European equities climb at open on better-than-expected US recovery, BFSI News, ET BFSI

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European stock markets opened higher on Friday, with investors encouraged by a strong start to the US earnings season.

In initial trade, London’s benchmark FTSE 100 index won 0.4 percent to 7,234.69 points, compared with Thursday’s close.

In the eurozone, the Paris CAC 40 added 0.5 percent to 6,720.72 points and Frankfurt’s DAX rose 0.1 percent to 15,484.79.

“The US earnings seasons unfolding … has set a very positive tone so far,” said AvaTrade analyst Naeem Aslam.

“We have seen really healthy numbers out of the US banking sector this week. The remaining Wall Street giants will report their earnings today.”

Asian equities extended gains Friday as traders also cheered better-than-expected data indicating the US recovery remains on track — despite concerns over elevated inflation and the imminent end to cheap cash.



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Asian markets rally as earnings offset inflation, taper worries, BFSI News, ET BFSI

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Hong Kong: Asian markets extended a global rally Friday on optimism for corporate earnings after a strong start to the reporting season, while traders cheered better-than-expected data indicating the US recovery remains on track despite inflation concerns and the imminent end to cheap cash.

Central banks around the world are preparing to start — or in some cases have started — winding back the vast financial support put in place at the beginning of the pandemic, which has helped economies rebound and pushed equities to record or multi-year highs.

Soaring prices, supply chain snarls and a brewing energy crisis caused by the reopening from lockdowns have put increasing pressure on finance chiefs to act sooner than they had expected to prevent inflation from getting out of control.

And that has put a brake on a market rally that had lasted for a year and a half.

However, traders have refound some of their mojo this week as strong earnings from banking giants including JP Morgan Chase, Morgan Stanley, Bank of America and Citigroup fuel hopes for a standout round of reports.

Meanwhile, US figures showing new applications for unemployment benefits fell below 300,000 last week, for the first time since the pandemic started, provided fresh evidence for the recovery narrative.

The S&P 500 on Wall Street had its best day since March, while the Dow and Nasdaq also saw big gains.

Asia followed suit, with Tokyo up 1.8 percent and Taipei more than two percent higher. Shanghai, Sydney, Seoul, Singapore, Bangkok and Manila also rose.

Hong Kong jumped more than one percent, having reopened after two days off, though Jakarta and Wellington dipped.

London, Paris and Frankfurt all opened on a positive note.

Investors are now awaiting the Federal Reserve’s next move as it plots an exit from its vast bond-buying monetary easing programme, with next month or December seen as the beginning, while bets on an early-2022 interest rate hike are also building.

“We’re likely going to continue to see this elevated inflation and probably well into 2022,” Wealth Enhancement Group’s Nicole Webb said on Bloomberg Television, adding that she saw November as the likely beginning of tapering.

Her comments were echoed elsewhere, with analysts warning that inflation is not going to be a short-term issue, as many observers — as well as Fed officials — had suggested.

And markets analyst Louis Navellier added that broadly healthy jobs readings showed the Fed’s goal of taming unemployment had been achieved.

“I think it is safe to conclude that the Fed has completed its unemployment mandate and can now turn its attention to another mandate, namely fighting inflation,” he said in a note.

Expectations for tighter US policy pushed the dollar above 114 yen for the first time since late 2018.

Oil markets continued their march higher, with both main contracts enjoying strong buying on expectations for a pick-up in demand as economies reopen and producers maintain a cap on output.

And bitcoin jumped to within touching distance of $60,000 for the first time since May after a report said the US Securities and Exchange Commission was close to greenlighting the first futures exchange-traded fund for the unit.

The cryptocurrency has been on a rollercoaster ride since hitting a record near $65,000 in April before tanking on concerns about a clampdown in China and mixed messages from major investor and Tesla tycoon Elon Musk.

