Indian Equity Market: Will the Budget Spark a Short-Term Reversal?

Can the Union Budget be the turning point investors are waiting for? With the Indian stock market facing a short-term bearish trend, all attention is on the upcoming budget for clues of a potential revival. Let’s explore how these changes could impact the market and revive investor confidence.

Why is the Market Bearish?

Since September 2024, the Indian stock market has been experiencing a short-term bearish trend, primarily driven by the economic slowdown, along with other contributing factors. To get out of this slump and start growing again, something big needs to happen. The Union Budget offers hope and could be crucial in restoring investor confidence.

Can Tax Reforms Help Boost Consumption?

To reverse the bearish trend, boosting domestic consumption—a key driver of economic growth—is essential. While demand in rural areas is recovering, urban demand still needs support. Increasing disposable income through tax exemptions or creating more jobs could provide the significant boost. There’s talk that the government might raise the tax exemption limit to ₹10 lakh, which might boost overall consumption and help the economy.

Capex Revival: Economic Growth's Backbone

Government capital expenditure (capex) has been a key driver of growth, but it has slowed down recently because of the election cycle, affecting fiscal spending targets. A renewed focus on sectors like railways and defense could give the necessary momentum.

The Production Linked Incentive (PLI) scheme has helped certain industries grow, but stronger efforts are needed to attract private investment. Since consumption, private investment, and government spending are the three main pillars of GDP growth, all of them need to be addressed in the upcoming budget for a strong recovery.

Sectors that Could Benefit from the Budget

• Healthcare: With the possibility of viral infections making a comeback, the government may increase funding for healthcare to strengthen medical infrastructure.
• Real Estate: Raising tax exemptions on home loan interest could make housing more affordable and stimulate demand in the real estate sector.
• Green Energy: Ongoing support for renewable energy projects is expected, in line with India’s goals for sustainability.
• Life Insurance: Lowering the GST on insurance premiums could help offset the effects of the new tax system, allowing the sector to recover.

Conclusion

The upcoming Union Budget is crucial for getting India’s growth back on track. By focusing on boosting consumption, increasing government spending (capex), and supporting key sectors like healthcare, real estate, and green energy, the government can lay the groundwork for a wide-reaching recovery. The question remains: will these measures be bold enough to reverse the current bearish trend and spark a long-term bull run? Investors should stay tuned—this budget could be the key to a more promising and prosperous market ahead.

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Candytoy Corporate Pvt Ltd (CTC), a prominent manufacturer of promotional toys and confectionery based in Indore (M.P), has successfully raised INR 110 crore in a series A funding round, which is backed by a group of domestic investors, high-net-worth individuals (HNIs), angel investors and institutional partners. Central India's leading Merchant banker Swastika Investmart Ltd was lead advisor to the transaction. This major investment will play a key role in scaling up the company’s operations and increasing its market presence globally. Its Series A round from a group of domestic investors including Abakkus Asset Managers, Girik Capital, Param Capital Research, Strategic Sixth Sense, and Viney Equity Market. With this funding, CTC becomes first Indian toy manufacturing company to raise private equity funding of above 100 cr.

The finding will be directed towards enhancing CTC’s manufacturing capabilities and further expanding its team to support its rapidly growing business. As part of its long-term vision, CTC plans to open new manufacturing units, aligning with the Indian Government’s ‘Make in India’ initiative, and strengthening its domestic production.

“We are entering an incredibly exciting phase for Candytoy,” said Gaurav Mirchandani, Director, Candytoy Corporate. “This INR 110 crore series A funding will not only bolster our growth but also allow us to continue investing in the talented workforce that has been key to our success. With these resources, we are ready to expand our operations and serve new business orders globally.

This new funding will enable the company to continue growing its production infrastructure and meet increasing demand from international markets. “Our focus is on continuing to innovate and diversify our product offerings. The additional funding will help us do just that while maintaining our high-quality standards, “added Mirchandani.

Sunil Nyati, Managing Director of Swastika Investmart Limited, which led the funding round, who facilitated the deal, commented, Candytoy’s exceptional growth potential and its ability to adapt to market trends makes it a great opportunity. He added, with over 2,000 manpower CTC is poised to further solidify its position as a leader in the candy toy and promotional toy industry, expanding its reach and fostering long-term growth across its global markets.

CTC has a strong foothold in the international market, supplying products to over 40 countries across three continents. Its client base includes major brands like Colgate, Puma, MTR, Bournvita, Yellow Diamond, Vistara Airlines, and Air Asia. The company also recently partnered with Reliance Retail to enter consumer market. With a production capacity of 10.5 million candy toys per day, CTC operates from six manufacturing units located in Indore, Delhi, Hyderabad, and Jebel Ali, Dubai, in addition to collaborating with 11 contractual manufacturers.

