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Max Pain

Tale of the Tape

Good evening, folks. Welcome back to the market of stocks. 🎲

Nifty and Sensex tanked over 2% to hit a four-month low. Both the benchmark indices have now corrected over 10% from their all-time highs. Midcaps and Smallcaps were completely wrecked, down 4% each. Ouch! 🤕

It was a sea of red across the board. Real Estate (-5.6%) and State-owned Banks (-4.5%) received the maximum damage. Pharma fell the least, down 0.7%. 🔻

Future Group stocks were locked in a 20% upper circuit. The Competition Commission of India (CCI) suspended Amazon’s deal with the group. More details are below. 👨‍⚖️

Macrotech Developers crashed 9%. Global brokerage firm CLSA initiated coverage on the stock with a Sell rating. They have a target price of Rs 1,000, which indicates a potential fall of 7.5% from its Monday closing price. 📉

Cipla jumped 4% after the US Food and Drug Administration (USFDA) approved a new drug used in the treatment of tumors. 💉

Shriram Properties chose the worst day to make its Dalal Street debut. The stock closed down 15% from its issue price but saw a decent pullback from the intraday low. 👎

IRB Infra (+2%) received a highway order from the Uttar Pradesh Government. The Company’s total order book stands at Rs 19,210 cr. 👷‍♂️

Eicher Motors (-2%) said it will recall +26,000 units of Classic 350 over braking issues. 🏍️

Supriya Lifesciences IPO got oversubscribed ~45x on the final day. 💸

Cryptos mostly trended lower. Bitcoin dropped 2.5%. Ethereum sank 5%. Solana, Cardano, and Doge also declined between 5%-7%. 😥

Here are the closing prints:

Nifty 16,614 -2.2%
Sensex 55,822 -2.1%
Bank Nifty 34,439 -3.3%

Why So Serious?

Stonks don’t always go up. 

That’s a lesson a lot of new investors and traders are learning the hard way. Both the Nifty and Sensex have dropped over 10% from their all-time highs following the recent sell-off. PS. this is the first time markets have seen such a steep correction since bottoming out in March last year. 📉

A combination of factors like US Fed tapering, constant FII selling, rising inflation, and the threat of a new Covid variant are worrying investors. FYI – we recently explained here the impact of the US Federal Reserve’s decision to withdraw stimulus and hike interest rates sooner than anticipated. 🤓

Retail inflation rose for a third straight month in November. Strong demand led by a red hot economy coupled with supply bottlenecks and the labor shortage is the perfect recipe for disaster. The Bank of England became the first major central bank to raise interest rates since the COVID-19 pandemic began. And several others including India are believed to follow suit, which is bad for stocks. 🚫

Record daily cases and fresh lockdown restrictions in several parts of Europe have added to the pessimism. The Netherlands announced a complete lockdown till Jan 14. Meanwhile, the UK announced a record 93,000 Covid cases in a day. 👾

Even though the long-term prospects remain positive, experts remain divided over the direction in the near term. However, they are all bullish on one sector – IT. Higher IT spends plus weak rupee provides ample confidence. They are also positive on Banks, Infrastructure, and Capital Goods companies to perform well in 2022. 👍

Our Stock Room Sunday guest and chart guru, Vishal Mehta, remains cautious on markets. He expects 16,400 to act as strong support on Nifty. Watch the latest episode here – 🔥

Amazon Took The L

Indian antitrust body, The Competition Commission of India (CCI) suspended Amazon’s 2019 deal with Future Group. They cited that the American e-commerce giant “concealed information” and made “false and incorrect” statements while seeking regulatory approval. If that wasn’t enough, they even slapped a Rs 200 cr fine on Amazon. Yikes! 😬

Amazon has been involved in an intense legal battle with its estranged partner in an attempt to block its sale to Reliance Industries. So far Amazon has been successful with favorable rulings by both Indian courts and a Singapore arbitrator. However, the latest ruling may throw a spanner in its works. 🙅‍♂️

