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SEBI approves relaunch of yellow peas futures, say NCDEX officials

Informist, Friday, Jul 19, 2024 --NCDEX officials: SEBI okays resuming futures trade in yellow peas  --CONTEXT: NCDEX officials speak on sidelines of a conference --NCDEX officials: May announce launch of yellow peas futures next week --NCDEX officials: Yellow peas futures to have compulsory delivery  --NCDEX officials: Kanpur to be delivery centre for yellow peas   By Afra Abubacker   NEW DELHI – The Securities and Exchange Board of India has approved the relaunch of yellow peas futures on the National Commodity & Derivatives Exchange, two officials with the exchange told Informist. The contract was last traded on the exchange in 2009, according to an official. The exchange withdrew the contract due to liquidity challenges. It hopes the contract will gain traction this time due to increased imports and growing consumption. "Fifteen years before, India was very different from what it is now," another official said.   In December, the government exempted yellow peas from import duty till Mar 31 and later till Jun 30. In May the government extended the duty waiver for shipments covered by bill of entry issued on or before Oct 31 after production of tur fell and availability of chana also became a matter of concern. This helped cap the high prices of chana and tur. Yellow peas is an affordable substitute for chana.   In 2023-24 (Apr-Mar), India imported around 1.2 mln tn of yellow peas, sharply up from 539 mln tn in the previous year. So far in the current year, India has imported 686,730 tn of yellow peas. "...because it (yellow peas) is imported, it is a decent sized commodity. The value chain is aware about the contract, since they have traded in pulses. They have a sense of acceptability among the value chain," an NCDEX official said.   Previously, many pulses like chana, tur, urad and yellow peas were traded on NCDEX. The exchange hopes to attract participation across the value chain including importers, domestic traders, farmers, processors, and millers.   In 2021, SEBI suspended for one year futures and options trading in a host of agricultural commodities such as wheat, chana, mustard seed, crude palm oil, moong, paddy (Basmati), soybean and its derivatives. Last year, SEBI extended this ban till December 20, 2024. On the relaunch of yellow peas, NCDEX officials said that the exchange is yet to finalise the details of the contract. The decision is likely to be taken next week.   The contract would be on a compulsory delivery basis and won't have a cash-settlement option, an official said. "Kanpur is the delivery centre. As of now there is no additional delivery centre," he added.   The minimum unit of trading would be 10 tn and prices would be quoted rupees per 100 kg, he added.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Need gradual fisc glide path post FY26 - StanChart's Sahay

Informist, Friday, Jul 19, 2024 --StanChart Sahay: Fiscal consolidation should be gradual post FY26 --StanChart Sahay: Govt may keep FY25 fiscal gap aim at 5.1% of GDP --StanChart Sahay: FY25 fisc gap may be lower by 300 bln rupees --StanChart Sahay: Govt need not run to fiscal deficit of 3% of GDP --CONTEXT:StanChart India research head Sahay's comments in interview --StanChart Sahay: Govt needs to spend more on education, skilling --StanChart Sahay: Budget may focus on fiscal consolidation, capex --StanChart Sahay: Budget may increase spend to boost consumption   By Shubham Rana and Priyasmita Dutta   NEW DELHI – The government should pursue a gradual fiscal consolidation path once it brings down the fiscal deficit to below 4.5% of GDP by 2025-26 (Apr-Mar) as there still exists a large requirement of public capital spending, according to Anubhuti Sahay, head of India Economic Research at Standard Chartered.   "I would support a more gradual fiscal consolidation path rather than just running back to 3% very quickly," Sahay told Informist in an interview. "Unless there is very clear visibility on large increases in taxes on a sustainable basis, I wouldn't recommend a sharp reduction in expenditure just to reach the 3% mark. A gradual path works well for the government, so no need to rush to the 3%."   The Fiscal Responsibility and Budget Management Act, 2003, dictates that the central government's fiscal deficit should be limited to 3% of GDP. The government's fiscal deficit had risen to an all-time high of 9.2% of GDP in the pandemic-hit year of 2020-21. In 2021, the government laid out a fiscal consolidation roadmap, under which it set a target to bring down the fiscal deficit to below 4.5% of GDP by 2025-26.   In the Interim Budget for 2024-25, the government pegged the fiscal deficit for the year at 5.1% of GDP. Last year, the Centre's fiscal deficit was 5.6% of GDP.   According to Sahay, the Centre not only needs to increase public capital expenditure, but also spend a "lot more" on education and the skilling of the workforce. "Given that India is in a good position today, the potential can be improved a lot more by spending on capex, both on social and infrastructure. I think a gradual fiscal consolidation path is a far better route rather than rushing towards the 3% target," she said.   Sahay expects the Centre to retain its fiscal deficit target of 5.1% of GDP in the full Budget, which will be presented on Tuesday, even as the absolute deficit may be lower by 300 bln rupees from the 16.855 trln rupees pegged in the Interim Budget.   "In this Budget, even if she (Finance Minister Nirmala Sitharaman) gives a tax cut, gives the farmer income scheme yet another instalment, we think food subsidy bill will also be higher, special assistance to states may also go up, and even if we account for some short fall in divestment and telecom receipts, our sense is that 5.14% (fiscal deficit) can come down to 5.06?cause the buffer is large," Sahay said.   Below are edited excerpts of the interview:   Q. What do you think the focus of the Budget will be this time, considering we have a coalition government after 10 years? A. I would break down the focus to three parts. Fiscal consolidation, I think that theme remains intact. Second is, the focus on capital expenditure, which is yet another thing which we expect to remain intact in this Budget. However, there is likely to be a little bit more spending to boost consumption and that can take the form of higher spending on rural as well as for the middle-income class.   So it is a Budget which will give some support for consumption without losing sight of fiscal consolidation and keep on pushing for higher public capex, especially in an environment where private capex is still shying away from making a large commitment.   Q. Where do you think they will peg the fiscal deficit for 2024-25? A. We are expecting 5.1%. But if you actually take the fiscal deficit number to the second decimal place... in the Interim Budget she presented it at 5.14%. In this Budget, even if she gives a tax cut, gives the farmer income scheme yet another instalment, we think food subsidy bill will also be higher, special assistance to states may also go up, and even if we account for some short fall in divestment and telecom receipts, our sense is that 5.14?n come down to 5.06?cause the buffer is large.   On a net basis, if I put a round figure around it, then she has a buffer of 0.6% of GDP in our view and the spending which she needs to make on the items I mentioned, is just 0.49%. So if we don't round it up then it will still remain at 5.1% but if you're looking at the size of the absolute fiscal deficit, it may be lowered by almost 300 bln rupees from the Interim Budget's projections.   Q. You are looking at a fiscal deficit lower by 300 bln rupees. Do you also see a borrowing cut along with that? A. No, because they announced a cut in the Treasury-bill auction size earlier in the year, 600 bln rupees, of which effectively 300 bln rupees will be affected because 300 bln rupees were actually getting redeemed this year. As far as dated securities are concerned, it will remain pretty similar to the Interim Budget.   If at the end of the year, she has sensed that amount has not been spent as planned, which is possible because now she will have just eight to nine months to spend the amount very quickly, which might not happen for a whole list of reasons. Then there is a possibility of a cut in market borrowing. But our sense is that the decision will be deferred to the last quarter rather than announcing it on Budget day itself.    Q. Do you think an income tax cut is a way to boost consumption demand sustainably? A. A tax multiplier or a fund transfer like the farmer's income scheme has a multiplier close to 1. So, in totality, it won't be more than 0.15% of GDP in terms of a tax cut and rural income spending. I'm not including higher food subsidies here. The support to consumption will only be that much because the multiplier is 1. These kinds of boosts are very incremental in nature.   The big support to consumption this year will come from better monsoons because almost 42% of the labour force is still dependent on agriculture. Last year, crop production was down by 6% and if you look at a typical agricultural household, they dropped close to 40% of their income by sale of agricultural produce.   And if output was bad, it clearly impacted their earning capacity, and we have had three bad crops in succession. That in turn has impacted rural demand, which is almost 50% of our aggregate household demand in the country. So, our sense is that consumption this year will improve, but that will be more a story of second half, rather than immediately in the second quarter of fiscal year 2024-25. The support which will come from the Budget will be incremental. At times, you need that positive sentiment also to start the virtuous cycle.   But the big push has to come from a revival in the monsoon and that will drive rural demand, which in turn will also be important for private investment. Private investment has been on a cautious footing because they still don't see, or they still don't have a very clear visibility on aggregate demand within the country. If 50% of the demand driver, which is rural India, comes back in full force, say by 2025, then that will crowd in private investment.   Q. For providing relief on the personal income tax front, what do you think is the best way of going about it? Is it raising the standard deduction limit or is it just raising the lower end of the limit? A. It is tough to say what is the best way, but I think the finance minister will try to work with the best permutation combination which gives maximum relief to the middle income class or say income to someone who has a net effective taxable income of 15 lakhs (1.5 mln rupees) or below. I think that is where the maximum multiplier impact can come through, because if you give a lot of tax reduction on the higher end, only so much extra will be consumed. But if you give it at the lower income, the consumption multiplier is much higher.   At the end of the day, the intent of the finance minister is to want more and more taxpayers under the new tax regime. Whatever tax boosts are announced, it will be directed to benefit the middle income segment plus ensure that we see more people shifting towards the new tax regime than the old tax regime. Right now, mathematically, the old tax regime still looks attractive. So whatever permutation combination she does, she has to make the new tax regime more attractive.   Q. The government has been putting a lot of thrust on capex to crowd in private investments, and it had also cut the corporate tax to give corporates a little bit of comfort to come forward and invest, but their animal spirits are still at bay, and they have not come forward. Why exactly is that and what more can be done? A. First is obviously on the demand side. Right now, if you look at it, everything is in place. Leverages are low for the corporate sector, and the banking sector is in good health. And the outlook on the Indian economy is extremely positive. Having said that, we have not seen a revival in demand. It's a big commitment in terms of investment and unless they get clarity on what is plaguing demand--at this point in time, whether that factor is temporary in nature or permanent in nature--it becomes very difficult for the private sector to come and start investing in a big way. So that brings us back to the point of whether rural demand be revived to an extent that the corporate sector gets a better visibility on demand sustainability. It is not just about demand revival but also the sustainability of that demand. The monsoons are a factor to keep an eye on.   Second, I think we will get to see in this Budget the 15% tax rate which she announced in September 2019 for a new manufacturing unit. She announced it, and then we immediately got into COVID period, so probably not many corporates were able to take that advantage. Maybe she can reintroduce it because it expired in March 2024.   Third, on the production-linked incentive scheme, the government has been talking about including more sectors, but there is also equal emphasis on streamlining the process, like reimbursement of incentives. I think all these factors, policy clarity, policy vision map, demand clarity and probably a better tax rate for profits will help them. I think these, in turn, will bring back private investment. Let us remember when we speak about the animal spirits in India, we always compare them to the period of 2010 or 2011. I don't think we will go back to those highs, because it's a very different world globally as well as domestically. There are issues around geopolitics and climate change. You have these broader narratives at play that can have an impact on policy strategy.   The fourth part which I would add is the ease of doing business. It requires limited costs, but it is an area where, hopefully, we can see more measures by the government. You can give all kinds of incentives, but if the approval process takes very long or the time period taken to set up a shop takes very long, then it becomes difficult. India definitely has a reason to get a larger chunk of investment. It has been getting investments, but it can get a larger chunk of investment if doing business becomes far easier. These are the four pillars that may push private investments.   Q. Is there a case to revisit states' borrowing limits? A. I don't think so. When we are talking about fiscal autonomy or the need to spend, considerations will have to be made of the broader framework of what it means for the overall debt to GDP. India's debt-to-GDP is already very high, at 83%. If there is another COVID-like scenario, it can very quickly jump towards 90% and higher. And it takes a lot of time before debt-to-GDP actually comes to a more desirable level. There is a camp that says the government, both central and state governments, should spend a lot more and not bother about debt to GDP. But if you look at it, barring the US, no country has been able to live with very high debt-to-GDP from a medium-term perspective.   And if you look at the states, even though they have a limit of 3.5%, they have been very conservative and have not even utilised their current fiscal deficit limit fully. Last year's fiscal deficit for all states combined was 2.6%. This year they are factoring in 2.8%, removing the capex loan because that is coming on Centre in terms of borrowing.   Our sense is, every year they budget higher, but they end up at least 0.1%, 0.2% less in terms of actual fiscal deficit. So they are not even utilising the full amount. Simply raising the limit is not the best way to go about it. I think maybe more consultative efforts are required to improve the efficiency of expenditure. States are, anyway, very efficient in terms of their expenditure because they are closer to the ground.   Q. How feasible do you think it is for the government to bring the fiscal deficit close to 3%? A. I would support a much more gradual fiscal consolidation path for a simple reason: there is a large requirement for public capex. India has done exceedingly well in many sectors, like roads, railways, airports, but there is still a lot more ground to cover.   So, I would support a more gradual fiscal consolidation path rather than just running back to 3% very quickly. Unless there is very clear visibility on large increases in taxes on a sustainable basis, I wouldn't recommend a sharp reduction in expenditure just to reach the 3% mark. A gradual path works well for the government, so no need to rush to the 3%.   They need to spend more on public capex, they need to spend a lot more on education and skilling. Because when we talk about employment opportunities we usually just focus on the aspect of job creation, but it's equally important to have the right quality of labour force. India has been creating quite a lot of jobs over the last five years based on the RBI's latest KLEMS data--26 mln on an annual basis and half of it is in the non-agricultural sector. But the quality of jobs that have been created are in usually very low-productive areas like domestic trade or construction. So there is a need to spend a lot more on physical infrastructure. There is an urgent need to spend a lot more on skilling.   Given that India is in a good position today, the potential can be improved a lot more by spending on capex, both on social and infrastructure. I think a gradual fiscal consolidation path is a far better route rather than rushing towards the 3% target, because even if you rush towards 3% target, your debt to GDP takes time to come off and debt to GDP always has two components. One is the pace at which fiscal consolidation happens, and the second is how sustainable the nominal GDP growth rate is. India is able to see 7-8% growth because we invested a lot in capex and that has to continue. So one has to look at it from all aspects.   Q. Do you think the current high tax buoyancy is sustainable? A. The record-high GST in April was because of the March effect. March is the last month of the year. So, usually, that number has a seasonality. I think the most sustainable number is 1.7 trln rupees. If you look at the GST collection, it has been growing a little faster than the nominal GDP. Nominal GDP has been less than 10%, GST has been growing at 11-12%, and I think that can continue going forward because GST has got very well integrated with the system.   The bulk of the gains in revenue is likely to come from the income tax side, where we are already seeing a shift happening, not because of an income component to it, but because there is also a large role played by increased compliance. I think this is an area where we can see a lot more benefits coming in. It used to be less than 3% of GDP and just talking about income tax, in 2023-24, it has jumped to 3.5%. So almost a 0.5% gain in a matter of one year. That much gain in a matter of one year is not easy. Every year the compliance gains can't be a safety net. Last year, we saw income tax going up by 22%. We can't see that much growth every year. We need to see a few more years, because right now the government has more data, it has a better sense because of the whole rise of the digital economy, how much income is generated, so they will be able to do it for a few more years, but it will plateau out at some point. But I think there's still time to plateau. We will continue to see good tax points going forward because data is still getting mined. Especially when they start integrating GST data with the digital transaction data, they will have far more clarity on how much taxes they should ideally be collecting.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Don't need fisc deficit below 4% of GDP - I-Sec PD Prasanna