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In contrast to the same period last year (Q2FY24), Bajaj Auto's Q2FY25 financial results demonstrate consistent increase across key measures. Here is a brief summary of the figures:

1. Net Profit:

Q2FY25: ₹2,005 crore

Q2FY24: ₹1,836 crore

Estimates: ₹2,228 crore

Despite falling short of the estimated ₹2,228 crore, Bajaj Auto’s net profit rose by 9.2% compared to last year.

2. Revenue:

Q2FY25: ₹13,127 crore

Q2FY24: ₹10,777 crore

Estimates: ₹13,270 crore

Bajaj Auto achieved a significant 21.8% growth in revenue compared to Q2FY24, though it came slightly below the estimated ₹13,270 crore.

3. EBITDA:

Q2FY25: ₹2,652 crore

Q2FY24: ₹2,133 crore

Estimates: ₹2,704 crore

EBITDA grew by 24.3% year-over-year but was marginally lower than the forecast of ₹2,704 crore.

4. EBITDA Margin:

Q2FY25: 20.2%

Q2FY24: 19.8%

Estimates: 20.4%

The EBITDA margin has shown improvement, increasing to 20.2%, close to the market estimate of 20.4%.

‍Conclusion

Overall, Bajaj Auto's financial performance in Q2FY25 demonstrates consistent growth in revenue, profitability, and margins compared to the previous year. However, it fell slightly short of analysts' estimates in all categories. This update reflects a robust performance for the company despite minor shortfalls in hitting projected targets.

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Source: CNBC

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Bajaj Auto Q1FY25- Results

Axis Bank has released its financial results for Q2 FY25, showing strong growth compared to the previous year. Key highlights from the report include:

Net Profit:

The bank's net profit surged to ₹6,918 crore, marking a significant increase from ₹5,863 crore in Q2 FY24. It also surpassed the market estimate of ₹6,300 crore.

Net Interest Income (NII):

Axis Bank recorded a healthy NII of ₹13,483 crore for Q2 FY25, an improvement from ₹12,314 crore in the same quarter of the previous fiscal year. However, the actual Net Interest Income (NII) was slightly lower than the estimated ₹13,620 crore.

Bottom Line:

Theses results highlight Axis Bank's strong financial position and its ability to exceed profit expectations, supported by solid banking operations and improved margins.

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Axis Bank Q1 FY25- Financial Results

Introduction

Delisting occurs when a company's shares are removed from a stock exchange and are no longer traded publicly. This can be a significant event for investors and can happen for various reasons, such as regulatory issues, financial troubles, or strategic decisions by the company.

What is Delisting?

·Delisting refers to the removal of a company's shares from a stock exchange. Once delisted, the shares are no longer available for trading on that exchange. Delisting can be categorized into two types:

· Voluntary Delisting: The Company chooses to delist its shares, often to go private or restructure. For example, a company might opt to delist to focus on its core operations or restructure its business model.

·Involuntary Delisting: The Company is removed from the exchange due to failure to meet listing requirements, such as financial standards or regulatory compliance. This can happen if a company consistently fails to meet the exchange's criteria for listing.

Reasons for Delisting

·Financial Troubles: Companies facing severe financial difficulties may be delisted if they cannot meet exchange requirements. For instance, if a company consistently reports losses and fails to turn around its financial situation, it may face delisting.

·Regulatory Issues: Non-compliance with exchange rules or regulations can lead to involuntary delisting. If a company does not adhere to regulatory requirements, it risks being removed from the exchange.

·Strategic Decisions: Companies may choose to delist to restructure or go private for strategic reasons. This might involve a strategic overhaul or a shift in focus away from public markets.

·Mergers and Acquisitions: A company may be delisted following a merger or acquisition if it is absorbed into another entity. For example, if Company A acquires Company B, Company B’s shares might be delisted as they are absorbed into Company A.

Impact on Shareholders

·The impact of delisting on shareholders can vary based on whether the delisting is voluntary or involuntary:

·Liquidity: Shareholders may find it challenging to sell their shares as they are no longer traded on the exchange. For example, if a stock like Jet Airways is delisted, finding buyers for its shares can become difficult.

·Value of Shares: The value of delisted shares may drop, especially if the delisting is due to financial issues. This can result in significant losses for shareholders.

·Alternative Trading Venues: After delisting, shares may trade on over-the-counter (OTC) markets, which often have lower liquidity and might not reflect the true value of the shares.

·Compensation: In voluntary delisting, companies may offer compensation or buyback options for their shares. Shareholders might receive a buyout offer, providing them with an option to sell their shares at a predetermined price.

