 (-0.3%)

The markets took a breather today after the recent, record-breaking rally. Weak cues from Asian indices also supported the bears in the domestic market. 

Among the Nifty sectoral indices, FMCG (+2.8%), Realty (+0.4%) and Metals (+0.2%) gained ground, whereas Media (-1.6%) and PSU Bank (-1.5%) were top sectoral losers.

Top gainers (Nifty50)

Top losers (Nifty50)

Here are the top stories for the day.

FMCG stocks come to the rescue

• FMCG stocks came to the rescue today when nearly all sectoral indices were in the red. The Nifty FMCG index (+2.8%) made record highs.
• The sector is witnessing a revival as challenges in supply chains during the lockdown have now eased. Further, consumption levels are getting back to normal, unlike when consumers were just purchasing essentials during lockdown. Nestle (+4.1%), ITC (+3.7%) and Godrej Consumer (+3.5%) were among top gainers. 

Cement companies on the radar

• Ambuja Cements (-1.6%) and ACC (-1.2%) have been pulled up by the Competition Commission of India in a recent investigation. Both companies are part of the Holcim group. Such investigations are generally conducted to check anti-competitive behaviour.
• Other cement stocks—Ultratech (-3.3%), Shree Cement (-2.7%) and Ramco Cements (-4.2%)—too reacted negatively to the development.

UPL cracks on whistleblower allegations

• Fear of corporate governance issues triggered heavy selling in UPL, a Nifty50 stock. As per media reports, a whistleblower has alleged that the agrochemicals company paid crores in rent on properties owned by its employees. 
• Meanwhile, the company has denied the claims. However, UPL shares were down -11.2% coupled with high volumes today. 

Kalpataru Power drops 

• On 8 December, power transmission company Kalpataru Power (-6.5%) announced a ₹380 crore capex for construction of its corporate office in Mumbai. The plan is to consolidate businesses of the company and its subsidiaries at a single location. 
• However, the new office plans didn’t go well with the investors, especially in these WFH times. Since the announcement, the company has lost nearly ₹800 crore of its market cap.

Inflation expectations

• Economists estimate the November inflation figure at 7.1%. The rate of inflation is likely to be lower than 7.6% in October, due to a reduction in food prices (veggies and pulses). That’s still above the RBI’s comfort zone of 2-6%. 
• In its recent meeting, the RBI kept rates unchanged, choosing growth over inflation control. November inflation data will be released tomorrow.

Closing bell

The US-China trade-war is old news. Now, the Australia-China trade dispute is making headlines. Such trade tensions and corporate governance allegations on Indian companies (like the one mentioned above) are something that investors would not want to hear at this juncture, especially when the economy is finally showing signs of recovery. Tomorrow’s session could be volatile as the inflation numbers will be released. 

Good to know

What is a defensive stock?

The term refers to the stock of a company that has maintained a record of stable earnings and continuous dividend payments through periods of economic downturn. Typically, investors hold these stocks in order to ’defend’ their portfolio from market corrections. In general, FMCG and pharma stocks are considered defensive stocks.

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Investment in securities markets are subject to market risks; please read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Past performance is not indicative of future results. Details provided in the above newsletter are for educational purposes and should not be construed as investment advice by RKSV group. Investors should consult their investment advisor before making any investment decision.