Informist, Thursday, Jul 18, 2024   --I-Sec PD Prasanna: Centre's fiscal gap needn't go below 4% of GDP --I-Sec PD Prasanna: Centre needn't cut fisc gap beyond stated path --CONTEXT: Centre aims to lower fisc gap to below 4.5% of GDP by FY26 --I-Sec PD Prasanna: Need to change FRBM aim of 3% fiscal deficit --I-Sec PD Prasanna: Centre should keep fisc gap at 4.0-4.5% of GDP --CONTEXT: I-Sec PD Head of Research Prasanna's comments in interview --Prasanna: Govt may peg FY25 fiscal gap aim at 5.0% of GDP --I-Sec PD Prasanna: Govt may use RBI surplus partly to cut fisc gap --I-Sec PD Prasanna:Govt may use RBI surplus partly to give tax sops --I-Sec PD Prasanna:Centre must mull merging both income tax regimes --I-Sec PD Prasanna: See bumper RBI surplus transfers for next 2 yrs --I-Sec PD Prasanna:See RBI surplus near 1.5-2.0 trln rupee next 2 yrs   By Shubham Rana and Pratigya Vajpayee   NEW DELHI – The central government does not need to continue to focus on fiscal consolidation once it achieves its target of lowering the fiscal deficit to 4.5% of GDP by 2025-26 (Apr-Mar), according to A. Prasanna, head of research at ICICI Securities Primary Dealership.   "I think the old FRBM (Fiscal Responsibility and Budget Management) formula of 3% as a stable fiscal deficit has to be changed," Prasanna told Informist in an interview. "So, probably we should move towards 4% or 4.0-4.5% as a more stable fiscal deficit regime for the central government."   The government's fiscal deficit had risen to an all-time high of 9.30% of GDP in the pandemic-hit year of 2020-21. In 2021, the government laid out a fiscal consolidation roadmap, under which it set a target to bring down the fiscal deficit to below 4.5% of GDP by 2025-26.   In the Interim Budget for 2024-25, the government pegged the fiscal deficit for the year at 5.1% of GDP. Last year, the Centre's fiscal deficit was 5.6% of GDP.   "Once the government achieves a fiscal deficit of 4.5% in 2025-26, I don't think there is too much that needs to be done on the consolidation side," Prasanna said. The consolidation beyond 2025-26 could be gradual, with the government lowering the deficit by 0.1% or 0.2% of GDP for the next two to three years, he said. "Then, we end up in the midpoint between 4% and 4.5%, I think that's good enough."   According to Prasanna, there is no need for the government to push the consolidation theme further because even in the periods when governments came close to the 3% fiscal deficit target set out in the Fiscal Responsibility and Budget Management Act, 2003, "it was achieved by pushing out some of the stuff off the Budget".   "Once you added all of them, the true deficits were closer to 4%. So, I think 4?n be a red line," he said.   For the current year, Prasanna believes the government may lower the fiscal deficit target by 10 basis points to 5.0% of GDP in the Union Budget, which will be presented on Jul 23, thanks to the higher than expected surplus transfer of 2.11 trln rupees by the Reserve Bank of India.   The government is likely to share the additional funds transferred by the RBI equally to reduce the fiscal deficit and to increase spending, the economist said. "The extra RBI dividend is roughly 1.2 trln rupees, slightly more than 50?n be used to increase revenue spending and capex and also maybe give some tax sops," he said. "The balance you use it to cut the deficit down.   "Since that excess amount from the RBI dividend compared to what is budgeted is so large, there is no stress on the government's finances," Prasanna said.   The Centre can use the extra funds to focus on revenue expenditure in the full Budget rather than capital expenditure, Prasanna said. Operational and management constraints could be affecting capital expenditure, with the rate of growth of capital spending pegged in the Interim Budget sharply lower compared to the previous Budgets, he said.   "So, in that sense, there is a limit to how much your capex can grow. Obviously, it has to keep growing faster than the nominal growth, nominal GDP growth. But probably, that growth is slowing down," the economist said.    The Interim Budget for 2024-25 pegged the government's capital expenditure at 11.11 trln rupees, up 16.9% from the revised estimate of 9.50 trln rupees for 2023-24. The Centre's capital expenditure for 2023-24 was projected at 10.01 trln rupees, up 37.4% from the revised estimate of 7.283 trln for 2022-23.   The government can, and should, provide relief to taxpayers, thanks to the excess funds at hand, by raising the standard deduction amount, Prasanna said. "It is better to keep the thresholds low but offer slightly higher deductions. I think they should do this and this time, they have the opportunity to tinker with it," he said.   The Centre must also look at merging the two tax regimes as the current system creates "a lot of confusion", Prasanna said. "The new tax regime is good. By keeping both the regimes running parallel, it just leads to confusion."   "If you say that I'm cutting taxes to boost consumption, and then you say that it's only in the new regime and the old regime continues with the old tax rates, it may not be effective," he said. "Then, it depends on how many people choose the new tax regime. To avoid that confusion, I think they might want to decide that once and for all, we are moving to the new regime, but maybe offer more sweeteners."   Providing relief on the personal income tax front would also be sustainable for the government right now, as it could expect bumper surplus transfers from the central bank for another year or two, Prasanna said.   "I feel the RBI dividend has entered a higher plane or a new normal. It may not be 2.1 trln or 2 trln plus every year, but I think broadly 1.5 to 2 trln kind of dividend numbers are possible for one more year, maybe for a couple of more years also," he said.   "The RBI's asset base has gone up and global interest rates don't look like they're going back to the zero interest rate regime. In this environment, the dividend has actually entered a new normal."   Higher dividend from RBI could be pencilled in for a few more years down the line, which obviously gave the confidence that some tax cut could be attempted, Prasanna said.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

India gold imports plunge over 50% to 39-43 tn in June, say sources

Informist, Tuesday, Jul 16, 2024 By Sandeep Sinha MUMBAI – Gold imports into India more than halved to 38-43 tn in June from 89.41 tn a year ago, according to trade and industry sources. The imports fell because of fewer auspicious days for weddings during the month and as buyers deferred their purchases in view of higher prices. In May, gold imports into the country were at 46.25 tn, according to commerce ministry data.   "Gold imports fell by more than 50% in June as Indian gold demand remained muted due to high prices, with consumers deferring purchases in anticipation of a possible import tariff drop in the upcoming Budget," said Prithviraj Kothari, managing director of RiddiSiddhi Bullions. "Gold prices traded 71,000 to 73,000 rupees range in June after the sharp rally and record high prices in April and May. Higher gold prices have started to pinch buyers in April to June as consumer sentiment has slowed waiting for a correction in prices," Kothari said.   Trade data released by the commerce ministry on Monday showed the value of gold imports fell 38.7% on year to $3.06 bln in June, from $5 bln a year ago. The monthly provisional data released by the ministry gives the import data only in value terms.   The country's gold imports in Jan-Jun rose 4% on year to around 302.5 tn against 291 tn in the same period a year ago. In the Jan-May period, the imports were 30% higher on year at 261.7 tn.   "The reasons for the sharp fall in imports were gold prices hovering near record-high, no demand in market, and expectation of the customs duty cut in the upcoming Budget," Surendra Mehta, national secretary at India Bullion and Jewellers Association, said.   If the government announces a cut in customs duty in the upcoming Budget, then gold prices may correct by 2,000-3,000 rupees per 10 gm, traders said.   In the first five months of 2024, Switzerland was the largest bullion exporter to India, followed by the United Arab Emirates, South Africa, Peru and the Dominican Republic. In Jan-May, the country imported 100.46 tn of gold from Switzerland, 38.7 tn from the UAE, 28.55 tn from South Africa, 22.95 tn from Peru, and 15.06 tn from the Dominican Republic, the commerce ministry data showed.   The price of the yellow metal is currently less than 1% from the record high of 74,442 rupees per 10 gm touched on May 20. On the Multi Commodity Exchange and COMEX, gold prices fell 0.4% and 0.3% on month respectively in June.   "If prices remain elevated, we might see a subdued gold demand in July too, as the Budget will be announced next week. The monsoon season has now begun, and farmers in rural regions are busy sowing summer crops, resulting in decreased footfalls at jewellery stores. Monsoon season is generally considered as lull season for gold demand, and demand is expected to pick up when the festive season starts in August," Kothari said.   India, the second-largest importer of gold after China, imported 734.3 tn of gold in 2023, up 3% from 2022. In an interaction with Informist, Sachin Jain, India region chief executive officer of the World Gold Council, said he expected the country's bullion imports to remain at 700-800 tn gold in 2024.  End   US$1 = 83.58 rupees   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Govt may nudge RBI to explore e-currency trade with Russia - source

Informist, Tuesday, Jul 16, 2024 --Source: Govt may nudge RBI to explore e-currency trade with Russia --Source: RBI may fix threshold value for e-currency trade with Russia By Krity Ambey   NEW DELHI – Efforts to boost bilateral trade with Russia have gained momentum after Prime Minister Narendra Modi's recent visit to Moscow. In this context, the government may nudge the Reserve Bank of India to explore the possibility of settling trade transactions with Russia using the respective central bank digital currencies, a senior government official said.   Last week, Modi went on a two-day trip to Moscow to attend the 22nd India-Russia bilateral summit. During the visit, he held two meetings with Russian President Vladimir Putin and both the leaders set a bilateral trade target of $100 bln by 2030.   The government had envisaged cross-border settlements using central bank digital currency two years ago, when the RBI launched the e-rupee pilot, the official told Informist. Russia had also shown willingness to settle cross-border transactions when its central bank had launched the e-rouble, the official said.   In view of the $100-bln trade target, this is an ideal time to explore settlement of trade transactions with Russia above a certain threshold value in digital currencies, the official said. The RBI and the finance ministry can together decide a suitable value for this, the official added.   The Central Bank of the Russian Federation launched the e-rouble in August 2023. India and Russia are among the 36 countries whose central banks have launched a pilot of digital currencies. Digital money issued by a central bank is denominated in the national unit of account. Digital currency in the retail segment can be used by the general public, while in the wholesale segment, it is for financial institutions. Wholesale central bank digital currency is similar to today's central bank reserves and is intended for settlement of large interbank payments.   In fact, cross-border payment was the most talked about use-case for the wholesale e-rupee before the launch of its pilot in November 2022. As of Mar 31, wholesale e-rupee worth 2.05 bln was in circulation, as per RBI data. In October, the central bank had also introduced a wholesale e-rupee pilot to facilitate inter-bank call money trade, in addition to the earlier use-case of government securities trade.   The Bank for International Settlements, in collaboration with Banque de France and Swiss National Bank, had studied the feasibility of the direct transfer of wholesale central bank digital currencies. They had explored the transfer of e-euro and e-Swiss franc between French and Swiss commercial banks. "This might pave the way for the broader and direct use of central bank money for cross-border financial transactions, contributing to safer and more efficient cross-border settlements and therefore to financial stability," Bank for International Settlements had said after the study.    This is not the first time India and Russia are exploring alternative methods to settle trade. After Western nations imposed economic sanctions on Moscow and banned Russian banks from Society for Worldwide Interbank Financial Telecommunication, or SWIFT, in 2022, Russia and India tried settling trade in local currency through vostro accounts.    Settling trade using respective digital bank currencies can also help the two sides tackle the difficulties arising on account of thr ban on Russian banks from SWIFT. For trade settlement in digital currencies, the government and the RBI are trying to develop a pilot that allows inter-bank communication as well, Economic Affairs Secretary Ajay Seth had said in July 2023.      India's trade with Russia has risen significantly since 2022 after New Delhi started importing crude oil from Russia at a discounted price in the aftermath of the Ukraine war. India's import of crude oil from Russia jumped to over $40 bln in 2022-23 (Apr-Mar) from about $6.38 a year ago. In the last fiscal year, the total trade between the two countries was $65.69 bln, which included imports worth $61.43 bln.  End   US$1 = 83.59 rupees   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Govt may increase Kisan credit card limit to 500,000 rupees - sources

Informist, Tuesday, July 16, 2024 By Pallavi Singhal and Kuldeep Singh   NEW DELHI – The Centre is likely to increase the credit limit under the Kisan credit card scheme to 500,000 rupees from the existing 300,000 rupees, two senior government officials told Informist.    A proposal in this regard has already been sent to the finance ministry for approval, one of the officials said on condition of anonymity. "The rationale behind the decision was to increase availability of credit to the farmers who are facing issues due to rising input costs," the official said. If the limit is increased, farmers will have enough money to sow crops for an entire year, the official said.    "Right now, farmers can only get additional credit after they pay back the loan taken. This will reduce their dependence on informal credit lenders," one of the officials said.    The Kisan credit card scheme was introduced in 1998 to provide farmers with formal, timely, and short-term loans for agricultural inputs. Under this, a farmer can currently avail a loan of up to 100,000 rupees against a landholding of 1 acre, with an upper limit of 300,000 rupees. The interest on loans up to 300,000 rupees is 7%, and subsidies are provided on interest rates for those who return the principal amount within a year.   State Bank of India, the country's largest lender, had an agricultural loan portfolio of 3.02 trln rupees in 2023-24 (Apr-Mar), up almost 18% from 2.56 trln rupees in the previous fiscal year. The total outstanding amount under the Kisan credit card scheme saw a 10.9% rise at 5.74 trln rupees in 2023-24, up from 5.18 trln rupees in 2022-23, according to data from the Reserve Bank of India's 2023-24 annual report.   In the interim Budget for 2024-25 (Apr-Mar) tabled on Feb 1 this year, the government allocated a 22% higher amount to the Kisan credit card scheme. The allotment stood at 226 bln rupees, against the revised estimate of 185 bln rupees for 2023-24.   The government is also considering incentivising crop diversification, one of the officials said. In recent years, the government has been promoting the cultivation of crops other than cereals, such as pulses, oilseeds and nutri-cereals, by offering higher minimum support prices for these crops. Over the previous year, the highest absolute increase in minimum support prices has been recommended for oilseeds and pulses.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Informist Poll

