Patanjali Rises on Legal Win
- 20th February 2025
Aaj Ka Bazaar
The US stock market showed modest gains on Wednesday, with all three major indices registering slight increases as participants absorbed the Federal Reserve’s meeting minutes and Trump’s proposed tariffs. In Japan, the Nikkei index traded in the red, mainly due to pressure on the auto sector and a stronger yen. This negative sentiment extended across other Asian markets, including the Hang Seng index in Hong Kong, which reflected similar cautious sentiments amidst ongoing trade uncertainties. Market participants in Asia were primarily concerned about the potential ramifications of the tariff plans on global trade dynamics. Given this backdrop, it is anticipated that Indian bourses will move in tandem with their Asian counterparts. Market sentiments in India are expected to remain weak amidst heightened volatility. The GIFT Nifty, which serves as an indicator of the Indian market’s performance, is pointing towards a negative start. Investors in India are likely to be cautious as they navigate through the uncertainties related to global trade and the implications of the Fed’s meeting minutes.
Markets Around Us
BSE Sensex –75,631.09 (-0.41%)
Nifty 50 – 22,861.15 (-0.31%)
Bank Nifty – 49,222.65 (-0.70%)
Dow Jones – 44,535.67 (-0.21%)
Nasdaq – 20,056.84 (0.08%)
FTSE –8,712.53 (-0.62%)
Nikkei 225 –38,589.69 (-1.47%)
Hang Seng – 22,627.51 (-1.40%)
Sector: Edible Oil
Supreme Court Relief Boosts Patanjali Stock
Patanjali Foods’ stock rose over 1% to ₹1,847 on February 20, marking its third consecutive session of gains after the Supreme Court dismissed a ₹186 crore tax demand related to the pre-CIRP period. The tax dispute, spanning multiple years, was previously struck down by the NCLT and upheld by the Bombay High Court. The Income Tax Department challenged this in the Supreme Court, which rejected the petition on January 15, 2025. Patanjali Foods only became aware of the verdict on February 18, confirming that the liability no longer exists and will have no financial impact. The stock reacted positively to the news. In Q3FY25, the company reported a 71.3% jump in net profit to ₹370.9 crore, with revenue rising 15.1% to ₹9,103 crore. However, weak demand and high costs affected FMCG sales and margins. At 9:20 AM, shares traded at ₹1,836, up 0.7% on NSE.
Why it Matters:
The Supreme Court’s dismissal of the ₹186 crore tax demand removes a financial overhang, boosting investor confidence in Patanjali Foods. Strong Q3 earnings signal the company’s growth, but challenges like weak demand and rising costs persist. The stock’s positive reaction reflects market optimism despite ongoing industry pressures.
NIFTY 50 GAINERS
HINDALCO– 638.65 (1.97%)
SHRIRAMFIN – 566.95 (1.64%)
CIPLA – 1480.05 (1.09%)
NIFTY 50 LOSERS
MARUTI – 12430.9 (-2.01%)
HDFCBANK – 1692.7 (-2.00%)
ITC – 402.3 (-1.01%)
Secto: Microfinance Institutions
Karnataka Microfinance Woes Hit CreditAccess
Goldman Sachs reports that microfinance collection efficiency in Karnataka has dropped to 87-95% in February due to an ordinance banning unregulated microfinance activities. This has led to a liquidity crunch, rising stress, and slowing disbursements, impacting formal lenders. CreditAccess Grameen is the most affected, as Karnataka accounts for 31% of its loan book and holds a 19% market share in the state. The brokerage estimates a 15-37% hit to its pre-tax profit for incremental loss rates of 2-5% on its Karnataka portfolio. As a result, its stock fell 3% to ₹866.35 on NSE and has plunged over 40% in the past year. Other listed players with Karnataka exposure, like L&T Finance, IndusInd Bank, Bandhan Bank, and AU Small Finance Bank, are expected to see limited profit impact (1-3%). L&T Finance has macro-rural provisions of ₹900 crore, cushioning its exposure.
Why it Matters:
The drop in microfinance collection efficiency in Karnataka signals rising stress in the sector, impacting lender profitability and market confidence. CreditAccess Grameen, with high exposure, faces significant earnings risk, leading to sharp stock declines. While other lenders have limited impact, the situation raises concerns about regulatory risks and liquidity challenges in microfinance.
Around the World
Most Asian stock markets fell on Thursday due to concerns over high U.S. interest rates and new trade tariffs. Hong Kong’s Hang Seng dropped 2.2% as an AI-driven rally lost momentum, with tech stocks like Baidu and Alibaba sliding. Japan’s Nikkei 225 fell 1.7% as Trump announced 25% tariffs on automobiles, semiconductors, and pharmaceuticals, hurting Toyota and Honda. South Korea’s KOSPI slipped 0.6%, while Australia’s ASX 200 lost 1.3% amid fears that commodity exports could be affected. Strong Australian jobs data also raised concerns that the central bank may stay cautious on future rate cuts. Chinese markets dipped slightly, with the Shanghai Composite down 0.2%, but losses were limited as Trump hinted at a possible trade deal. India’s Nifty 50 futures pointed to a flat open, reflecting trade worries. Overall, uncertainty over U.S. policies and slowing AI momentum weighed on sentiment across Asian markets.
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