Share markets in India closed on a positive note yesterday. Sectoral indices traded mixed, with stocks in the power sector and stocks in the metal sector, leading the losses.
At the closing bell yesterday, the BSE Sensex stood higher by 267 points (up 0.7%) and the NSE Nifty closed up by 70 points (up 0.6%). The BSE Mid Cap index ended the day down 0.2%, while the BSE Small Cap index ended the day up by 0.4%.
Top Stocks in Focus Today
From the banking sector, market participants will be tracking Dena Bank share price today as it was reported yesterday that the lender has sold a cumulative 60,50,000 shares in three entities. The move a part of the public-sector bank's strategy to hive off non-core assets.
From the pharma sector, Aurobindo Pharma share price will be in focus as the company has received approval from the US Food and Drug Administration (USFDA) to manufacture painkiller drug Ibuprofen. The approved product is a generic equivalent of Pfizer's Advil Liqui-Gels Capsules. The product will be launched in September 2018.
From the FMCG sector, ITC share price will be in focus today as the company yesterday revealed plans to explore every possible consumer category and launch 30-40 new products each year in its effort to become the country's biggest fast-moving consumer goods (FMCG) company.
Government Approves Hike in MSP
In the news from the macroeconomic space, the government has approved a substantial increase in the minimum support price (MSP) of most of the kharif crops.
As per the news, the highest YoY (year-on-year) increase was seen in ragi, followed by that in nigerseed and jowar.
Ragi saw a 52.47% increase in MSP to Rs 2,897 per 100 kg, while nigerseed saw a 45.11% hike to Rs 5,977 per 100 kg. The Cabinet approved 42.94% increase in MSP of jowar hybrid to Rs 2,430 per 100 kg. The MSP for common grade paddy was raised Rs 200 per 100 kg or 12.9% to Rs 1,750 per 100 kg for the 2018-19 season.
The above increases were in line with the announcement by Finance Minister Arun Jaitley, who had said while presenting the budget for 2018-19 that the government would fix MSP for all crops at least one a half times of their production cost.
Home Minister Rajnath Singh said that the above increases will cost the exchequer more than Rs 150 billion.
Tata Group to Integrate Food and Beverage Business into a Single Entity?
Moving on to the news from Tata group. As per an article in a leading financial daily, Tata Group is evaluating a proposal to integrate its food and beverage businesses into a single company.
The Mumbai-headquartered group is considering separating the salt and branded lentils businesses of Tata Chemicals Ltd. and folding them into Tata Global Beverages Ltd.
It's also weighing merging Tata Coffee Ltd., which owns coffee plantations and tea gardens, with the beverages company, and entering dairy.
The proposal is part of chairman Natarajan Chandrasekaran's larger strategy to combine related businesses under a single umbrella to increase efficiency and simplify the conglomerate, which includes more than 100 independent operating companies.
In April, the Tata group said it will create a single entity called Tata Aerospace & Defence by merging all allied businesses.
Reportedly, the rationale behind folding food and beverage businesses into a single company is nothing but de-risking.
The group is weighing different options and a final decision hasn't been made about the units that will be merged and into which company. A special task force has been formed and has made presentations to the board of Tata Sons Ltd., the group's holding company.
LIC-IDBI Bank Deal
As per a leading financial daily, the proposed 51% stake purchase by Life Insurance Corporation (LIC) in IDBI Bank may not require Parliament's approval as it does not require any changes in the LIC Act.
As per the news, since the deal is going to be a financial deal as per the LIC Act, the legislation would not require amendment. However, it would need cabinet approval if the proposed deal gets all regulatory approval.
The proposed acquisition by LIC would not bring any money to the government but IDBI Bank would get capital support between Rs 100 billion and 130 billion depending on the share price of the bank.
The bank intends to issue fresh shares so that LIC stake goes up to 51% and simultaneously, the government stake comes down from the existing 80.96%.
The above developments come as last week the Insurance Regulatory and Development Authority of India (IRDAI) permitted LIC to acquire up to 51% stake in state-owned IDBI Bank.
This attempt by LIC to bail out the troubled IDBI Bank is a classic case of the state insurer buying toxic assets. In fact, LIC has been acting like the government's ATM for years. It has bailed out public issues of scores of PSUs.
As Tanushree Banerjee writes in a recent edition of The 5 Minute WrapUp...
- Given the high stakes that LIC owns in the most troubled banks, the government needn't even consider the proposal of setting up a 'Bad Bank'. It could just turn LIC into one. At least then the investors owning investments in LIC policies, would know the real risk they carry.
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