Budget may cut FY25 fiscal deficit aim to 5.0% of GDP

Informist, Thursday, Jul 18, 2024 By Shubham Rana NEW DELHI – The government is likely to lower its fiscal deficit target for the current financial year that started in April to 5.0% of GDP from 5.1% projected in the Interim Budget, according to an Informist poll of economists and bond market participants.   The actual fiscal deficit in 2023-24 was 5.6% of GDP, 20 basis points lower than the revised Budget estimate of 5.8%. In a General Election year, the incumbent government presents an Interim Budget in Parliament. The government had presented the Interim Budget for 2024-25 on Feb 1. Finance Minister Nirmala Sitharaman will present the full Budget for 2024-25 on Tuesday.   "The saving on the 2023-24 fiscal deficit implies a relatively more favourable base for setting the 2024-25 fiscal deficit target," Nomura said in a report.   Nine of the 21 poll respondents said they expect the government to peg the fiscal deficit for 2024-25 at 5.0% of GDP, while seven respondents see the Centre retaining the target at 5.1% of GDP. Three respondents expect the government to lower the fiscal deficit target to 4.9% of GDP and two have given a range.   The government has enough financial space to cut its fiscal deficit target for the current year thanks to the higher-than-budgeted surplus transfer of 2.11 trln rupees by the Reserve Bank of India. The Interim Budget for 2024-25 had pegged the government's income from surplus of the RBI and dividend of state-owned banks and financial institutions at 1.02 trln rupees.   "Bumper dividend transfer from the RBI along with marginal upside in tax collection is expected to strengthen the Centre's fiscal position," CareEdge Ratings said in a report.   Apart from the RBI surplus, the government's direct tax collections have also been robust so far this year. This, economists said, will provide additional space for the government's finances.   The government's direct tax collection, net of refunds, during Apr 1-Jul 11 was 5.74 trln rupees, up 19.5% from a year ago. Direct tax collections till Jul 11 made up 26% of the full year's budgeted estimate of 21.99 trln rupees. The government will also get a boost from the base effect as the total tax collections in 2023-24 were 276 bln rupees higher than the revised estimate.   The Centre is likely to use the additional funds to increase revenue expenditure, and likely to announce tax sops as well, economists said.   Economists and market participants are of the view that the result of the General Elections, where the Bharatiya Janata Party had to rely on its allies in the National Democratic Alliance to form the government, could force the ruling party to announce some welfare measures.   Informist had reported in June, citing senior financial ministry officials, that the government will try to strike a balance between fiscal prudence and increasing allocations for social welfare schemes.   According to ICICI Bank, the Centre could announce an increase in standard deduction to 100,000 rupees from the current 50,000 rupees. It can also change tax slabs, introduce a new tax slab in between 5% and the 20% bracket, and also give tax relief at the lower end of the income pyramid, economists at ICICI Bank said in a report.   The government can afford to forego revenue from the income tax front, as it is likely to receive another bumper surplus transfer from the RBI next year as well, economists said.   "I feel the RBI dividend has entered a higher plane or a new normal. It may not be 2.1 trln or 2 trln plus every year, but I think broadly 1.5 to 2 trln kind of dividend numbers are possible for one more year, maybe for a couple of more years also," A. Prasanna, head of research at ICICI Securities Primary Dealership, said.   The Centre is on track to meet its aim of lowering the fiscal deficit target to below 4.5% of GDP by 2025-26, economists said.   The government's fiscal deficit had risen to an all-time high of 9.2% of GDP in the pandemic-hit year of 2020-21. In 2021, the government laid out a fiscal consolidation roadmap, under which it set a target to bring down the fiscal deficit to below 4.5% of GDP by 2025-26.   With 4.5% within grasp, policy watchers look for fiscal consolidation path beyond 2025-26. "Beyond FY26 (2025-26), I think we're waiting for the Budget to see where the more medium-term fiscal path goes at this point. And so I think that will sort of be a key document in framing," Fitch Ratings Asia Sovereign Ratings Director Jeremy Zook told Informist in an interview last month.   The following are the estimates for the fiscal deficit this financial year:   ORGANISATION FISCAL DEFICIT Bank of Baroda 4.9-5.1% Barclays 5.1% BofA Securities 5.1% CareEdge 5.0% Deutsche Bank 5.0% Goldman Sachs 5.1% HDFC Bank 5.0% HSBC 4.9% ICICI Bank 5.1% ICICI Securities Primary Dealership 5.0% ICRA 4.9-5.0% IDFC FIRST Bank 5.0% India Ratings 4.9% Kotak Mahindra Bank 5.0% Motilal Oswal Financial Services 5.0% Nomura 5.0% SBI Mutual Fund 5.0% Societe Generale 5.1% Standard Chartered 5.1% State Bank of India 4.9% UBS Securities 5.1%   End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Nifty 200 cos' net profit growth seen hit hard Apr-Jun