·Investment Strategy: Shareholders need to adjust their investment strategy and may consider seeking legal or financial advice to navigate the changes and mitigate losses.

Let us understand this with an example Suppose a company like Sahara India is delisted due to financial troubles. Shareholders might experience a sharp decline in share value and face difficulties finding buyers. If Sahara India had planned a voluntary delisting to go private, shareholders might receive a buyout offer, providing them with an option to sell their shares at a predetermined price.

Did you know that Suzlon Energy, a major player in the renewable energy sector, was delisted from the Bombay Stock Exchange (BSE) in 2021 due to non-compliance with financial requirements? This delisting was a significant event, impacting many investors and highlighting the importance of financial health in maintaining a public listing.

Conclusion

Delisting of shares can have significant consequences for shareholders, ranging from reduced liquidity to potential loss in value. It's essential for investors to stay informed about the reasons behind the delisting and how it may affect their investments. 

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Introduction

Welcome! Today, we’ll explore Bond ETFs—an investment option that combines the stability of bonds with the flexibility of exchange-traded funds (ETFs). Bond ETFs are increasingly popular among investors looking for a blend of steady income and trading flexibility. Let’s break down what Bond ETFs are, how they work, and why they might be a good fit for your investment strategy.

What are Bond ETFs?

Bond ETFs are exchange-traded funds that invest primarily in bonds. These funds are traded on stock exchanges just like individual stocks and hold a diversified portfolio of bonds. Bond ETFs offer exposure to fixed income securities while providing the benefits of trading flexibility and diversification.

Why Invest in Bond ETFs?

1. Diversification: Bond ETFs usually hold a variety of bonds from different issuers and sectors. This diversification helps spread risk and reduces the impact of any single bond defaulting.
2. Liquidity: Unlike individual bonds, which might be difficult to buy or sell in large quantities, Bond ETFs can be traded on stock exchanges throughout the trading day. This liquidity provides investors with greater flexibility.
3. Cost-Effective: Bond ETFs often have lower expense ratios compared to actively managed bond funds, making them a cost-effective choice for fixed-income investors.
4. Transparency: Bond ETFs regularly disclose their holdings, allowing investors to see exactly which bonds are in the portfolio and assess their risk.

How Do Bond ETFs Work?

1. Portfolio Composition: A Bond ETF holds a collection of bonds, which might include government bonds, corporate bonds, municipal bonds, or a mix. The ETF manager selects these bonds based on the fund’s investment strategy.
2. Trading: Bond ETFs are traded on stock exchanges, so you can buy or sell shares of the ETF just like stocks. The price of the ETF fluctuates throughout the day based on the value of its underlying bonds.
3. Distributions: Bond ETFs pay out income from the bonds they hold to investors in the form of dividends, typically on a monthly or quarterly basis.

Benefits of Bond ETFs

1. Diversification: By holding a variety of bonds, Bond ETFs help diversify your fixed-income investments and reduce individual bond risk.
2. Accessibility: Bond ETFs provide easy access to a broad range of bonds without needing to buy individual bonds directly.
3. Flexibility: The ability to trade Bond ETFs throughout the day offers greater flexibility compared to traditional bond investments.
4. Transparency and Low Costs: Regular disclosure of holdings and typically lower expense ratios make Bond ETFs an attractive option for cost-conscious investors.

Examples of Bond ETFs in India

1. Nippon India ETF – Nifty 10 Year Gilt: This ETF invests in Indian government securities with a maturity of around 10 years. It provides exposure to long-term Indian government bonds, offering stability and low risk.
2. ICICI Prudential Corporate Bond Fund – Direct Plan – Growth: This fund focuses on high-quality corporate bonds. It provides exposure to a diversified portfolio of corporate debt, which can offer higher yields compared to government bonds.
3. HDFC Bond Fund: A well-known Bond ETF in India, it invests in a mix of government and corporate bonds. This fund offers diversified fixed-income exposure and aims to provide steady returns.

Risks and Considerations

1. Interest Rate Risk: Bond ETFs are sensitive to interest rate changes. When interest rates rise, the value of the bonds in the ETF may fall.
2. Credit Risk: If a bond issuer within the ETF defaults, it can impact the ETF’s performance. While diversification helps mitigate this risk, it doesn’t eliminate it entirely.
3. Market Risk: The price of Bond ETFs can fluctuate based on market conditions and may not always trade at their net asset value (NAV).

Conclusion

Bond ETFs offer a convenient and cost-effective way to invest in bonds while benefiting from the liquidity and flexibility of the stock market. They provide diversification, transparency, and regular income, making them an appealing choice for many investors. However, it’s essential to be aware of the risks, such as interest rate and credit risk, and consider how they fit into your overall investment strategy.

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