Goodwill Investor Education Eagle’s Eyes – Stock Market Review.

Goodwill  Investor Education Initiative:                   3rd July 2020

GW Eagle’s Eyes !-Market news: 

The market is agog with a lot of news about China’s  aggressive initiatives against its neighbours  including India, Vietnam,  Japan, Philippines and Ladakh area. This has rightly invited the wrath of  Trump –US President and U.K P.M., India has treading the path quite carefully  in dealing with China but the one bold step of India is in fact attracting the attention of all in India- viz., the Chinese Apps 59 of them, being banned  and this apart the FDI investments in India come under more scrutiny henceforth. In fact this has been done now is welcome although it should have been  through a few years back as this would have encouraged less dependence on China and promoted Desi products and also help India in  Employment generation and help in GDP-in industrial sector. There is also another dimension to this issue namely the security threat and data pilferage and abuse.

While many Indian companies have fallen into the trap of Chinese companies  by heavily depending on cheap but sans quality of the products being manufactured and shipped into Indian soil unabashedly. The trade balance is very much in favour of China on account of this. Of course Chinese companies have heavily invested in multiple sectors of the Indian Economy and shedding the India – China linkages would be difficult and time consuming. Many chemical and pharma companies are heavily reliant on Chinese sources for their raw materials . India depends  on China  for 70 % of bulk drugs and drugs intermediaries. So Pharma sector has to emerge more self-reliant through own  manufacturing or local sources. Another important sector is Mobile phones sectors- India’s mobile sales are more of Chinese products, stated over 70 %.

Many companies like M & M, JSW Steel have decided to limit and reduce their dependence on Chinese in their imports. Chinese companies have pledged for an investment plan of over $ 20 Billion investments including in infra projects which are under scrutiny.

So Indian companies have a tough task of strengthening their backward linkages sooner than later and they must do it with cost effectiveness on par with that of the Chinese suppliers if not lower.

So companies in India dependent on China will have problems in scaling up their production levels in the context of the Covid lockdown is being slowly relaxed. Investors will do will watch these companies and exercise caution before deciding to invest in them.

The other market news is that American buyout company KKR is taking  54 % in JB Chemicals and Pharma… This company shares are bound to go up in the medium term.

Axis bank has made a loss in the last quarter and the news is that Axis bank is proposing to raise new capital to the tune of  Rs 15,000 cr through equity shares, Depository receipts and convertible debentures.

Another greenshoot message is that the tractor selling companies are doing brisk business. M & M and Sonalika report jump in sales and agri. Sector is getting a boost with the robust monsoon . SAIL has also reported highest ever June sales adding optimism to the investors. Good news indeed!

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