Informist, Monday, Jul 15, 2024 By Anshul Choudhary  MUMBAI – High profit growth momentum of most companies in the Nifty 200 index is likely to have slowed down during the June quarter as benefits of lower raw material prices have faded away at the time when India Inc is struggling to increase revenue as demand in several sectors is either weak or slowing down. The cumulative net profit of 173 companies in the Nifty 200 index is expected to rise 1% on year during the June quarter, showed estimates given by 19 brokerages.   This is strikingly lower than the net profit growth of nearly 49% in the June quarter of the previous year, and 13% rise in Jan-Mar. Estimates for 21 companies were not available, while six companies that have already reported Apr-Jun earnings till today have been excluded as well.   This sharp slow down comes as benefits of low-cost inventories have faded, and raw material prices have started rising in some sectors. Due to this, Anand Rathi Share and Stock Brokers expects only modest gains in the overall margins of Indian companies. "...product mixes, operational efficiencies and calibrated pricing in specific segments (excluding FMCG) are expected to have driven margin growth, though slower," the brokerage said. With a slowdown expected in margin growth, all eyes now are on revenue growth. Analysts said revenue growth becomes imperative this year in order to drive profitability. However, companies have found it difficult to significantly grow their revenues for some time now, which is seen as a risk to earnings estimate. "With margin tailwinds fading, top line needs to recover (signs not yet visible); else there could be risks to FY24-26 consensus EPS (earnings per share) growth forecasts of 15-16%," Nuvama Institutional Equities iterated in its earnings preview report.   During the June quarter, apart from slowing demand, extreme weather played its part in the moderation of growth as heatwaves impacted construction activity, largely visible in the muted earnings of cement companies and other materials-related players. Further, the model code of conduct put in place ahead of the General Election also led to drying up of government orders at a time when private players were not increasing their capital expenditure.   What's more, global demand remains lacklusture, which has continued to impact many export-dependent companies. High interest rates have been a deterrent for companies globally, who remain on the sidelines in terms of spending and await improvement in and microeconomic fundamentals. At the same time, high inflation continues to impact people's spending power.   A confluence of these factors has likely led to muted revenue growth in some of the major sectors such as information technology, fast-moving consumer goods, metal, cement, and chemicals. The cumulative revenue of 173 companies that are a part of the Nifty 200 index is expected to rise 6% on the year during the June quarter. Sequentially, the topline is seen declining 3% while the profit after tax may fall 11%.    However, some sectors will continue to post strong earnings growth as they reap the benefit of the resilience of the domestic economy. Automobile sales remained strong during the quarter, while healthy execution helped consumer goods companies even as government orders slowed down, and pharmaceutical companies were among the few that witnessed healthy demand in India as well as some global markets. Although heatwaves impacted construction activity in India, it helped increase sales of cold beverages and consumer durables such as air conditioners.   Going forward, the Union Budget on Jul 23 and monsoon rains remain a key focus for market participants. A normal monsoon is expected to help farmers increase their income, which, in turn, may boost consumption in rural India. For the Budget, it is widely expected that the government will continue with its plans of capital expenditure, which is likely to bring higher earnings growth for companies in the remaining part of this year.   SECTORAL TRENDS Automobile companies remain among top performers in terms of earnings growth with two-wheelers and auto ancillaries driving growth this quarter. Price increases and higher mix towards premium products have likely aided earnings, analysts said.   However, experts see weakness in sales of commercial vehicles, passenger vehicles, and tractors, looking at poor dispatch numbers. Analysts were worried about passenger vehicles segment with YES Securities mentioning that average inventory has increased to 5-6 weeks as of Jun 30 and discounts have ballooned up to 20-25%.     Analysts are expecting some moderation in earnings growth for the sector with brokerage Nomura Financial Advisory and Securities mentioning that sales data in June was on the softer side. "While the impact of rising input costs is likely to be visible for OEMs (original equipment manufacturers) from 2Q (Jul-Sep) onwards, tyre companies are expected to face this adverse impact in 1Q (Apr-Jun) itself, with the major impact likely in 2Q," Motilal Oswal Financial Services said in its earnings preview report.   Another sector that will continue to see moderation in earnings growth is banking, where net interest margin is expected to continue to decline. "We expect banks to report 10-15 bps decline in NIMs (net interest margins) led by re-pricing of deposits or slippages that tend to be seasonal in nature," Kotak Insitutional Equities said in a note. While robust credit growth is aiding earnings growth, deposit growth remains a challenge. Analysts said commentary on deposit growth is important, along with outlook on asset quality.   The combined net interest income of 17 banks is seen 12% higher and the net profit is expected to rise 15% on year. When compared on quarter, net interest income may rise 2% but profit after tax could fall 5%. Estimates of IDBI Bank were not available.   Among domestic cyclicals, engineering and capital goods companies will see robust growth on strong execution of order book. The six engineering and capital goods companies that are a part of the Nifty 200 index are seen posting a 26% on-year rise in net profit and 10% growth in revenue.   Further, high temperatures during the quarter pushed consumers to buy air conditioners, fans, and refrigerators, with premium products sales outpacing entry level product sales, YES Securities said. In this segment, Voltas is likely to report a 90% rise in net profit and a 33% growth in revenue as compared to the previous year. This strong traction in urban demand is likely to help several other companies whose focus is on India’s major cities, such as hotels, retail and real estate segments, which are expected to post strong earnings this quarter.   Pharmaceutical companies will witness a strong quarter with its 16 constituents on the Nifty 200 index likely to report an aggregate net profit growth of 21% on year, while revenue growth is seen at 11%. Sequentially, net profit may rise nearly 7%, and revenue may report 5% growth.   Earnings of pharmaceutical companies are seen strong as prices of generics in the US are stable. For domestic-driven companies in the sector, healthy growth is seen in dermatology and ophthalmology therapies, said YES Securities. Apart from this, three constituents of the index that run hospitals across India may report on-year profit growth of 43%, on a net sales growth of 19%.   Information technology companies are expected to report better sequential growth as Apr-Jun is seasonally strong. During the quarter, Kotak Equities witnessed lower cuts in discretionary spending, especially in the financial services segment. Tata Consultancy Services, which reported Apr-Jun results on Thursday, witnessed a quarter-on-quarter rise in sales in the banking, financial services, and insurance segment after two straight quarters of decline, according to Nirmal Bang Institutional Equities.   Although, a slight uptick is expected for IT companies, the overall earnings are still expected to be muted. The combined sales of 12 IT companies is seen 4% higher and the net profit is expected to rise 10% on year. When compared on quarter, their combined sales may rise 2%, and net profit may fall 7%. TCS, HCL Technologies, and Tata Elxsi have already reported their Apr-Jun earnings.   Meanwhile, weak consumption is likely to impact earnings of fast-moving consumer goods companies, which are struggling to grow their volumes. The combined net profit of 13 FMCG companies is expected to rise 10% on year and revenue growth is seen at 3%.   Among some of the other laggards, oil companies will report lower net profits owing to the fall in gross refining margins. However, city gas distribution companies are likely to report volume growth after these took price cuts during the quarter, Nuvama Institutional Equities said. Overall, the combined net profit of 10 oil and gas companies on the Nifty 200 index is likely to decline 39% on year and revenue is seen growing 5%.   Following are the Apr-Jun consensus earnings estimates of companies that constitute the National Stock Exchange's Nifty 200 index. These estimates are based on reports compiled by Informist Media from 19 brokerage houses.   Company name      Sales           PAT      Sales        PAT      Sales        PAT      EBITDA  (million rupees) Result date    Number of brokerages polled ------Average-------    -----(Y-o-Y)-----    -----(Q-o-Q)----- -----million rupees-----    --------------% Change-------------- AUTO                                              Apollo Tyres +    63,594    3,945    1.84    (0.61)    1.62    11.41    10,099         --         -- Ashok Leyland    87,926    5,958    7.37    3.35    (21.96)    (33.84)    10,159         --    9 Bajaj Auto    117,403    19,575    13.88    17.58    2.23    1.11    23,511    Jul 16    11 Balkrishna Industries    25,926    4,034    22.29    29.18    (3.01)    (16.10)    6,826         --    7 Bharat Forge    30,746    3,543    44.53    13.75    32.04    (9.06)    6,724         --    8 Bosch    42,693    5,072    2.67    24.01    0.85    (10.15)    5,800    Aug 6    3 Eicher Motors +    42,345    10,074    6.23    9.70    (0.51)    (5.89)    11,302         --    11 Escorts Kubota    22,961    2,777    (1.36)    (1.80)    10.26    14.72    3,184         --    8 Hero MotoCorp    104,846    11,958    19.59    45.00    10.14    17.69    15,667         --    10 M&M    281,656    27,570    15.58    (0.60)    10.73    35.27    39,195    Jul 31    10 Maruti Suzuki    347,253    32,420    7.42    30.46    (9.18)    (16.40)    39,510    Jul 31    11 MRF    66,911    4,688    5.82    (19.37)    7.66    23.51    10,161         --    4 Samvardhana Motherson International +    283,145    9,395    26.05    56.36    4.64    (31.51)    27,398         --    6 Sona Blw Precision Forgings +    8,743    1,420    19.41    26.71    (1.24)    (4.52)    2,452    Jul 24    5 Tata Motors +    1,089,271    55,483    6.52    73.23    (9.22)    (68.13)    149,390    Aug 1    9 Tube Investments of India +    20,321    1,649    (47.86)    (23.26)    (54.74)    (13.00)    2,349         --    1 TVS Motor Co    84,148    5,791    16.58    23.82    3.01    19.29    9,621    Aug 6    12 Total    2,719,889    205,352    9.75    27.27    (4.42)    (37.49)                                                               Airports and Aviation                                              Interglobe Aviation    182,565    20,014    9.43    (35.17)    2.42    5.68    43,123         --    7 GMR Airports Infrastructure +    24,408    (3,121)    20.97        N.A.    (0.24)        N.A.    8,707         --    1 Total    206,973    16,893    10.68    (44.75)    2.10    (4.72)                                                               BANK                                              AU Small Finance Bank*    18,545    4,970    48.81    28.46    38.70    34.06         N.A.         --    8 AXIS Bank*    133,213    64,652    11.39    11.52    1.77    (9.32)         N.A.    Jul 24    12 Bandhan Bank*    28,936    7,992    16.18    10.84    0.95    1,363.03         N.A.         --    9 Bank of Baroda*    117,231    45,423    6.61    11.60    (0.59)    (7.04)         N.A.         --    11 Bank Of India*    60,250    18,000    1.88    16.05    1.50    25.09         N.A.         --    1 Canara Bank*    94,652    39,554    9.23    11.90    (1.20)    5.27         N.A.         --    3 Federal Bank*    22,811    9,585    18.89    12.27    3.92    5.76         N.A.         --    12 HDFC Bank*    295,713    157,524    25.31    31.80    1.70    (4.60)         N.A.    Jul 20    13 ICICI Bank*    196,194    106,039    7.64    9.91    2.76    (0.97)         N.A.    Jul 27    13 IDFC First Bank*    47,030    7,051    25.58    (7.85)    5.24    (2.66)         N.A.    Jul 27    6 Indian Bank *     62,087    23,438    8.86    37.16    3.21    4.31         N.A.         --    4 IndusInd Bank*    55,947    23,296    14.95    9.70    4.06    (0.73)         N.A.         --    11 Kotak Mahindra*    70,638    36,734    13.32    6.40    2.24    (11.13)         N.A.    Jul 20    11 IDBI Bank*         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Punjab National Bank*    105,536    30,129    11.04    139.99    1.84    0.09         N.A.         --    5 SBI*    423,535    168,803    8.86    (0.02)    1.68    (18.45)         N.A.         --    12 Union Bank Of India*    94,443    36,476    6.84    12.71    0.08    10.18         N.A.    Jul 19    5 YES Bank*    21,898    3,812    9.51    11.28    1.71    (15.65)         N.A.    Jul 20    4 Total    1,848,657    783,477    12.17    14.74    1.94    (5.25)                                                               CEMENT                                              ACC +    50,347    4,203    (3.20)    (9.83)    (6.91)    (55.51)    7,456         --    13 Ambuja Cements     47,218    5,228    (0.17)    (18.93)    (1.23)    (1.78)    7,757         --    9 Dalmia Bharat +    35,806    1,335    (1.20)    2.73    (16.87)    (57.60)    5,640    Jul 18    11 Grasim Industries    73,120    1,519    17.23    (57.25)    8.05    (65.56)    5,404         --    4 Shree Cement    50,337    5,585    0.69    (3.90)    (1.32)    (15.61)    11,640    Aug 6    14 UltraTech Cement +    180,934    17,827    2.01    5.58    (11.39)    (21.05)    33,653    Jul 19    13 Total    437,762    35,697    2.93    (7.66)    (6.43)    (30.72)                                                               CHEMICAL                                              Asian Paints +    91,935    14,118    0.12    (8.94)    5.30    12.34    19,876    Jul 17    9 Astral +    15,134    1,558    17.95    30.08    (6.88)    (14.19)    2,584         --    5 Berger Paints India +    31,089    3,362    2.62    (5.11)    23.35    51.39    5,330    Aug 9    5 Deepak Nitrite         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Fertilisers and Chemicals Travancore         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- PI Industries    21,147    4,130    15.61    4.47    30.03    7.43    5,562         --    8 Pidilite Industries +    34,864    5,271    6.45    12.59    20.14    75.36    7,894         --    5 SRF +    33,911    3,308    1.58    (7.92)    (5.00)    (21.64)    6,914         --    10 Tata Chemicals +    39,796    1,808    (5.65)    (66.02)    14.52        N.A.    6,177         --    2 UPL +    88,899    (3,318)    (0.82)        N.A.    (36.85)        N.A.    12,140         --    6 Total    356,773    30,237    1.59    (23.36)    (7.40)    54.46                                                               CONSUMER ELECTRICAL                                              Voltas +    44,785    2,458    33.30    90.09    6.56    111.07    3,332         --    9 Total    44,785    2,458    33.30    90.09    6.56    111.07                                                               DEFENCE                                              Bharat Dynamics         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Hindustan Aeronautics    46,160    9,116    17.90    11.96    (68.74)    (78.76)    9,735         --    2 Mazagon Dock Shipbuilders  +         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Total    46,160    9,116    17.90    11.96    (68.74)    (78.76)                                                               DIVERSIFIED                                              Adani Enterprises +         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Total         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.                                                               ELECTRICAL                                              ABB India    31,163    4,363    12.53    20.25    1.17    (5.00)    5,325    Aug 8    5 Bharat Electronics    39,124    6,890    11.44    29.80    (54.13)    (61.37)    8,637    Jul 29    5 Dixon Technologies (India) +     57,297    1,202    75.14    74.72    23.01    26.34    2,271         --    5 Havells India    55,678    4,059    15.43    41.23    2.46    (9.58)    5,825    Jul 18    9 Polycab India +    46,940    4,405    20.69    10.24    (16.06)    (19.32)    6,424    Jul 18    8 Total    230,202    20,920    26.04    26.83    (15.66)    (37.23)                                                               ENGINEERING - CAPITAL GOODS                                              BHEL    58,632    (1,696)    17.18        N.A.    (29.02)        N.A.    (1,130)         --    3 CG Power and Industrial Solutions +    22,711    2,325    21.19    14.11    3.62    (0.49)    3,110         --    2 Rail Vikas Nigam    58,501    3,940    7.42    18.12    (12.69)    (9.07)    3,627         --    1 Cummins India    23,610    4,208    6.90    33.29    1.94    (25.07)    4,524    Aug 6    6 L&T +    516,094    27,798    7.78    11.51    (23.06)    (36.77)    53,107    Jul 24    5 Siemens    57,315    6,589    28.13    55.51    7.86    (26.49)    8,309         --    5 Total    736,864    43,163    10.16    26.28    (19.79)    (38.39)                                                               FINANCE                                              Aditya Birla Capital         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.    Aug 1         -- BSE +    6,139    2,434    136.48    (45.02)    12.70    127.36    3,166         --    3 Jio Financial Services *+         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.    Jul 15         -- Bajaj Finance *+    88,821    40,331    32.19    17.35    10.85    5.45         N.A.    Jul 23    8 Bajaj Finserv *+         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.    Jul 24         -- Bajaj Holdings & Investment*+         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.    Jul 24         -- Cholamandalam Investment and Finance *    25,854    9,529    21.55    31.25    (11.25)    (9.94)         N.A.    Jul 26    10 ICICI Lombard General Insurance Co#    49,053    5,790    (87.38)    48.33    12.30    11.46         N.A.    Jul 19    3 ICICI Prudential Life Insurance Co#    94,940    2,200    35.24    6.33    (35.80)    26.61         N.A.    Jul 23    2 Indian Railway Finance Corp *          N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- L&T Finance *+    20,439    6,345    16.61    19.51    2.84    14.56         N.A.    Jul 16    6 LIC Housing Finance*    21,870    12,151    (1.01)    (8.20)    (2.26)    11.40         N.A.         --    8 Life Insurance Corporation of India #         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- M&M Financial Svcs*    19,180    5,116    21.05    45.07    5.84    (17.35)         N.A.    Jul 23    10 Max Financial Services*         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.    Aug 13         -- One 97 Communications +    15,239    (3,864)    (34.92)        N.A.    (32.78)        N.A.         N.A.    Jul 19    3 PB Fintech +    9,459    392    42.12        N.A.    (13.19)    (35.30)    382         --    1 Piramal Enterprises +     7,990    1,339    19.49    (73.68)    8.89    (2.33)         N.A.         --    1 Poonawalla Fincorp +    5,947    2,896    41.27    28.31    5.72    (12.68)         N.A.    Jul 20    5 Power Finance Corp*    45,153    38,240    28.88    27.17    6.56    (7.53)         N.A.         --    1 REC*    48,511    38,184    33.28    28.97    8.10    (4.93)         N.A.         --    1 SBI Cards And Payment Services    14,769    6,323    19.76    6.57    4.38    (4.54)         N.A.         --    8 SBI Life Insurance Co#    155,700    4,000    18.81    4.98    (38.01)    (50.67)         N.A.    Jul 24    1 Shriram Finance*    53,000    20,286    26.18    21.08    4.18    4.25         N.A.         --    8 Total    682,064    191,693    (24.49)    16.93    (16.48)    (1.68)                                                               FMCG                                              Britannia Industries +    41,937    5,271    4.56    15.20    3.05    (2.08)    7,773         --    10 Colgate Palmolive    14,352    3,321    8.42    21.35    (3.68)    (12.56)    4,730         --    10 Dabur India +    33,422    5,009    6.76    7.98    18.74    43.31    6,597    Aug 1    11 Godrej Consumer +    35,043    4,769    1.61    49.59    3.50        N.A.    7,515         --    8 Hindustan Unilever     152,349    25,372    0.57    2.64    2.54    5.45    35,643    Jul 23    11 ITC    168,512    51,153    6.46    4.34    1.64    1.90    65,066         --    9 Jubilant Foodworks    14,883    554    13.64    (26.35)    11.79    116.07    2,759    Aug 9    7 Marico +    26,554    4,689    7.20    9.81    16.57    47.45    6,234    Aug 5    10 Nestle India    50,585    7,990    8.59    14.41    (3.97)    (14.47)    12,021    Jul 25    10 Patanjali Foods         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.    Jul 19         -- Supreme Industries +    26,903    2,935    13.58    36.15    (10.56)    (17.29)    4,442    Jul 22    6 Tata Consumer Products +    43,649    3,646    16.67    15.17    11.15    68.31    6,750         --    5 United Spirits    24,037    3,078    (54.75)    29.20    (62.41)    (19.86)    3,990    Jul 23    6 Varun Beverages +    73,640    13,123    29.20    32.05    67.44    144.25    20,424         --    6 Total    705,863    130,910    3.11    10.44    1.13    36.78                                                               HEALTHCARE                                              Apollo Hospitals +    50,698    2,255    14.76    35.33    2.55    (11.17)    6,738         --    5 Fortis Healthcare +    18,117    1,723    9.31    54.17    1.45    (3.60)    3,563         --    1 Max Healthcare Institute +    18,813    3,438    46.41    43.19    32.22    36.66    5,043         --    5 Total    87,628    7,415    19.06    43.03    7.48    8.40                                                               HOTELS                                              Indian Hotels Co +    15,887    2,692    8.34    21.01    (16.62)    (35.56)    4,763         --    7 Total    15,887    2,692    8.34    21.01    (16.62)    (35.56)                                                               IT                                              Coforge +    24,290    2,239    9.36    22.41    2.99    (3.21)    4,010    Jul 22    10 Oracle Financial Services Software +         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Tata Technologies +    13,599    1,813        N.A.        N.A.    4.52    15.27    2,540    Jul 18    2 Info Edge India    6,411    2,330    9.72    16.54    5.39    10.44    2,622         --    3 Infosys +    390,062    63,408    2.83    6.66    2.86    (20.43)    94,715    Jul 18    13 LTIMindtree +    90,831    12,071    4.38    4.83    2.14    9.74    15,997    Jul 17    12 L&T Technology Services +    25,218    3,248    9.57    4.40    (0.62)    (4.73)    4,767    Jul 18    9 Mphasis +    34,647    4,380    6.54    10.59    1.54    11.39    6,277    Jul 25    8 KPIT Technologies +    13,833    1,772    26.02    32.24    4.97    7.82    2,882    Jul 24    4 Persistent Systems +    26,894    3,042    15.86    32.99    3.82    (3.52)    4,591    Jul 18    11 Tech Mahindra +    129,634    9,087    (1.49)    31.23    0.72    37.48    15,032    Jul 25    12 Wipro +    222,092    29,627    (2.72)    3.22    0.00    4.52    44,154    Jul 19    12 Total    977,508    133,015    3.55    9.82    1.80    (7.49)                                                               LOGISTICS                                              Container Corp    21,939    3,140    14.31    28.63    (5.34)    6.61    5,029    Aug 8    5 Delhivery +    21,186    (641)    9.78        N.A.    2.07        N.A.    433         --    6 Total    43,125    2,499    12.04    61.59    (1.84)    10.53                                                               MEDIA                                              Sun TV Network    13,678    6,206    3.80    6.49    47.53    55.63    7,657         --    2 Zee Entertainment +    21,034    1,182    6.03    121.22    (3.07)    785.21    2,242         --    4 Total    34,712    7,388    5.14    16.12    12.08    79.26                                                               METAL                                              APL Apollo Tubes +     50,306    1,942    10.69    0.30    5.56    13.94    3,178         --    6 Hindalco Industries +    583,789    36,840    10.17    50.12    4.26    16.07    75,505    Aug 13    8 Jindal Steel & Power +    131,302    12,077    4.30    (28.41)    (2.65)    29.11    27,223         --    7 JSW Steel +    426,067    11,348    0.93    (51.46)    (7.92)    (12.64)    62,098    Jul 19    6 NMDC     55,183    16,694    2.29    1.18    (14.78)    14.18    20,561         --    6 Steel Authority of India    244,303    7,144    0.30    376.78    (12.62)    (29.36)    24,993         --    7 Tata Steel +    575,542    10,598    (3.25)    67.17    (1.93)    73.32    62,428         --    8 Vedanta +    362,046    28,684    7.33    8.65    1.96    109.52    99,237         --    3 Total    2,428,537    125,326    3.20    6.69    (2.53)    24.92                                                               OIL & GAS                                              Adani Total Gas+         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- BPCL    1,152,091    30,152    1.97    (71.42)    (1.15)    (28.62)    58,803    Jul 19    10 GAIL     334,111    21,407    3.72    51.61    3.38    (1.67)    36,495         --    10 Gujarat Gas    42,613    3,149    12.69    46.41    3.07    (23.10)    5,321    Aug 6    9 Hindustan Petroleum    1,151,894    12,205    2.88    (80.33)    0.55    (57.07)    34,853    Jul 29    10 Indian Oil Corp    1,998,242    24,495    1.16    (82.19)    0.93    (49.37)    82,628         --    10 Indraprastha Gas    36,819    3,661    8.07    (16.50)    2.36    (4.37)    5,269         --    10 Oil India    57,933    17,315    27.85    7.32    4.81    (14.66)    25,510         --    8 ONGC    354,696    86,780    4.90    (13.35)    2.40    (12.07)    171,113         --    9 Petronet LNG    141,748    8,769    21.61    11.02    2.77    18.89    13,130    Jul 24    10 Reliance Ind +    2,312,958    165,429    11.44    3.32    (1.99)    (12.71)    396,847    Jul 19    8 Total    7,583,104    373,362    5.40    (38.79)    (0.10)    (19.64)                                                               PHARMA                                              Alkem Laboratories +    31,637    4,136    6.60    44.24    7.76    40.88    5,158         --    6 Aurobindo Pharma +    75,930    9,473    10.84    65.98    0.17    4.25    16,435         --    10 Biocon +    39,208    1,706    14.56    68.24    0.09    25.90    8,699         --    4 Cipla +    67,818    11,196    7.16    12.45    10.04    19.23    16,528    Jul 26    9 Divi's Laboratories    21,175    4,720    22.40    36.81    (6.26)    (11.11)    6,420         --    7 Dr Lal Pathlabs +    6,004    959    10.98    16.13    10.08    13.51    1,626         --    5 Dr. Reddy's Lab +    72,803    13,344    7.73    (5.03)    2.34    1.88    19,722    Jul 27    11 Gland Pharma +    15,314    2,236    26.70    15.19    (0.39)    16.19    3,671         --    6 IPCA Laboratories    21,629    1,914    45.52    14.89    43.18    195.52    3,692         --    5 Laurus Labs +    11,582    564    (2.00)    126.88    (19.55)    (25.43)    2,351         --    5 Lupin +    52,120    5,511    8.27    21.85    5.06    53.32    10,481         --    11 Mankind Pharma +    29,376    5,629    13.92    15.62    20.34    19.46    7,505         --    4 Sun Pharma +    128,636    26,097    7.73    29.03    7.35    (1.69)    34,144         --    10 Syngene International    8,160    960    14.00    27.49    (5.63)    (49.42)    2,454    Jul 24    1 Torrent Pharma +    29,110    4,728    12.35    25.09    6.05    5.31    9,271    Jul 23    9 Zydus Lifesciences +    58,096    12,018    13.04    10.57    4.98    1.65    17,440         --    8 Total    668,595    105,191    10.96    21.26    5.24    6.89                                                               PORT                                              Adani Ports and SEZ +    70,273    23,326    12.48    10.30    1.90    14.36    35,525         --    5 JSW Infrastructure +    10,306    3,264    17.37    1.72    (6.00)    (1.09)    5,363    Jul 18    3 Total    80,579    26,590    13.08    9.17    0.81    12.21                                                               POWER & ENERGY                                              Adani Energy Solutions +         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Adani Green Energy +         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Adani Power +         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Coal India +    359,709    73,609    (0.03)    (7.65)    (3.85)    (15.22)    92,739         --    5 JSW Energy +    30,064    2,214    2.68    (23.62)    9.09    (36.98)    11,213         --    1 NHPC    23,926    8,931    (6.94)    (15.18)    44.87    28.00    12,813         --    1 NTPC     425,522    45,239    8.77    11.26    0.05    (18.58)    121,243         --    3 Power Grid    116,127    39,345    13.35    11.06    5.09    (4.68)    99,217         --    3 SJVN         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Suzlon Energy +    22,834    3,015    69.01    198.81    3.97    18.64    3,416         --    2 Tata Power +    176,474    8,316    16.00    (14.49)    11.36    (7.11)    27,388         --    2 Torrent Power +         N.A.         N.A.        N.A.        N.A.        N.A.        N.A.         N.A.         --         -- Total    1,154,655    180,669    7.50    0.39    1.78    (12.15)                                                               REALTY                                              DLF +    15,478    6,649    8.75    26.17    (27.50)    (27.78)    4,859         --    4 Godrej Properties +    13,333    4,336    42.44    247.05    (6.50)    (7.99)    2,197         --    3 Macrotech Developers +    27,153    4,531    67.88    153.98    (32.43)    (31.92)    7,464         --    3 Oberoi Realty +    10,390    4,178    14.18    29.89    (20.97)    (46.98)    5,642    Jul 19    4 Prestige Estates +    23,302    1,107    38.63    (58.54)    7.68    (20.95)    6,751         --    3 Total    89,656    20,801    36.51    46.60    (18.92)    (30.33)                                                               RETAIL                                              Aditya Birla Fashion    35,509    (1,974)    18.87        N.A.    24.48        N.A.    3,346         --    7 FSN E-Commerce Ventures +    17,585    149    23.68    351.11    5.43    114.98    974         --    3 Kalyan Jewellers India+    55,791    1,867    27.50    29.75    23.03    35.69    3,754    Aug 1    1 Page Industries    13,054    1,694    5.92    6.99    31.15    56.58    2,558         --    7 Titan Co    121,814    7,501    9.30    (3.47)    8.21    (4.57)    11,870         --    6 Trent    37,262    3,175    46.91    114.11    16.92    (51.48)    5,830         --    5 Zomato +    39,698    2,613    64.31    12,966.67    11.45    49.33    1,733         --    3 Total    320,713    15,025    22.81    26.88    14.31    (15.05)                                                               TELECOM                                              Bharti Airtel +    385,759    34,791    3.03    115.76    2.60    67.94    200,483         --    6 Indus Tower +    74,907    15,419    5.86    14.39    4.14    (16.80)    38,321    Jul 30    2 Tata Communications +    58,055    2,487    21.67    (34.85)    2.00    (22.58)    10,957    Jul 18    3 Vodafone Idea +    105,869    (80,474)    (0.64)        N.A.    (0.19)        N.A.    42,635         --    4 Total    624,591    (27,778)    4.20        N.A.    2.24        N.A.                                                               TRAVEL & TOURISM                                              IRCTC    11,434    2,954    14.14    27.19    (0.98)    3.86    3,758         --    2 Total    11,434    2,954    14.14    27.19    (0.98)    3.86                                                               Grand Total    22,136,716    2,445,064    5.73    0.46    (2.45)    (11.16)                  EARNINGS DECLARED SO FAR Company Name        Sales    Informist estimates         PAT    Informist estimates    EPS (in Rupees)     Result Date Bank of Maharashtra*    27,991.00         N.A.    12,935         N.A.    1.83    Jul 15 HCL Tech +    280,570    280,107    42,570    37,906    15.69    Jul 1 HDFC Asset Management Co    7,752    7,662    6,040    5,713    28.19    Jul 15 HDFC Life Insurance Co#    125,096    135,925    4,777    5,100         N.A.    Jul 15 Tata Elxsi    9,265    9,286    1,841    1,972    29.55    Jul 10 TCS +    626,130    622,132    120,400    120,047    33.28    Jul 1   Notes: + Consolidated Figure * Net interest Income Y-o-Y: Year-on-Year # Net premium income Q-o-Q: Quarter-on-Quarter N.A.: Not Available   Estimates from: Anand Rathi Share and Stock Brokers Ltd, Axis Securities Ltd, Elara Securities (India) Pvt Ltd, Emkay Global Financial Services Ltd, HDFC Securities Ltd, ICICI Securities Ltd, IDBI Capital Market Services Ltd, Incred Research Services Pvt Ltd, Indsec Securities and Finance Ltd, Kotak Institutional Equities, KR Choksey Research, Motilal Oswal Financial Services Ltd, Nirmal Bang Equities Pvt Ltd, Nomura Equity Research, Nuvama Wealth Management Ltd, PhillipCapital (India) Pvt Ltd, Prabhudas Lilladher Pvt Ltd, Sharekhan Ltd and YES Securities (India) Ltd.  End Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Budget optimism to give legs to mkt rally Jul

