Market update 24 Sept 2020 – SP Group exit hurts Tata Group stocks

Gold drops as the dollar makes a come back
With fading hopes of an additional stimulus in the US, the dollar index has strengthened nearly 1.5% this week. This has resulted in selling in gold and silver, which generally move inversely to the dollar index. In general, investors seem to be turning risk averse and are withdrawing money from risky assets, including bullion. This week, Comex Gold futures have dropped over 5%, while Comex Silver futures have slipped about 18%. As the selling pressure subsides, one could see fresh vigour in bullion leading up to the US presidential election, which is scheduled for 3 November 2020.

Apollo Hospitals surges on improved occupancy
Contrary to the general market weakness, shares of Apollo Hospitals are at a lifetime-high, due to improving operational metrics in its healthcare services segment. As per reports, hospital occupancy has gone up to 60% in September versus 38% in June, when the movement of people was restricted due to the lockdown. Further, the company’s financials have strong support from its pharmacy business, where revenues grew by 21% on a year-on-year basis in Q1FY21. For this fiscal, the company is looking to save around ₹180–200 crore by cutting administrative, manpower, and travel costs, etc. The Apollo shares saw investor interest, as the stock went up 7.2% today and have risen nearly 18% this month.

SP Group exit hurts Tata Group stocks 
Expectations are rife that Tata Sons might either reduce its stake in TCS or raise funds by pledging shares to buy SP Group’s stake. Shares of TCS (Tata Group’s largest company by market cap) are already feeling the heat of this selling overhang and were down 5.4% today. Similarly, shares of other major Tata Group companies—Tata Motors (-6.5%), Tata Steel (4.7%) and Tata Chemicals (-4.7%)—were also trading lower. The value of the SP Group’s stake is expected to be as high as ₹1.75 lakh crore, and it is believed that the sale could be spread over a few years.  

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