Relief rally

Nifty50: 18,603 ▲ 110 (+0.6%)
Sensex: 62,533 ▲ 402 (+0.6%)

Buenos Dias, friends!

First Neymar, then Ronaldo. Like the tumbling global indices, teary-eyed football superstars have been exiting the world cup. But Lionel Messi’s Argentina is still in the mix and in fact have improved with each match. So, will the Messi magic prevail again tonight against the underdogs Croatia or will it all end in tears for the last standing G.O.A.T?

• The markets rebounded, cheering the easing of inflation rate in India.
• Of the Nifty50 universe, 34 stocks gained.
• Street expects the US Fed to increase the key rate by 0.50%, breaking the trend of 0.75% rate hikes. More on that later. 

Among the Nifty sectoral indices, PSU Bank (+3.8%) and IT (+1.1%) were the top gainers, while Realty (-0.8%) and FMCG (-0.1%) were the top losers.

What’s trending

⭐ US Fed meeting begins today

The US Federal Reserve’s last meeting for 2022 begins today, December 13. Market experts are hoping to see the Fed slow down on its rate hike spree. This after US inflation has also shown signs of easing. ICYDK, the US Fed announced four consecutive rate hikes of 0.75% in 2022, taking rates to 4%. 

⭐ India’s November report card

Meanwhile, India has something to cheer about. Our November numbers are looking up.   

• Retail inflation dropped to an 11-month low of 5.88% for November 2022. This is well below October’s 6.77% reading.. 
• Factory activity(as measured by the Index of Industrial Production or IIP)  declined by 4% on an annual basis in October 2022. This is a 26-month low. 
• India’s net direct tax collection grew by 24% to 8.77 lakh crore between April to November of the current fiscal year. Higher tax collection indicates a pick up in economic activity. 

⭐ TVS Motors ‘electric’ expansion

TVSMOTOR (NSE): 1,032 ▼ 5.8 (-0.5%)

TVS Motor plans to ramp up its electric two-wheeler production to about 25,000 units by March 2023. Right now, about 10,000 units roll out of the company’s plants every month. The company is increasing production to meet higher demand. The management said it has already committed ₹1,000 crore capex for its EV business. In November 2022, the company sold around 10,056 units of iQube e-scooter. It is carrying  an order book for 25,000 units. 

⭐ KEC up on fresh orders 

KEC (NSE): 488 ▲ 19 (+4.1%)

Shares of KEC International climbed 8% intraday after the company bagged multiple orders across various business segments. The new orders amount to ₹1,349 crore. These include orders for transmission, cabling and data centre work. The year-to-date order book of the company now stands at ₹13,000 crore, an increase  of 20% over last year.   

⭐ Written off! 10 lakh crore in bad loans

Indian banks have written off bad loans worth ₹10.09 lakh crore in the last five years. They have also managed to recover ₹1.3 lakh crore from loans written off earlier. Write-off is an accepted accounting practice in the banking industry where-in banks remove the non-performing assets (NPAs) from their balance sheet if a loan has not been repaid for four years. However, the borrower does not get any relief. They are  still liable for repayment and the bank pursues recovery of the loan. 

In Focus

Strong CAFE norms could hit auto cos with stiff fines

Ever been fined for not having a PUC certificate for your car? Under a new law, automakers could face steep fines if they do not limit carbon emissions of the vehicles they manufacture. 

These fines could be levied on all the vehicles a company sells in that year. The government will enforce this through what it calls a CAFE score (has nothing to do with your cup of joe).

So, what is a CAFE score?  

The Rajya Sabha has cleared the Energy Conservation (Amendment) Bill, 2022 which mandates use of non-fossil energy sources across different industries. Tucked in the bill is a 

clause that limits the average CO2 emission limit for Indian carmakers to 113gm/km. This is the CAFE (Corporate average fuel economy) score which measures total emission of pollutants produced by vehicles. These norms aim to bring down average corporate emissions. 

What happens if auto companies violate CAFE limits? 

They have to face a fine of ₹25,000 per car sold. The penalties could be imposed on the company’s entire fleet. While these norms are new to India, they are in effect globally. But, experts say the fines imposed in India are the highest when compared to other geographies. These penalties could amount to crores for those automakers whose sales are in large volumes. Each company will have their individual CAFE limit based on the number of cars sold and the mix of fuel type. 

 Why should you care?

Since it will drive up expenses for auto companies. This should be a concern if you own auto stock or if you are in the market to buy a car. The auto industry has already been investing serious capital in green tech like hybrids and electrics. The industry also spent significantly to migrate to the BS VI standards introduced in 2020. 

But, look at it this way. This is a price you pay to clean up the air you breathe.

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Good to know

What is index rebalancing?

Rebalancing is a periodic exercise whereby a stock exchange adjusts the stocks in an index to reflect market developments. This may entail the inclusion or exclusion of companies based on free float market cap, which is a measure of a company’s outstanding shares multiplied by its share prices. Companies that meet the criteria stay in the index, and companies that fall short are removed from the index. 

On 19 December, the Sensex will see a periodic reshuffle when Tata Motors will replace Dr Reddy’s Laboratories. 

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