Informist, Friday, Jul 5, 2024 By Anshul Choudhary    MUMBAI – Indian equities are expected to keep moving higher in July on the back of widespread optimism that the government will not only announce measures to boost consumption but also maintain its investment-led thrust on building infrastructure and manufacturing scale in the economy, according to market watchers. However, gains are likely to be limited in most pockets of the market, as stock valuations have run-up in quick time, which, in-turn, is fuelling concerns about corporate earnings growth not being able to justify premium multiples.   What's more, the impending corporate earnings season may give rise to more volatility in the market this month, as investors look for signs of improving demand and monitor management commentary to assess how companies are viewing growth prospects. The Budget is scheduled to be announced sometime in the fourth week of this month, while the corporate earnings season will begin in full force with the results of Tata Consultancy Services on Thursday.    According to the median of estimates given by 13 brokerages, the Nifty 50 is expected to scale new highs and face resistance at 24500 points, 0.7% higher than today's close of 24323.85 points. This month, the index has already hit a fresh intraday lifetime high of 24363 points on Thursday.   However, there remains a risk of investors booking profits periodically owing to rich valuations, especially in mid- and small-cap stocks. The Nifty 50 is expected to find support at 23700 points, which would mean a fall of 2.6% here on.   Apart from the optimism related to the Budget, hope of lower interest rates in the US soon are also aiding fresh buying in stocks, such as information technology counters, noted analysts. As inflation in the US has steadily declined and the economy is slowing down, market participants now expect an interest rate cut as early as September. The CME FedWatch Tool shows a 67% probability of a 25 basis-point cut in September. Interest rate cuts in the US will mean more foreign fund inflows into Indian equities as well as other emerging markets. Over the past couple of years, expensive stock valuations in India and high rate of risk-free returns in the US have made equities less attractive to foreign investors. "It is difficult to get foreign flows if interest rates don't come down...because we are expensive," Shrikant Chouhan, head of equity research at Kotak Securities, said.   He pointed out that China, which holds the biggest share in Asian market indices, has not performed, which is also affecting foreign investors' decision-making. In June, foreign portfolio investors net bought Indian equities worth $3.11 bln, a sharp turnaround from May, when they net sold $3 bln worth of equities.    BUDGET HOPE In June, the Nifty 50 rose nearly 7?ter the National Democratic Alliance came back to power after the General Election. The equity market saw some selling initially because the Bhartiya Janata Party did not win a majority by itself, but the caution abated after key BJP ministers retained their portfolios, bolstering expectation of continuity in policies.    Now, the Union Budget for the current financial year will be a major trigger for the equity market, as investors want to understand if the new NDA government will keep focus on fiscal prudence and capital expenditure, even as it looks to appease its coalition partners and voters by coming up with populist measures. While most analysts don't expect sharp changes from the current policies and focus areas, some believe measures to stoke consumer demand in the economy are a must.    "If populist goals become more prominent, the market is likely to react negatively," Trideep Bhattacharya, president and chief investment officer-equities at Edelweiss Mutual Fund, said. Similarly, if the government compromises on fiscal prudence, the market will probably respond unfavourably, he said.   The government is expected to maintain focus on capital expenditure and bringing down the fiscal deficit. In the interim Budget, the government had pegged the fiscal deficit at 5.1% of GDP for 2024-25 (Apr-Mar).   Further, there is uncertainty over tax changes that the government may make to simplify the taxation structure in the country, which may impact the overall tax incidence for equity investors in the short-term, said analysts. Media reports over the past few weeks have also been rife with speculation of several tax changes and rationalisations that are being reportedly debated or sought, such as a uniform holding period for determining short-term and long-term capital gains for all asset classes, changes in deductions allowed under the old regime and higher exemptions for capital gains, among various others.    While all these changes are expected to be aimed at bringing simplicity to the tax structure in the long-run, market participants cautioned that there is a possibility that tax changes may impact equity investors' net returns in the short-term. Thus, the uncertainty over likely tax changes in the Budget remains a key monitorable.    EARNINGS Another important event for the market would be corporate earnings, which will assume even more significance given the recent rally in shares. As Indian corporates see lower benefits of soft raw material prices, they are struggling to keep up the pace of profit growth seen last year, especially with revenue growth slowing down due to high inflation and weakness in the global economy.   Analysts are expecting margins to be flat this financial year and earnings growth expectations have already come down to 14-15% for the Nifty 50 companies. The top 50 companies reported a net profit growth of 25% in 2023-24 (Apr-Mar), according to Motilal Oswal Financial Services.   During the June quarter, automobiles, financials, healthcare, capital goods, and telecommunication companies are expected to post strong earnings. At the same time, companies in the chemicals, construction materials, and oil and gas sectors are expected to report disappointing earnings. Kotak Institutional Equities expects the net profit of Nifty 50 companies to rise 0.5% on year and revenue is seen to be 7.3% higher.   Analysts await commentary around consumption patterns in hope of better rural demand for fast-moving consumer goods. Further, commentary from information technology is also eyed to assess when the earnings will bounce back.   STOCKS IN FOCUS Companies that are set to benefit from higher government spending and the ones that sell premium products are expected to keep finding favour with investors, especially in the lead-up-to Budget, said analysts. Sectors such as power, infrastructure, cement, railways, and automobiles are expected to perform better than the rest, but gains are seen capped as several of these are trading at frothy valuations.   Defence companies are also among the ones being seen as highly overvalued. The government's focus on indigenisation in the sector has helped Indian companies get more business and provided earnings visibility for the coming years. As per an analysis of 25 private aerospace and defence companies by CRISIL last week, their revenues may grow 20% this financial year. However, expensive valuations put these stocks at a risk of correction even as there is earnings visibility, analysts said.   Analysts are hopeful that consumption-based companies will see a turnaround if the monsoon turns out to be normal and the government announces some measures to boost consumption, especially in the rural areas. Some analysts pointed out that there is not much comfort on the valuation side for fast moving consumer goods sector and that there are companies in other sectors expected to grow faster.   Information technology stocks can be a "dark horse", in the language of a fund manager. Analysts said the worst is likely behind for IT companies and earnings will improve after a few quarters. These expectations were bolstered after US-based Accenture in June mentioned better bookings and a pick up in the consulting business, which analysts see as positive for Indian IT companies. Going forward, comments from the management on the demand environment will be of the utmost importance.   Keeping in mind the valuations of stocks, some expect large-caps to fare better, while others are still focussed on finding opportunities in the broader market. Large-cap valuations are in line with or slightly below their 10-year average, Bhattacharya of Edelweiss MF, said.   In contrast, mid- and small-cap valuations are 20-40% higher than their 10-year average, making them clearly more expensive, he said. However, the earnings growth of mid- and small-cap companies is also significantly higher than that of their large-cap counterparts, he added. So far this year, the Nifty 50 is up nearly 12%, Nifty Midcap 150 is up 25%, and Nifty Smallcap 250 is up 26%.    Following are the support and resistance levels for the Nifty 50 index for July, based on inputs from 13 brokerage houses:   Broking Firm    Support 1    Support 2    Resistance 1    Resistance 2 Anand Rathi Shares and Stock Brokers    24000    23800    24500    25000 Choice Equity Broking    23950    23700    24400    -  Emkay Global Financial Services    23800    23300    24400    24500 Globe Capital Market    23350    -     24550    -  ICICI Securities    23800    23700    24500    -  IDBI Capital Markets & Securities     23500    23000    25000    25200 Khandwala Securities    23200    22200    24500    25000 Monarch Networth Capital    23700    23300    24400    -  Nirmal Bang Institutional Equities    24000    23800    25000    -  Religare Broking    24000    23400    24500    25000 SAMCO Securities    24000    23800    24650    -  Sharekhan    23400    23200    24610    24950 Way2Wealth Brokers    23680    23350    24500    25000   End US$1 = 83.49 rupees   With inputs from Team Informist   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Rupee seen steady at 83.38/$1Jul-end on RBI dlr buys