Key figures around 0720 GMT – Tokyo – Nikkei 225: UP 1.8 percent at 29,068.63 (close)

Hong Kong – Hang Seng Index: UP 1.2 percent at 25,254.61

Shanghai – Composite: UP 0.4 percent at 3,572.37 (close)

London – FTSE 100: UP 0.5 percent at 7,240.32

Dollar/yen: UP at 114.03 yen from 113.67 yen at 2040 GMT

Pound/dollar: UP at $1.3690 from $1.3674

Euro/dollar: UP at $1.1612 from $1.1601

Euro/pound: UP at 84.82 pence from 84.80 pence

West Texas Intermediate: UP 0.8 percent at $81.98 per barrel

Brent North Sea crude: UP 0.9 percent at $84.75 per barrel

New York – Dow: UP 1.6 percent at 34,912.56 (close)

dan/leg

J.P. MORGAN CHASE & CO

MORGAN STANLEY

BANK OF AMERICA

CITIGROUP



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Regional bank loan growth could hint at healthier supply chains, BFSI News, ET BFSI

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NEW YORK: If regional banks show signs of accelerating loan growth when they report earnings in the week ahead, it could signal an easing of the supply chain bottlenecks that have weighed down the U.S. economic recovery from the pandemic, analysts and investors said.

Overall, small banks accounted for 63% of the approximately $520 billion in loans through the federal Paycheck Protection Program launched in response to the pandemic. The program allowed small businesses to take loans that either could be forgiven or would have a 1% interest rate, according to the U.S. Small Business Administration

Increasing demands for new loans at higher interest rates could signal that small businesses are securing inventory and expanding, said Dave Ellison, a portfolio manager at Hennessy Funds.

“It seems like everybody else has benefited from the economy reopening but the banks because you’ve seen very little loan growth” on account of the Paycheck Protection Program, Ellison said. “The pandemic has disproportionably hurt small businesses, and those are the customers of regional banks,” he said.

As of June 30th, small banks held 15% of total banking industry loans but an outsized share of Paycheck Protection Program loans, holding 31%, according to the Federal Deposit Insurance Corp.

Overall, commercial loan growth fell 12% in September from a year earlier after bottoming out with a 16.3%% decline in annual loan growth in May, according to data from the Federal Reserve and Oppenheimer. Yet rising inventories at auto suppliers and retailers should bolster loan growth in the year ahead, said Chris Kotowski, an analyst at Oppenheimer.

“It seems likely to us that the next significant move is up – not down – for the simple reason that it can’t possibly come down as much as it already has,” said Chris Kotowski, an analyst at Oppenheimer.

A healthy increase in new loans at regional banks would be a strong signal that supply chain issues are moderating, said Steven Comery, an analyst at Gabelli Funds.

“If clients can’t get products to market because of the supply chain they aren’t going to be borrowing to build their inventory,” he said. “If we see signals that supply chain issues aren’t going away then that’s going to impact earnings estimates through 2023.”

The four largest U.S. banks reported mixed loan growth when reporting their earnings results Oct. 14, with J&P Morgan said loans were up 5% compared to the prior year while Bank of America and Wells Fargo reported declines.

Companies including First Community Bancshares Inc, First Midwest Bancorp Inc, and Zions Bancorp are expected to report earnings on Monday, while Fifth Third Bancorp O> and United Community Banks Inc are among those expected to report on Tuesday.

On Wednesday, Oct. 13, shares of First Republic Bank gained 1.5% after the regional bank originated approximately $15 billion in new loans and reported that its average Paycheck Protection Program loan balance was down 39% over the quarter. Those gains in new loans will make it likely that the bank will raise its guidance in the coming quarters, noted Casey Haire, an analyst at Jefferies.

Concerns over loan growth by regional banks comes at a time when the sector’s shares are trading near record highs. Regional banks in the S&P 500 are up nearly 37% for the year to date and are just below the high they reached on Oct. 8, according to Refinitiv data.

Despite those gains, regional banks continue to look attractive based on valuations, Ellison said.

Regional banks in the S&P 500 trade at a forward price to earnings ratio of 13.5, well below the 21.2 of the broad S&P 500, according to Refinitiv data. Valuations will likely rise alongside the yield of the benchmark 10-year Treasury, which is used to set rates for loans including mortgages, Ellison said.