Founded by Kishore Biyani, Future Group transformed the retailing landscape in recent decades. It is one of the largest retail brands in India with +1,700 outlets in 400 cities. But, COVID-19 hit business so hard that Biyani was forced to find a buyer. That’s where Reliance enters the picture and acquired the debt-laden firm for roughly Rs 25,000 cr. This didn’t sit well with our boi Jeffery as Reliance planned to consolidate the retail market with this acquisition. 😤

The latest twist to the Amazon vs Future Group saga, may open the roads for its deal with Reliance, say experts. This triggered a relief rally in the shares of Future group stocks. Future Retail, Future Lifestyle and Future Consumer were locked in 20% upper circuit. Check out their charts below: 

Delivering The Stacks

CMS Info Systems’ IPO will open on Dec 21. The price band is fixed at Rs 205-216 per share. The company plans to raise Rs 1,100 cr from the markets. 💸

Founded in 2008, CMS Info Systems is India’s largest cash management company. It provides complete end-to-end ATM management services. This includes cash pickup and delivery, ATM network management, and providing back-end support to banks. CMS services +1.3 lakh business points spread across 96% of districts in India. Asia’s largest PE firm, Baring PE holds 100% stake in CMS Info Systems. 😎

Financial Snapshot:

  • FY21 Revenue: Rs 1,306 cr; -6% YoY
  • FY21 Net Profit: Rs 169 cr; +25% YoY

Cash is king in India. Nearly 90% of all transactions still happen in cash, according to a report by McKinsey. Currency in circulation rose 9% over the previous year as many people preferred to hold cash amid the disruption caused by the Covid-19 pandemic. As a result of this, ATM business has continued to flourish even as digital payments grow in popularity. 📊

India is the third-largest ATM market in the world based on the number of installed ATMs. Yet, it has one of the lowest ATM penetration rates in the world, with only 22 ATMs per 100,000 adults (vs global avg of 44). Going forward, the number of ATMs in India is estimated to grow 6% CAGR by FY27, to touch 3.6 lakhs. 🏦

Investors may give the IPO a thumbs up on the company’s leadership position, strong financial performance, and reasonable valuations. However, weak market conditions and a 100% offer-for-sale may keep gains in check. Let’s see how this goes. 👍

Payment Clear

Razorpay has raised $375 million in its Series F funding round led by Lone Pine Capital, Alkeon Capital, and TCV. 🤑 The latest funding round values the company at $7.5 billion. That’s a massive 7x jump in its valuation in just 15 months! 🤯

It’s now the second-highest valued fintech in India, behind Paytm. Razorpay will use the funds to strengthen RazorpayX, its neo banking arm. It also plans to use the funds to scale up its global presence and pursue acquisitions. 🌎

Fun fact: Razorpay was initially planning to raise $250 million. However, increased interest from investors added more dollars to their kitty. 🕵️‍♀️ So, why are investors ready to empty their pockets for Razorpay? The answer is the huge growth potential in the company’s core payment solutions business. 

As we all know, digital adoption has skyrocketed post-Covid. One of the most crucial areas for businesses is to deliver a seamless payments experience. Having a safe payment terminal that gives users multiple payment options like credit cards, debit cards, net banking, and UPI with high transaction success rates is absolutely essential. And then of course there is the Government which is working hard on making India “cash-mukt”. Razorpay facilitates digital transactions in exchange for a small fee called the Merchant discount rate or MDR. 💸

Founded in 2014, Razorpay is one of the largest payment solution providers in India. Its total payments volume (TPV) crossed $60 billion so far this year (vs $15 billion in 2020). Going forward, the company expects TPV to hit $90 billion. Facebook, Ola, Zomato, Swiggy, Cred are some of its clients. It has recently expanded its offerings to include lending, tax, and compliance services for small businesses. FWIW: Sequoia Capital expects Indian fintech startup valuations to grow 10X by 2030. Read more here. ✌️