  Informist, Monday, Jul 1, 2024 By Kabir Sharma   MUMBAI – The rupee is expected to settle unchanged from its current levels at the end of July as foreign fund inflows into the domestic debt market are likely to be absorbed by the Reserve Bank of India through dollar purchases. The Indian unit is likely to end the current month at 83.38 a dollar, unchanged from 83.3825 a dollar on Jun 28, according to the median of estimates of 22 respondents, including banks, corporates, and brokerage firms, polled by Informist.   Market participants expect a steady stream of foreign fund inflows on the back of Indian government bonds' inclusion in the JP Morgan Government Bond Index – Emerging Markets suite, to keep the Indian currency supported. Starting last Friday, India has a 1% weight on the JP Morgan index, which will rise by 1?ch month until March. A total of around $25 bln worth of inflows are expected from FPIs into index-eligible bonds that are designated under the fully accessible route.   "Inflows in both bonds and equities will support the rupee, and I don't think there is any major pressure on the rupee to depreciate," said Sajal Gupta, executive director, Head - Forex and Commodities - Nuvama Institutional Desk.   However, the local currency will not be able to notch significant gains as the central bank will actively purchase the US unit to contain the volatility in the exchange rate and ramp up its foreign exchange reserves, poll respondents said. Case in point: On Friday, the day of bond-index inclusion, the Indian unit's appreciation was capped due to the RBI's active dollar purchase intervention.    Further, poll respondents said the RBI's intervention strategy may be backed by its stated stance of being keen to build its foreign exchange reserves. Recently, RBI Governor Shaktikanta Das had said that the central bank would continue to build its forex reserves "opportunistically". India's foreign exchange reserves were at $653.71 bln in the week ended Jun 21. Out of the 22 poll respondents, only five expected the rupee to move above 83.20 a dollar in July.   "The central bank will continue to intervene to contain the volatility and to position the rupee as the most stable currency, said V.R.C. Reddy, head of treasury, Karur Vysya Bank. "Intervention depends on other major Asian currencies' movements and they (RBI) will align with that to keep the export competitiveness," Reddy said.    On other hand, even though the rupee hit a record low of 83.67 a dollar last month, market players don't expect the RBI to allow a sharp depreciation in the local unit either, suggesting that the Indian unit will move in a tight range this month. Out of the 22 poll respondents, only four expect the rupee to hit a record low in July.    After rising 1.2% last month, a strong dollar index is expected to continue weighing on the domestic unit, market participants said. "From here, the dollar index may stay put until the FOMC at least, it will neither strengthen nor weaken so the pressure on rupee will continue," said Upasna Bharadwaj, chief economist at Kotak Mahindra Bank. The US Federal Reserve's policy outcome is due on Jul 31. Currently, the CME FedWatch tool shows around 63% of Fed fund futures traders expecting a rate cut by September, with another US rate cut priced in December.   Market players said that the cloud of doubt around the outcome of the US elections has created a solid base for the greenback, hampering the risk appetite of investors. Market participants are keeping a close eye on the poll between President Joe Biden, a Democrat, and Republican challenger and former president Donald Trump, as the poll campaign grows in intensity in the coming months. The world's largest economy goes into election on Nov 5.    Investors anticipate that Trump coming to power would mean lower corporate taxes, stricter trade relations leading to higher stock prices and bond yields, strengthening the dollar. Trump's win is also expected to bring about strict restrictions on immigration and hikes in tariffs on imports, leading to a stagflation in the economy.   Rising crude oil prices may also pressure the Indian unit in July, according to market participants. Last month, Brent crude prices rose over 5%.    Crude prices are expected to rise due to extended supply cuts. In June, the Organization of Petroleum Exporting Countries and allies agreed to extend the production cut of 1.65 mln barrels per day into next year, a deal that suggests that oil prices will remain high until the end of 2025. That cut was due to expire at the end of this year. As India is the third-largest oil importer in the world, a rise in prices of the commodity weighs heavily on the Indian rupee. Apart from events in the US, parliamentary elections in France and the UK are also expected to keep market players on the edge. Further, the Union Budget for 2024-25 (Apr-Mar), due to be presented in the third week of this month, is also expected to be a key event.    POLL DETAILS   Participants Jul-end Sep-end CR Forex 83.10-83.50 82.80-83.10 CSB Bank 83.42-83.52 83.55 DCB Bank     83.25-83.75   Federal Bank 83.25-83.75   Finrex Treasury Advisors LLP 83.40 83.55 HDFC Bank 83.20-83.50 82.80-83.20 IBM India 83.60 83.90 IDFC FIRST Bank 83.30 83.00 Karur Vysya Bank   82.10-83.20 83.10-83.20 Kotak Mahindra Bank   83.50   Kotak Securities 83.45 83.70 Large Engineering Co 84.00 83.00 LKP Securities 83.00-83.25   Mecklai Financial Services  83.40 83.10 Nuvama Institutional Desk 83.30 83.20 Private bank 83.50-83.60   Private bank 83.25-83.50 83.00 Large brokerage 83.15-83.60   Shinhan Bank India  83.00-83.70 82.80-83.50 Small Finance bank 83.50   Suryoday Small Finance bank 83.00-83.70   State-owned bank 83.00-83.50 82.50 Median 83.38 83.15   With inputs from Pratiksha and Sourabh Kumar   End US$1 = 83.4375 rupees IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

IIP growth seen slowing to 3-month low of 4.6% in Apr

Informist, Monday, Jun 10, 2024 By Shubham Rana   MUMBAI – India’s industrial growth is likely to have slowed down to a three-month low of 4.6% in April from 4.9% in March, according to the median of estimates of 14 economists polled by Informist. Industrial output grew 4.6% in April 2023.   The estimates in the poll varied sharply from 0.7% to 10.8%. The National Statistical Office will detail the Index of Industrial Production data for April at 1730 IST on Wednesday.   Industrial output, as measured by the Index of Industrial Production, is expected to have fallen in April as the year-end impact faded away from the previous month. Industrial activity typically rises in March as it marks the end of the financial year.   A 4.6% growth in industrial output in April would mean that the overall index would have contracted 7.6% from the previous month, sharply lower than the historical average of contraction of 14.9%.   Most high frequency indicators showed a rising trend in output growth in April. The growth in output of eight core industries, which account for over 40% of the total weight of the Index of Industrial Production, rose to 6.2% in April from 6.0% in March.   Growth in vehicle production accelerated to 20.5% on year in April from 15.8% a month before. Growth in e-way bills generated rose to 14.5% in April from 13.9% in March. Merchandise exports in April rose 1.1% in April after contracting 0.7% in March.   However, the manufacturing Purchasing Managers' Index, compiled by S&P Global, eased to 58.8 in April from a 16-year high of 59.1 in March. The April print was the second highest since October 2020.   Following is a summary of the details and estimates of respondents for IIP growth in April, in ascending order:   Range of expectations: 0.7-10.8% Mean: 4.8% Median: 4.6% Mode: 4.1%   ORGANISATION IIP GROWTH ESTIMATE ICICI Securities Primary Dealership 0.7% Nirmal Bang Institutional Equities 3.9% ICRA 4.0% Nomura 4.1% STCI Primary Dealer 4.1% ICICI Bank 4.3% ANZ Banking Group 4.5% HDFC Bank 4.6% Capital Economics 4.7% India Ratings and Research 5.0% QuantEco Research 5.1% YES Bank 5.3% CareEdge 5.5% Moody's Analytics 10.8%   End   IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Majority sees MPC cutting interest rate in Oct-Dec

Informist, Monday, Jun 10, 2024 By Pratiksha and Shubham Rana MUMBAI – Economists are veering towards a rate cut by the Monetary Policy Committee of the Reserve Bank of India in Oct-Dec, though they vary on the exact time of the cut, according to a post-monetary policy poll by Informist.   According to the poll, of the 24 respondents, 14 expect the rate-setting panel to cut the policy repo rate in Oct-Dec. While eight of the 14 respondents expect the rate cut to start in October, four expect it in December, and two expect it in either October or December.   Out of the remaining ten respondents, two expect the committee to pivot as early as the next meeting in August.   The rate-setting panel has not changed the policy rate since February 2023, though two out of its six members - Ashima Goyal and Jayanth R. Varma - voted to cut the repo rate by 25 basis points in June. In the April meeting, only Varma had voted to cut the repo rate.   Six respondents expect the MPC to lower interest rates in Jan-Mar quarter. There is only one scheduled meeting in the quarter in February. DBS Bank said it does not see a rate cut in 2024, while Equirus Securities does not see a rate cut in the current financial year ending March.   Economists expect the rate cut cycle, whenever it begins, to be a shallow one of 50-75 bps. Most expect the panel to change the policy stance to "neutral" from the "withdrawal of accommodation" before cutting the policy rate.   On Friday, the committee left the repo rate unchanged at 6.50% for the eighth consecutive meeting. It also maintained the "withdrawal of accommodation" policy stance, as expected.  "In India, with growth holding firm, monetary policy has greater elbow room to pursue price stability to ensure that inflation aligns to the target on a durable basis," RBI Governor Shaktikanta Das said in his statement on Friday.   "While the Monetary Policy Committee took note of the disinflation achieved so far without hurting growth, it remains vigilant to any upside risks to inflation, particularly from food inflation, which could possibly derail the path of disinflation," the governor said.   The RBI raised its GDP growth forecast for 2024-25 (Apr-Mar) by 20 bps to 7.2%, after the Indian economy rose faster-than-expected at 8.2% in 2023-24. The RBI kept its inflation projection for the current financial year unchanged at 4.5%.      "With growth momentum remaining strong, RBI's focus is to bring down inflation to 4% level on a durable basis. Given its assessment of growth-inflation mix, the RBI is likely to stay on an extended pause," YES Bank said in a report. YES Bank expects the committee to cut interest rate in December.   Economists took note of the governor's cautious tone on the outlook for inflation, particularly food inflation. "At the current juncture, the uncertainties related to the food price outlook warrant close monitoring, especially their spillover risks to headline inflation," Das said.    India's headline CPI inflation moderated to an 11-month low of 4.83% in April, but is expected to have risen to a three-month high of 5.0% in May because of a rise in food prices. Food inflation was at a five-month high of 8.70% in April.   How food inflation will behave going ahead is dependent on monsoon rains, which are projected to be above normal at 106% of the long period average.   A key takeaway for economists from Das' statement on Friday was that the RBI may not follow the US Federal Reserve in interest rate decisions. "There is a view that in matters of monetary policy, the Reserve Bank is guided by the principle of 'follow the Fed'. I would like to unambiguously state that while we do keep a watch on whether clouds are building up or clearing out in the distant horizon, we play the game according to the local weather and pitch conditions," Das said.   "We interpret this statement to mean that even if the Fed easing cycle gets pushed out because of US growth-inflation dynamics, the RBI can ease if inflation in India eases by Q4 (Oct-Dec). On the other hand, if inflation in India stays sticky, the RBI is unlikely to ease even if a Fed easing cycle is underway," Goldman Sachs said in a report.    Interestingly, the next meeting in August will be the last for the three external members, who were appointed for a period of four years. With two of the three external members already pivoting towards a rate cut, it will be interesting to see a stand taken by the other external member, and the three RBI members on the committee.   Following are the expectations of respondents on the rate action: Organisation When rate cut cycle is expected to begin Bank of Baroda October Barclays December Capital Economics August CareEdge Ratings Oct-Dec DBS Bank No rate cut in 2024 Deutsche Bank October Emkay Global Financial Services Jan-Mar Equirus Securities No rate cut in 2024-25 Goldman Sachs December HDFC Bank Jan-Mar HSBC August ICICI Securities Primary Dealership February IDFC FIRST Bank  October Kotak Mahindra  Bank December Nirmal Bang Institutional Equities February Nomura October QuantEco Research October RBL Bank Jan-Mar Societe Generale Oct-Dec Standard Chartered October State Bank of India October UBS Securities February Union Bank of India October YES Bank  December End   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Deep Dives

Corp bond supply dips on mo in Jun as issuers wait and watch

Informist, Tuesday, Jul 16, 2024 By Subhana Shaikh MUMBAI – Private placements of corporate bonds declined marginally in June from the previous month as moderation in credit growth--a barometer of economic activity--and uncertainty about the policies of a new coalition government resulted in issuers adopting a wait-and-watch approach to fresh fundraising, merchant bankers believe.   Corporations and financial institutions raised 663 bln rupees in June through 247 bond offerings, down 9% from 730 bln rupees raised in May, according to data compiled by Informist. Year-on-year, fundraising through corporate bonds halved owing to the absence of big-ticket issuer Housing Development Finance Corp, which merged with HDFC Bank last year, market participants said. In June 2023, issuers had raised 1.39 trln rupees through 230 bond issuances.   "The fall in issuances in June, primarily from an NBFC (non-banking finance company) point of view, happened because June was the month when a lot of banks came up with a lot of term loan sanctions," said Anirudh Muchhal, head of markets at Aditya Birla Finance. "You end up growing from the bank borrowing side, right? So a lot of NBFCs ended up doing that."   Muchhal said business "obviously" did not grow as much as it had last year or the year before that. "There is some moderation in credit growth," he said. "A little moderation has crept in and with committed drawdowns you had to do with the bank, I think that's why bond issuances came down."   Bank credit grew 17.4% on year to 168.81 trln rupees as of Jun 28, data from the Reserve Bank of India showed, recording a decline from 19.2% as of Jun 14.    "Large corporate demand remains sluggish with hopes abounding for a revival amid rising capex (capital expenditure) across industrials, partly cannibalized by buoyant capital and private credit market," Emkay Global Financial Services said in a report.   Excluding the loans extended by the erstwhile HDFC, the total loans of scheduled commercial banks rose 13.9% on year as of Jun 28. A fortnight ago, the figure was 15.6% on year.   Companies went easy on borrowing as they waited for clarity on the policies of the new coalition government after the Bharatiya Janata Party failed to secure a simple majority in the Lok Sabha for the first time in a decade. Counting of votes cast in the seven-phase General Election held over two months took place on Jun 4. Though the results were declared early in June, uncertainty about which ministries would be handled by members of key allies Telugu Desam Party and Janata Dal (United) persisted much longer.   Issuances fell last month despite the slight decline in borrowing costs. Yields on corporate bonds issued by the National Bank for Agriculture and Rural Development declined 3-5 basis points across tenures, tracking a similar movement in government securities which saw strong buying from foreign portfolio investors.   Among state-owned entities, NABARD was the biggest issuer of corporate bonds, raising 50 bln rupees through paper maturing in December 2029. REC was second, borrowing 40 bln rupees through a July 2034 bond issue. National Housing Bank and Indian Railways Finance Corp raised 32 bln rupees and 30 bln rupees through a September 2027 bond and a 10-year paper, respectively.   Indian Renewable Energy Development Agency tapped the primary market twice last month, mopping up 25 bln rupees through two long-term bond offerings. Small Industries Development Bank of India, India Infrastructure Finance Co Ltd, and ONGC Petro additions were among other public-sector entities to raise funds through bonds.   Last month also featured the first infrastructure bond issue by a bank in 2024-25 (Apr-Mar), with State Bank of India raising 100 bln rupees through a 15-year infrastructure bond at a rate of interest of 7.36%.   Frequent issuer Bajaj Finance raised over 17 bln rupees through two short-term bonds. Muthoot Finance issued a five-year bond and mobilised 15 bln rupees, while Shriram Finance hit the market several times, raising 13 bln rupees. Cholamandalam Investment and Finance Co and Sundaram Finance borrowed a total of 19 bln rupees.   As usual, housing finance companies continued to hit the bond market, with LIC Housing Finance raising nearly 26 bln rupees through a three-year bond. Mahindra Rural Housing Finance, Tata Capital Housing Finance, and Aadhar Housing Finance raised a total of 10.5 bln rupees.    From the private sector, GMR Energy issued 10-year paper raising 15 bln rupees, and pharmaceutical company Eris Lifesciences borrowed a total of 12.5 bln rupees through two papers.   India Infradebt mobilised funds worth 15 bln rupees through two issuances and Tata Power Renewable Energy borrowed 10 bln rupees through two bonds, one maturing in five years and another in 10 years.  End   Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