“Valuation is not a problem for future gains,” he said.



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Regional bank loan growth could hint at healthier supply chains, BFSI News, ET BFSI

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NEW YORK: If regional banks show signs of accelerating loan growth when they report earnings in the week ahead, it could signal an easing of the supply chain bottlenecks that have weighed down the U.S. economic recovery from the pandemic, analysts and investors said.

Overall, small banks accounted for 63% of the approximately $520 billion in loans through the federal Paycheck Protection Program launched in response to the pandemic. The program allowed small businesses to take loans that either could be forgiven or would have a 1% interest rate, according to the U.S. Small Business Administration

Increasing demands for new loans at higher interest rates could signal that small businesses are securing inventory and expanding, said Dave Ellison, a portfolio manager at Hennessy Funds.

“It seems like everybody else has benefited from the economy reopening but the banks because you’ve seen very little loan growth” on account of the Paycheck Protection Program, Ellison said. “The pandemic has disproportionably hurt small businesses, and those are the customers of regional banks,” he said.

As of June 30th, small banks held 15% of total banking industry loans but an outsized share of Paycheck Protection Program loans, holding 31%, according to the Federal Deposit Insurance Corp.

Overall, commercial loan growth fell 12% in September from a year earlier after bottoming out with a 16.3%% decline in annual loan growth in May, according to data from the Federal Reserve and Oppenheimer. Yet rising inventories at auto suppliers and retailers should bolster loan growth in the year ahead, said Chris Kotowski, an analyst at Oppenheimer.

“It seems likely to us that the next significant move is up – not down – for the simple reason that it can’t possibly come down as much as it already has,” said Chris Kotowski, an analyst at Oppenheimer.

A healthy increase in new loans at regional banks would be a strong signal that supply chain issues are moderating, said Steven Comery, an analyst at Gabelli Funds.

“If clients can’t get products to market because of the supply chain they aren’t going to be borrowing to build their inventory,” he said. “If we see signals that supply chain issues aren’t going away then that’s going to impact earnings estimates through 2023.”

The four largest U.S. banks reported mixed loan growth when reporting their earnings results Oct. 14, with J&P Morgan said loans were up 5% compared to the prior year while Bank of America and Wells Fargo reported declines.

Companies including First Community Bancshares Inc, First Midwest Bancorp Inc, and Zions Bancorp are expected to report earnings on Monday, while Fifth Third Bancorp O> and United Community Banks Inc are among those expected to report on Tuesday.

On Wednesday, Oct. 13, shares of First Republic Bank gained 1.5% after the regional bank originated approximately $15 billion in new loans and reported that its average Paycheck Protection Program loan balance was down 39% over the quarter. Those gains in new loans will make it likely that the bank will raise its guidance in the coming quarters, noted Casey Haire, an analyst at Jefferies.

Concerns over loan growth by regional banks comes at a time when the sector’s shares are trading near record highs. Regional banks in the S&P 500 are up nearly 37% for the year to date and are just below the high they reached on Oct. 8, according to Refinitiv data.

Despite those gains, regional banks continue to look attractive based on valuations, Ellison said.

Regional banks in the S&P 500 trade at a forward price to earnings ratio of 13.5, well below the 21.2 of the broad S&P 500, according to Refinitiv data. Valuations will likely rise alongside the yield of the benchmark 10-year Treasury, which is used to set rates for loans including mortgages, Ellison said.

“Valuation is not a problem for future gains,” he said.



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Regional bank loan growth could hint at healthier supply chains, BFSI News, ET BFSI

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NEW YORK: If regional banks show signs of accelerating loan growth when they report earnings in the week ahead, it could signal an easing of the supply chain bottlenecks that have weighed down the U.S. economic recovery from the pandemic, analysts and investors said.

Overall, small banks accounted for 63% of the approximately $520 billion in loans through the federal Paycheck Protection Program launched in response to the pandemic. The program allowed small businesses to take loans that either could be forgiven or would have a 1% interest rate, according to the U.S. Small Business Administration

Increasing demands for new loans at higher interest rates could signal that small businesses are securing inventory and expanding, said Dave Ellison, a portfolio manager at Hennessy Funds.

“It seems like everybody else has benefited from the economy reopening but the banks because you’ve seen very little loan growth” on account of the Paycheck Protection Program, Ellison said. “The pandemic has disproportionably hurt small businesses, and those are the customers of regional banks,” he said.

As of June 30th, small banks held 15% of total banking industry loans but an outsized share of Paycheck Protection Program loans, holding 31%, according to the Federal Deposit Insurance Corp.

Overall, commercial loan growth fell 12% in September from a year earlier after bottoming out with a 16.3%% decline in annual loan growth in May, according to data from the Federal Reserve and Oppenheimer. Yet rising inventories at auto suppliers and retailers should bolster loan growth in the year ahead, said Chris Kotowski, an analyst at Oppenheimer.

“It seems likely to us that the next significant move is up – not down – for the simple reason that it can’t possibly come down as much as it already has,” said Chris Kotowski, an analyst at Oppenheimer.

A healthy increase in new loans at regional banks would be a strong signal that supply chain issues are moderating, said Steven Comery, an analyst at Gabelli Funds.

“If clients can’t get products to market because of the supply chain they aren’t going to be borrowing to build their inventory,” he said. “If we see signals that supply chain issues aren’t going away then that’s going to impact earnings estimates through 2023.”

The four largest U.S. banks reported mixed loan growth when reporting their earnings results Oct. 14, with J&P Morgan said loans were up 5% compared to the prior year while Bank of America and Wells Fargo reported declines.

Companies including First Community Bancshares Inc, First Midwest Bancorp Inc, and Zions Bancorp are expected to report earnings on Monday, while Fifth Third Bancorp O> and United Community Banks Inc are among those expected to report on Tuesday.

On Wednesday, Oct. 13, shares of First Republic Bank gained 1.5% after the regional bank originated approximately $15 billion in new loans and reported that its average Paycheck Protection Program loan balance was down 39% over the quarter. Those gains in new loans will make it likely that the bank will raise its guidance in the coming quarters, noted Casey Haire, an analyst at Jefferies.

Concerns over loan growth by regional banks comes at a time when the sector’s shares are trading near record highs. Regional banks in the S&P 500 are up nearly 37% for the year to date and are just below the high they reached on Oct. 8, according to Refinitiv data.

Despite those gains, regional banks continue to look attractive based on valuations, Ellison said.

Regional banks in the S&P 500 trade at a forward price to earnings ratio of 13.5, well below the 21.2 of the broad S&P 500, according to Refinitiv data. Valuations will likely rise alongside the yield of the benchmark 10-year Treasury, which is used to set rates for loans including mortgages, Ellison said.

“Valuation is not a problem for future gains,” he said.



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Union Bank MD, BFSI News, ET BFSI

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MUMBAI: With digitization gaining pace, close to 50 per cent of retail and MSME loans offered by banks will shift to digital lending platforms over the next two to three years, Union Bank of India’s Managing Director and CEO Rajkiran Rai G said on Thursday.

Rai said digital lending is changing the banking landscape in a big way because of the availability of data and many ecosystem partners collaborating with banks.

“I feel that at least 50 per cent of the loans under retail and MSME segments will move to the digital lending platforms, right from sourcing to documentation level, in two to three years,” Rai said while speaking at the Sibos 2021, an annual banking and finance conference.

He said the digital lending space is gaining traction and banks need to develop products that can deliver services online to customers. Rai said he sees a big revolution in MSME lending going forward.

“The working capital lending to MSME will move from open credit like working capitals and cash credits, to very-targeted lending such as very specific invoice discounting and supply bill discounting,” he said.

Speaking about the entry of fintech in the banking space, he said initially it was thought that fintech will compete with banks, but now the relationship between the two has become more symbiotic.