CD supply hits 4-mo high as PSU banks dash to mkt at qtr-end

Informist, Thursday, Jul 11, 2024 By Sachi Pandey MUMBAI – Fundraising through certificates of deposits surged to a four-month high of 1.5 trln rupees in June as state-owned banks rushed to fulfil a cyclical rise in their funding needs towards the end of the financial quarter, industry players said. Of the total CD issuances last month, public sector banks accounted for over 69%.   Typically, borrowing through CD issuances picks up towards the end of a quarter as banks seek to disburse additional loans to show strong credit growth. The 1.5 trln rupees raised through CDs in June was 80% higher than what banks borrowed in May, according to data compiled by Informist.   This is the first time that CD issuances have surpassed 1 trln rupees in 2024-25 (Apr-Mar). The last instance of such a whopping amount through CDs was in March, when the banks had raised 1.27 trln rupees. In June 2023, banks had issued CDs worth 729 bln rupees.   Punjab National Bank was the largest issuer of CDs last month, raising 308 bln rupees, followed by Canara Bank with 253 bln rupees and Union Bank of India borrowing 211 bln rupees. Among private sector banks, HDFC Bank was the top issuer, raising 222 bln rupees. IDBI Bank raised 47 bln rupees through CDs.   According to market participants, tight liquidity conditions drove banks to the short-term debt market. While data shows that banking system liquidity was in a surplus of 289 bln rupees during the beginning of the month, and at 279 bln rupees towards the end, it largely remained in deficit throughout the month. In fact, the liquidity deficit had widened to as much as nearly 1.7 trln rupees following the first instalment of corporate advance tax payment for 2024-25 and monthly goods and services tax payment.   Tight liquidity conditions prevailed despite the Reserve Bank of India's frequent interventions through repo auctions. The central bank conducted five variable repo auctions and two variable rate reverse repo auctions in June to manage liquidity.   Market participants believe that the RBI's announcement of a reduction in Treasury bill supply boosted demand for short-term debt papers.   "They (RBI) had reduced the borrowing, which helped increase liquidity. If the government is not taking out money through treasury bills, then much more money is available to go into other money markets such as CPs and CDs. That was also a positive for the short-term debt market," said Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.   On May 17, the RBI issued a revised calendar for the government's Treasury bill issuance from May 22 to Jun 26, reducing the quantum to 600 bln rupees. Following this revision, the government aimed to raise a total of 720 bln rupees through T-bills by the end of the quarter in June.   Overall, CD rates remained relatively stable throughout the month, around 7.15-7.35%. While rates briefly dipped by 7 basis points due to higher demand from mutual funds, they soon returned to their original level as the liquidity deficit widened.   "Rates have largely stayed flat...RBI also stepped up on liquidity, so even though issuances went up, there was no requirement to hike rates because of adequate liquidity and funds were available, so banks raised CDs at more or less the same rates," Pawar said.   Going forward, market participants expect the momentum in CD issuances to continue in July, driven by volatile liquidity conditions and strong credit growth.   COMMERCIAL PAPER Funds raised through the issuance of commercial paper rose to 1.6 trln rupees in June, 22% higher from a month ago due to higher borrowing by non-banking financial companies, which accounted for over 70% of the total quantum. Non-banking financial companies raised 1.13 trln rupees in June, up 22% on month, and fundraising by manufacturing companies rose 26% on month to 396 bln rupees.   Among CP issuances, National Bank for Agriculture and Rural Development was the biggest issuer, raising 205 bln rupees. The Export Import Bank of India was a distant second with issuances worth 147 bln rupees. Other major issuers included Small Industries Development Bank of India, Bajaj Finance, and Reliance Retail Ventures.   Last month, CPs worth 1.44 trln rupees came up for redemption compared with 1.41 trln rupees in May, according to data compiled by Informist. Of the total CPs scheduled for redemption last month, papers worth 1.19 trln rupees were rolled over.   Tight liquidity conditions during the month and higher demand pushed up rates on non-banking financial companies around 25 basis points. "Short-term debt rates reflect the liquidity situation. So with liquidity deficit and increased demand, rates moved up," said Mahendra Jajoo, chief investment officer at Mirae Asset Investment Managers.   By the end of June, rates on three-month CPs issued by non-bank lenders were at 7.90-8.10%, while those of similar maturity issued by manufacturing companies were at 7.27-7.47%.   Details of CPs and CDs issued in June, as per data sourced from the Clearing Corp of India and compiled by Informist (all figures, except percentages, in bln rupees): CPs June May on-mo% Jun-23 on-yr% Housing finance companies        98.75        95.76          3.12      66.06            49.49 Non-banking finance companies     1,134.59       928.22         22.23     999.59           13.51 Manufacturing companies       396.11       313.46         26.37     444.6          (10.91) REIT              -     Total     1,629.45     1,337.44         21.83   1,510.25            7.89             CDs June May on-mo% Jun-23 on-yr% State-owned banks      1,020.65       497.00        105.36     519.35            96.52 Private banks       416.6       329.30         26.51     126.00           230.63 Other financial institutions          50          -              -      83.50          (40.12) Total      1,487.25      826.30         79.99     728.85           104.05   End    Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Higher acreage of pulses may fail to reduce reliance on imports

Informist, Friday, Jul 12, 2024 By Taniva Singha Roy   MUMBAI – A significant rise in the acreage of pulses over the last year might not lead to a proportionate rise in production, according to market participants. Import of pulses is inevitable unless domestic production continues to rise steadily for the next few years, they say.    The area under pulses in the 2024-25 kharif season has risen to 3.7 mln ha so far from 2.4 mln ha a year ago. While this is up 55% on year due to a slightly early onset of the monsoon, it is still 49.3% lower than in 2022, according to data released by the farm ministry on Jul 8.   "Higher prices of pulses also prompted farmers to grow more tur and moong during this season," said Rahul Chauhan, director of IGrain India. Last year, sowing area was down mainly due to the El-Nino weather phenomenon and late sowing, which also contributed to a rise in prices.   While the acreage has risen, consumption remains way higher than production. Moreover, it is too early to comment on production, which could be lower than last year if the weather is unfavourable, said G. Chandrashekhar, commodity market expert and policy commentator. "I don't see kharif pulses production reaching its target," he said.    The government's aim of self-sufficiency in pulses is a distant dream, he says, as climate change will worsen the situation. "The land is already scarce and the cultivable area has also been shrinking due to weather."     In its third estimate released on Jan 4, the government pegged production of urad in 2023-24 (Jul-Jun) at 2.3 mln tn, down from 2.63 mln tn a year ago. However, tur production has been pegged slightly higher at 3.4 mln tn from 3.3 mln tn a year ago. While India is the largest producer of pulses, accounting for around 25% of global production, the yield of pulses in India is quite low at 781 kg per ha. The India Meteorological Department has forecast southwest monsoon rainfall this year at 106% of the long period average, with rainfall likely to be higher in the second half of the season. While this could support production, a Vashi-based trader said it was too early to talk about a rise in output as the kharif sowing season was still underway. Even if production is higher this year, imports would still be required, he said.    PULSES INFLATION Broadly, prices of pulses are up about 17% on year due to lower production. On Thursday, the price of tur was 15,582.82 rupees per 100 kg, against 12,146.04 rupees a year ago, while urad prices were at 11,653.78 rupees per 100 kg, against 10,277.98 rupees a year ago, according to data from the Ministry of Consumer Affairs. Consecutive years of falling output and lower arrivals have led to a rise in prices, experts said.   Prices are likely to remain at the current levels or even increase this month, said Chandrashekhar, adding, "One can expect a dip in prices when the domestic harvest starts between Dec-Jan." When imports come in from Africa in August and from Myanmar in January and February, prices could cool down slightly, he said.     Stockists could become active in liquidating their stocks with every rise in prices, especially with cheaper supplies from Africa expected in the near future, India Pulses and Grains Association said in a report. Analysts and traders will also monitor African tur price offers, increased freight charges, and the pace of supply, it said.     MSP HIKE Although the government has hiked the minimum support price of pulses, just as for other crops, they are still below market prices. This has failed to encourage farmers to grow more pulses.    The minimum support prices for tur, moong, and urad have been increased 7.9%, 1.4% and 6.5%, respectively, for marketing season 2024-25 (Oct-Sep). But market prices alone determine the sentiment of farmers and which crop they are eager to grow, said Rahul Chauhan.    To reduce India's dependence on pulses imports, breakthrough seed technology and robust policies of export and import are needed. A mere increase of the minimum support price will not help much in increasing production, said Chandrashekhar. Efforts should be made to shift a section of rice growers to pulses, he said.  End   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.  

June CPI vindicates RBI caution, kills any Aug rate cut hopes

Informist, Friday, Jul 12, 2024   By Shubham Rana   NEW DELHI – The latest CPI inflation print has not only vindicated the Reserve Bank of India's caution on price stability, it has shot down any last hopes of a rate cut in August. The four-month-high June CPI inflation print of 5.08% was well above the consensus estimate of 4.8% in an Informist poll. In fact, just three of the 20 economists polled by Informist had projected inflation to be near 5.1% or higher.   The June print also reversed a five-month declining trend in headline inflation and was the first above 5% print since February.   This was also the biggest upside surprise in headline inflation in nearly a year. The last time inflation was above the consensus estimate by nearly 30 basis points or higher was in July 2023, when the headline print was 7.44% against expectations of 6.5%.   Headline inflation for last month mainly rose because of a surge in food prices, particularly of vegetables. Food inflation rose to a six-month high of 9.36% in June, and the food price index increased 3.2% from the previous month.   The rise in food prices was led by a 14.2% month-on-month jump in vegetables, particularly tomato, onion, and potato. The tomato index surged 48.7% on month in June and the onion index was up 24.2% from the previous month. The potato index rose 12.2% in June from May.   Vegetable prices surged last month because of the slow progress of monsoon rains and above normal heatwave days in the country, economists said. The rise in food prices was such that it offset a statistical effect of a favourable base, which would have pushed headline inflation to 3.7% in June had the overall index remained unchanged from May.   "The Consumer Price Index-based inflation for June corroborates the Mint Road position that the last mile of disinflation remains a challenge," Dharmakirti Joshi, chief economist at rating agency CRISIL, said in a note.   RBI Governor Shaktikanta Das has repeatedly said in recent months that while inflation is moving towards the central bank's target of 4%, the pace of disinflation has been "grudgingly slow" because of food inflation. And the latest print will not provide any comfort to Das and his peers in the Monetary Policy Committee, which has kept the policy repo rate unchanged at 6.50% since February 2023.   Indeed, it may even force Jayanth Varma and Ashima Goyal, the two external members who voted in favour of lowering the repo rate in June, to rethink their calls for rate cuts, economists said.   "The surprise jump in headline consumer price inflation last month will be enough to convince any MPC members who may have been leaning toward rate cuts at the August policy meeting that conditions are not yet right to begin easing," Capital Economics, a London-based consultancy, said in a note.   Even policy commentators outside the MPC who were projecting the rating setting panel to lower interest rates in August have now pushed away their expectations. Capital Economics, which was one of the last forecasters who saw a repo rate cut in August, now sees the first rate cut in India in December.   The RBI governor, on his part, has said that it is "too premature" to talk about interest rate cuts right now.   Most economists expect the central bank to begin easing rates in Oct-Dec. However, the June inflation print shows that the RBI may keep interest rates higher for much longer than is expected, economists said.   This would also justify why Das has gone out of his way multiple times to sound the slow pace of disinflation and warn financial markets of boarding the "wrong train". Not just interest rates, Das has also said that it is too early to change the monetary policy stance of 'withdrawal of accommodation', and the central bank wants clear evidence of inflation moderating before it takes a call on changing the policy stance.   The June inflation is far from providing an evidence of inflation moderating. While CPI inflation is projected to fall to near 3% this month and stay below 4% in Jul-Sep, it is only because of the statistical impact of a high base, and is forecast to rise again after Jul-Sep.   The central bank has projected CPI inflation to moderate to 3.8% in Jul-Sep, before rising again to 4.6% in Oct-Dec and 4.5% in Jan-Mar.   "Taking today's data and early price indicators for June into account, we are tracking CPI inflation for July at 3.0% year-on-year, driven lower in part by a high base," Barclays, a bank, said in a report. "Food prices are likely to increase into next month, though we expect the momentum in vegetables to ease."   The food inflation outlook largely depends on how monsoon rains pan out, which have disappointed so far even as the weather bureau had predicted an above normal monsoon this year.   Since Jun 1, India has received 259.4 mm of rainfall, 3?low the normal of 266.9 mm for the period, India Meteorological Department data shows. The spatial distribution of rainfall over the country has been poor so far, even though some regions have experienced rains in large excess.   Apart from food inflation, the trajectory of core inflation will also be important going ahead. Core inflation, which strips out food and fuel items, remained at a record low of 3.1% in June, but it is expected to rise from hereon.   "July is likely to see a larger sequential increase in core inflation than seen in recent times with a seasonal pick-up in housing prices combined with the implementation of higher telecom prices from July," Barclays said. Core inflation will also likely rise because of the statistical effect of a lower base, and some uptick in demand, economists said.   The current inflation scenario, along with robust growth gives the RBI enough room to continue to focus on price stability, as has been reiterated multiple times by Mint Street, economists said. As such, the RBI is widely expected to maintain the status quo on rates and stance next month.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

In a first, more ethanol to come from grain than cane this yr

Informist, Wednesday, Jun 26, 2024 By Afra Abubacker NEW DELHI – In a first, India will rely more on ethanol made from grain rather than sugarcane byproducts for blending with petrol in the ethanol supply year 2023-24 (Nov-Oct), government officials and industry experts said. Oil companies purchase ethanol to blend the biofuel with petrol to reduce import bill and promote green energy.    "Right now, ethanol from sugar and grain is on a par. But, going forward, grains will catch up in the third (May-Jul) and fourth quarter (Aug-Oct)," said Deepak Ballani, director general, India Sugar and Bio-Energy Manufacturers Association, on the sidelines of the 64th International Sugar Organisation council meeting in Delhi on Tuesday.    As of May 26, grain-based distilleries had supplied 1.65 bln ltr to oil companies, only a tad up from 1.61 bln ltr from sugar-based distilleries. However, the allocation for the entire ethanol supply year is higher for grain at 4.16 bln ltr, against 2.31 bln ltr from sugarcane by-products, according to Indian Sugar Mills Association data accessed by Informist. Sugar mills have supplied 71.4% of contracted ethanol, while grain-based distilleries have only given 40%.     "Probably this is the first year...we have greater production of ethanol coming from grains rather than sugar," said Food Secretary Sanjeev Chopra at the council meeting. Ethanol is made from starch-containing feedstocks like molasses and grains.   Amid concern over lower sugar production, in December, the government limited sugar diversion for ethanol output at 2 mln tn to ensure sufficient sugar availability in the country. Last year, mills diverted 3.8 mln tn of sugar for ethanol production.    However, to not trail back on the blending targets, in January, the government hiked the price of ethanol from maize by 5.70 rupees to 71.86 rupees a ltr, making it a premium biofuel. Prices of ethanol from sugarcane by-products sugarcane juice, B-heavy molasses, and C-heavy are 65.61 rupees a ltr, 60.73 rupees, and 49.41 rupees, respectively. Ethanol from damaged food grain fetches 64.00 rupees per ltr.    "The government wants to encourage maize production and distilleries to go multifold feedstock," said Prakash Naiknavare, the managing director of the National Federation of Cooperative Sugar Factories. To encourage farmers to take up maize cultivation, it hiked the minimum support price of maize by 128 rupees to 2,090 rupees per 100 kg in 2023-24 kharif marketing season (Oct-Sep).  Asked if grain-based distilleries can fill the gap left by sugarcane by-products, a source from a distilleries association said, "Grain-based sector is geared up to meet the requirement." Though the government is pinning its hopes on maize to achieve ethanol blending targets, sugar industry officials say that the poultry industry's demand for the grain is growing, and ensuring the availability of the feedstock for the biofuel would be a challenge. Maize is a high-protein sought after feed ingredient in the poultry industry.   In the grain basket, only maize and damaged food grains are currently used for making ethanol, as the supply of surplus food grain from the Food Corp of India is yet to resume. In July 2023, FCI halted the supply of subsidised rice to distilleries. The government's move came after it banned the export of non-basmati white rice in July.    However, in the upcoming sugar season starting October, India is likely to spare more sugarcane by-products for ethanol production, as the country expects better sugarcane output on account of good rains. "...This (good rains) will ensure that not only would we be able to meet the requirements of the domestic consumption, but we would also be able to set aside reasonable quantities for the purpose of making ethanol," Chopra said at the council meeting.    After patchy rains last year due to El Nino weather conditions, the India Meteorological Department has forecast above-normal southwest monsoon rainfall this year at 106% of the long-period average, with rainfall likely to be higher in the second half of the season.   To achieve the 15% blending aim, India needs about 8.25 bln ltr ethanol. As of Apr 30, oil marketing companies procured 2.70 bln ltr of ethanol in the ethanol supply year 2023-24 (Nov-Oct) and achieved 12.07% blending with petrol, as per the Ministry of Petroleum and Natural Gas. Last year, total ethanol production was around 5.06 bln ltr, and a larger share of 3.69 bln ltr came from sugarcane-based feedstock, according to the All India Sugar Trade Association.    To reduce dependence on crude oil, India plans to achieve 15% blending of ethanol with petrol in 2023-24 (Nov-Oct), 18% in the subsequent year, and 20% in 2025-26. The ethanol production capacity in the country is about 13.80 bln ltr per annum, out of which about 8.75 bln ltr is molasses-based and about 5.05 bln ltr is grain based, according to government release in December.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Corporate bond issuance surges in May as borrowing cost falls