“Now, fintechs are helping us (banks). They are no longer competitors to us. The digital lending space will be nothing but fintech tie-ups,” he said.

There are many products where fintechs are already working with banks, he added.

Rai believes banks need to continuously invest in technology and upgrade themselves.

He said the management bandwidth in the public sector space, at least on thinking about innovations and digitization, is quite less.

“We have the traditional people who are good in handling technology and managing the core banking system, but they are not in the space of innovation and developing new products,” Rai said.

He said public sector banks need to get new talent from the system who are adept in technology and can bring in innovations.



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Karnataka Bank to get Centenary building

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Foundation stone for the establishment of the centenary building of Karnataka Bank was laid in Mangaluru on Friday. Established in 1924, the bank will observe its Centenary Year during the financial year 2023-24.

To be constructed adjacent to the present Head Office premises of the bank in Mangaluru, the proposed new building will be of 2.41 lakh sq ft of area.

Laying the foundation stone for the centenary building, Mahabaleshwara MS, Managing Director and Chief Executive Officer of Karnataka Bank, said the bank has always travelled ahead of time to cater to the varying demands of the customers from all walks of life.

As the bank steps into the second century of its existence, it is going through a new phase of growth backed by optimum use of new age digital technologies enabled by machine learning/artificial intelligence and business intelligence.

He said the proposed new building will be a state-of-the-art infrastructure capable of housing various operations for future banking.

In 1924, the founders of the bank started operations from a single branch at Dongerkery in Mangaluru in a very tiny premises primarily to cater to small farmers and traders.

The bank witnessed a period of exponential growth under the visionary leadership of late K Suryanarayana Adiga. It was during his time the bank shifted its head office to a spacious own building of 35,000 sq ft area at Kodialbail in Mangaluru. The said premises was inaugurated by late TA Pai, the then Central minister.

The bank decided to have a premises commensurate with its growth momentum and shifted its head office to a 1.19 lakh sq ft own building at Mahaveera Circle in Mangaluru in 2003.

P Jayarama Bhat, Chairman of the bank, the directors, and senior executives of the bank were present at the programme to lay the foundation stone for the new building.

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Fintech firm Tala raises $145 m in Series-E round

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Tala, a financial services company, has raised $145 million in Series E fundraise led by Upstart, taking the total funds raised to $350 million.

Stellar Development Foundation, Kindred Ventures and the J. Safra Group, IVP, Revolution Growth, Lowercase Capital, and PayPal Ventures also joined the round.

“Tala will use the investment to accelerate the rollout of its new financial account experience, which provides customers with fresh tools to borrow, save and manage their money, all through Tala’s top-rated consumer finance app,” a Tala statement has said.

“Tala will also grow its world-class team across Kenya, India, the Philippines, Mexico and the United States and pull forward plans for both geographic and product expansion, including crypto offerings,” it said.

Leveraging the Stellar network, Tala will also use this funding to develop the first mass-market crypto product for emerging markets.

As part of this fundraise, Paul Gu, co-founder of Upstart and Denelle Dixon, CEO and Executive Director of the Stellar Development Foundation, have joined Tala’s board of directors.

“Tala has spent the past seven years delivering critical and valued services in markets where the financial system is fundamentally broken for millions of people,” Shivani Siroya, founder and CEO, Tala, said.

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Bitcoin nears $60,000 as investors eye first US ETFs

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Bitcoin hit a six-month high on Friday,approaching the record hit in April, as traders became increasingly confident that US regulators would approve the launch of an exchange-traded fund based on its futures contracts.

The world’s biggest cryptocurrency rose nearly 4 per cent to as high as $59,664, its highest since mid-April. It has doubled in value this year and is near April’s record high of $64,895.

The US Securities and Exchange Commission (SEC) is poised to allow the first US bitcoin futures ETF to begin trading next week, Bloomberg News reported on Thursday, citing people familiar with the matter.

Ben Caselin, head of research and strategy at Asia-based cryptocurrency exchange AAX, said bitcoin’s spike above $59,000 wasn’t arbitrary and long-term investors had been accumulating it for a while.

“It is widely expected that Q4 will see significant progressaround a bitcoin ETF in the US,” he said.

Friday’s moves were also spurred by a tweet from the SEC’s investor education office, he said.

“Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits,” the SEC tweet stated.

Wait for bitcoing ETF

Cryptocurrency investors have been waiting for news of approval of the country’s first bitcoin ETF, and some of bitcoin’s rally in recent months has been in anticipation of that move and how it could speed up its mainstream adoption and trading.

Several fund managers, including the VanEck Bitcoin Trust, ProShares, Invesco, Valkyrie and Galaxy Digital Funds have applied to launch bitcoin ETFs in the United States. Cryptocurrency ETFs have been launched this year in Canada and Europe.

SEC Chair Gary Gensler has previously said the crypto market involves many tokens which may be unregistered securities and leaves prices open to manipulation and millions of investors vulnerable to risks.

The Bloomberg report said that the proposals by ProShares and Invesco are based on futures contracts and were filed undermutual fund rules that Gensler has said provide “significant investor protections”.

The SEC did not immediately respond to a request for comment on the Bloomberg report.

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5 Top Auto Ancillary Multibaggers Of The Last 1-year

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Investment

oi-Roshni Agarwal

|

Major auto players have suggested and confirmed that the chip crisis is a near term issue and will be resolved soon, amid it and the festive season in the counting, the sector that was knocked down owing to coronavirus led lockdown and hence subsequent weak sales, is highly likely to make a good comeback. Nonetheless, few of the players in the run up have managed to give multibagger returns i.e. of over 100 percent in a 1-year’s time frame.

5 Top Auto Ancillary Multibaggers Of The Last 1-year

5 Top Auto Ancillary Multibaggers Of The Last 1-year

Also, in comparison to the auto stocks’ there is more bullishness on the auto ancillary stocks.

1. GNA Axles:

GNA Axles Limited is among the leading manufacturers of rear axle shafts used in on-highway and off-highway vehicular segments in India. The company ever since its first production has been expanding its portfolio and is now actively engaged in exports.

In the last one year, the share price of GNA Axles has gained 345 percent to currently quoting at over Rs. 1077 apiece on the NSE. Furthermore, dividend history of the stock is good.

The stock has been on the buy list of Angel Broking for substantial gains.

2. Rajratan Global:

The publicly held company is into manufacture of steel wires. The group draws its revenues from selling tyre bead wire as well as other ancillary products. Also its operation scale even beyond India.

The stock of the company has surged over 600 percent to a price of over Rs. 2200 currently from levels of Rs.330, a year ago.

3. Pricol:

Based out of Coimbatore, the company is an automotive components as well as precision products manufacturing entity.

This is a small cap scrip from the auto ancillary space that in a year’s time has also multi-fold return of over 100 percent.

The company as per reports aims to become debt free in a 1-year period despite low demand. In FY21, the company’s debt stood at Rs. 247 crore and this has substantially reduced its debt from Rs. 431 crore in Fy 2020. Now ever since the company’s new MD has taken over, the company has been on a recovery path.

4. Kinetic Engineering:

It is a Firodia group entity that launched the famous Luna Moped. The company’s founder started the industry’s most respectable companies in the space including Kinetic Engineering Limited and Kinetic Honda Motor Company (in collaboration with Honda).The company’s product portfolio in transmission components like gears, shafts, axles, and more; engine components, including crankshafts, cylinder heads, camshafts, with complete gearbox and engine assemblies for auto and non-auto products.

This is a small cap company with an market cap of Rs. 112.6 crore. The stock in a year’s time has surged by 256 percent to now scale to Rs. 63.6 per share.

5. Kranti Industries:

The company has capabilities into machining critical components with utmost precision. An OEM-supplier of All type of Critical Machined Components to Indian and Global automobile giants
The company’s stock in the last 1-year has surged by 200%.

Story first published: Friday, October 15, 2021, 13:28 [IST]



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