Informist, Monday, Jun 10, 2024 By Abhinaba Saha MUMBAI – After a slow April, fundraising through private placement of corporate bonds surged in May as issuers, especially non-banking finance companies, tapped the primary market to take advantage of a fall in borrowing costs, industry players said.   Non-bank lenders and public-sector companies raised nearly 730 bln rupees through the placement of 244 bonds, up 92% from 380.28 bln rupees raised in April, according to data compiled by Informist. In May 2023, issuers raised around 875 bln rupees through 238 bond issuances.   The jump in fundraising last month is also on account of the statistical effect of a low base, given that corporate bond supply tends to fall in April as companies chart out borrowing plans for the new financial year, merchant bankers said.   "Yields softened during the month, which is why a lot of NBFCs (non-banking finance companies) came to the market with shorter-tenure bonds," Ajay Manglunia, managing director and head – institutional fixed income at JM Financial, said.   Yields on corporate bonds issued by the National Bank for Agriculture and Rural Development--considered a benchmark in the corporate bond market--maturing in three and five years fell 7-8 basis points in May, while those maturing in 10 years fell 3 bps. This followed a decline in 10-year benchmark government bond yields, which were down 11 bps in May.   Bond yields across the board fell last month on hopes of a lower supply of government securities following a higher-than-expected surplus transfer from the Reserve Bank of India to the central government for 2023-24 (Apr-Mar). Macroeconomic data in support of a possible rate cut in the US by September also dragged yields down, market participants said. This was despite liquidity in the banking system being in a deficit, on average, of over 1 trln rupees throughout the month.   With the RBI taking its time before lowering interest rates, the fall in yields last month presented an opportunity for corporate borrowers who had been waiting for the cost of funds to cool, dealers said. The central bank, which has been maintaining status quo on rates since April 2023, is widely expected to stay its hand at least until its policy review in October.   On a year-on-year basis, fundraising through corporate bonds fell 17% due to the absence of a big-ticket issuer, Housing Development Finance Corp, which merged into HDFC Bank last year, market participants said. Ahead of the merger, HDFC went on a borrowing spree, which augmented the corporate fundraising in the debt market. In May 2023, the housing financier raised 216.4 bln through corporate bonds, accounting for 25% of the total fundraising that month.   According to merchant bankers, strong demand from general insurance companies, pension funds, and corporations provided comfort to non-banking finance companies, whose business model depends heavily on borrowed capital, to tap the primary market. Last month, financial institutions accounted for 60% of total borrowing.   "This time, incremental demand from mutual funds was low as they did not receive enough fresh inflows into their longer-tenure schemes,” a debt capital market associate at a large private bank said. “The majority of the demand for corporate bonds last month came from insurance companies and pension funds who wanted to lock in current rates ahead of rate cuts."   Non-banking finance companies and housing finance companies raised 367.38 bln rupees through corporate bonds in May. Bajaj Finance was the largest issuer, raising 112.64 bln rupees through six bonds, followed by HDB Financial Services, which borrowed 25.75 bln rupees through two papers. Other key non-bank lenders such as Cholamandalam Investment and Finance Co, Kotak Mahindra Prime, Muthoot Finance, and Sundaram Finance also tapped the debt market last month.   Amongst home financiers, Bajaj Housing Finance raised 50 bln rupees through three bonds and LIC Housing Finance raised 21.05 bln rupees through a five-year bond issue.   State-owned entities--the most frequent issuers in the bond market--accounted for only around 40% of total borrowing in May. "The larger volume (of corporate bond issuances) comes from PSUs (public-sector undertakings) as they borrow large amounts from the market. They slowed down their longer-tenure borrowings on expectations of rates coming down in the future," Manglunia said.   Among public-sector companies, REC was the largest issuer, raising a total of 91.15 bln rupees through four issuances. NABARD was a distant second, borrowing 45.58 bln rupees through one bond. NHB raised 40 bln rupees through a single bond issuance.    Power Finance Corp raised 31.78 bln rupees through long-term bonds and Housing and Urban Development Corp raised 19.36 bln rupees through medium-term bonds.   Last month also saw bond offerings by Vedanta Semiconductors and Mindspace Business Parks REIT, which raised 25 bln rupees and 5 bln rupees, respectively, through short-term paper.  End    Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

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India should aim USD 500 billion in electronics manufacturing by 2030: NITI Aayog

New Delhi, Jul 18 (PTI) India should aim USD 500 billion in electronics manufacturing by 2030, NITI Aayog said in a report on Thursday, adding that such growth would create employment for about 6 million people. In a report titled 'Electronics: Powering India's Participation in Global Value Chains', the Aayog said this ambitious target comprises USD 350 billion from finished goods manufacturing and USD 150 billion from components manufacturing. As of FY23, India's electronics production stands at USD 101 billion. This comprises USD 86 billion in finished goods production and USD 15 billion in components manufacturing. According to the report, India's electronics exports are expected to reach USD 240 billion and domestic value addition to increase to over 35 per cent. "India's ambition to become the third-largest global economy necessitates a more ambitious vision for its technology-driven sectors. "With a conducive business environment and robust policy support, including fiscal incentives and non-fiscal interventions, India should aim to achieve USD 500 billion in electronics manufacturing by value terms by FY30," the report said. In a business as usual (BAU) scenario, the report noted that the projections indicate India's electronics manufacturing could escalate to USD 278 billion by FY30. This includes USD 253 billion from finished goods and USD 25 billion from components manufacturing. Employment generation is expected to grow substantially to around 3.4 million, with exports reaching USD 111 billion. The report recommends strategic interventions across fiscal, financial, regulatory, and infrastructure domains to support this growth trajectory. According to the report, these include promoting components and capital goods manufacturing, incentivising R&D and Design, tariff rationalization, skilling initiatives, facilitation of technology transfers, and infrastructure development to foster a robust electronics manufacturing ecosystem in India. India's electronics sector has experienced rapid growth, reaching USD 155 billion in FY23. Production nearly doubled from USD 48 billion in FY17 to USD 101 billion in FY23, driven primarily by mobile phones, which now constitute 43 per cent of total electronics production. India has significantly reduced its reliance on smartphone imports, now manufacturing 99 per cent domestically, the report said. The report emphasised scaling up production in established segments such as mobile phones and establishing foothold in component manufacturing. Additionally, it said there should be a strong focus on diversifying into emerging areas such as wearables, IoT devices, and automotive electronics. "This strategic diversification will capitalize on evolving consumer demands and technological advancements, positioning India as a leader in innovative electronic products on the global stage," it said. As per the report, the global electronics market, valued at USD 4.3 trillion, is dominated by countries like China, Taiwan, the US, South Korea, Vietnam and Malaysia. India currently exports approximately USD 25 billion annually, representing less than 1 per cent of the global share despite 4 per cent share in global demand. To enhance competitiveness, India needs to localize high-tech components, strengthen design capabilities through R&D investments, and forge strategic partnerships with global technology leaders, the report noted. Presently, India's electronics manufacturing primarily involves the final assembly of electronic goods. While brands and design firms have started increasingly outsourcing assembly, testing, and packaging tasks to Electronic Manufacturing Services (EMS) companies in India, the ecosystem for design and component manufacturing is at a nascent stage. Releasing the report, NITI Aayog CEO BVR Subrahmanyam said India has been a part of the global value chain. "Currently, India is a very very minor player as far as electronics manufacturing is concerned," he said adding certain types of components are just not made in India. PTI

No plans to allow business houses to promote banks: RBI Guv Das

Mumbai, Jul 19 (PTI) Governor Shaktikanta Das on Friday said the Reserve Bank does not have any plan to allow business houses to promote banks at present. Allowing corporate houses to promote banks exposes one to conflict of interest risks and related-party transactions, Das said, speaking at an event organized by the Financial Express here. "At this point, there is no thinking in that direction," Das said, replying to a specific query on whether there is any consideration to allow business houses. The RBI had disqualified a long list of conglomerates from floating a lender in the last round of licensing around a decade ago. The issue was revived again in 2020, with a Reserve Bank of India (RBI) working group supporting it, given the potential to get the capital for helping meet the country's growth aspirations. Underlining that banks are different from other businesses, he said experience worldover has shown potential conflicts of interest and issues relating to related-party transactions, if business houses are allowed. India also had business houses engaged in banking fray, Das said, speaking about the time before bank nationalization in the late 1960s. "Experience world over has shown that it will be very difficult to monitor or to regulate and prevent related-party transactions. The risks involved are very high," Das said. He said, while the economy needs the resources to grow, we do not necessarily require more banks to achieve the aspirations. "What India needs is not proliferation in the number of banks, India needs sound banks, healthy banks, well governed banks which we feel will be able to mobilize savings throughout the country through technology and meet the credit requirements," he said. Das said that licensing of universal banks has been made on tap and added that applications are welcome. Das said that the private credit space is growing rapidly and emerging as an attractive investment avenue for those with high risk appetite at present, and added the RBI is monitoring developments there. "While risks appear to be contained at present, it is important to bear in mind that vulnerabilities and interconnectedness in these markets can amplify negative shocks and pose financial stability concerns," he said. PTI   

Industry expects govt to focus on rural economy, agri-infra in Union Budget

New Delhi, Jul 19 (PTI) With Finance Minister Nirmala Sitharaman gearing up to present the first Budget of the Modi 3.0 government, industry players expect that the government would come out with proposals to boost the rural economy and earmark adequate funds for agri-infrastructure development. On Tuesday, Sitharaman will present the Union Budget 2024-25, the first major economic document of the Modi 3.0 government in the Lok Sabha. The government has a capital expenditure target of Rs 11.1 lakh crore in the Interim Budget Estimate (IBE), said Ashish Modani, Icra's senior vice president and co-group head - corporate ratings. He said against the embedded growth target of 17.1 per cent for FY2025 (over the preceding fiscal), the government's capital expenditure declined by 14.4 per cent on a year-over-year basis to Rs 1.4 lakh crore in April-May FY25 amid a volatile monthly trend. "Further, the capex numbers are typically low in the monsoon months, thereby suggesting that the required monthly run-rate in the second half of FY2025 would be quite sharp to achieve the IBE for the fiscal. Consequently, ICRA believes that the government is likely to retain its capital expenditure target of Rs 11.1 trillion for FY2025," Modani said. Seeking lower customs duties on medical devices, Pavan Choudary, Chairman of Medical Technology Association of India (MTaI), said the gross customs duties on such devices coming in India is between 13 per cent and 16 per cent, whereas in neighbouring countries like Sri Lanka and Nepal, it less than 5 per cent. The difference in duties creates opportunities for smuggling. It is one of the important reasons why customs duties on medical devices should be brought down. "The other reason concerns patient affordability which is a top priority of the government. A consistent customs duty reduction will go towards improving affordability and access," Choudary said. "The industry seeks immediate government assistance by removal of health cess (at the minimum, bring down to 2.5 per cent) and rollback of the additional 5 per cent health cess ad valorem imposed on imported medical devices in the upcoming Union Budget 2024-25," Sanjay Bhutani, Managing Director at Bausch & Lomb India & SAARC, said. Akshay Munjal, Founder and CEO of Hero Group firm Hero Vired, said as India aspires to become a USD 5 trillion economy, it is crucial that education, health and skill development remain at the forefront of the national agenda in the upcoming Budget. "Developing a strong tech infrastructure is critical for fueling growth and job creation in high-demand sectors like AI, cybersecurity and big data. Our policies must equip our workforce with essential digital skills and technologies, enabling India to spearhead global advancements," Munjal said. Sanjay Kumar Sinha, founder and managing director of Chaitanya Projects Consultancy, anticipates robust support for sectoral growth in the upcoming Budget. He expects more incentives for technology and leveraging cutting-edge tools like AI (Artificial Intelligence) and IoT (Internet of Things) as these are crucial for the economy. Founder and CEO of Gurugram-based property brokerage firm VS Realtors Vijay Harsh Jha said the government should raise the tax deduction limit for interest payment on home loans from the existing Rs 2 lakh a year to Rs 5 lakh per year. This, he said, will add momentum to the demand in the segment. "This is especially crucial given the substantial rise in housing prices and mortgage rates over the past 1-2 years," Jha said. Madhusudan G, CMD of Sumadhura Group, expects the Union Budget to introduce progressive reforms to meet rising demands for residential and commercial spaces. "Our top priorities include tax breaks for affordable housing projects to boost stagnant sales in the sector. Also, a revival of the Credit-Linked Subsidy Scheme will make homeownership more accessible," he said. Shreeram Bagla, MD of Annapurna Swadisht, cited data and said the FMCG industry has witnessed a growth of 6.5 per cent in volume terms on a country-wide basis. Rural areas surpassed the growth in urban areas for the first time in five quarters. "So, the green shoots of recovery in the rural market are clearly visible. We expect that in the upcoming Budget for 2024-25, finance minister Nirmala Sitharaman is likely to announce measures to boost rural jobs, create adequate agricultural infrastructure besides laying increased thrust on infrastructure sector leading to better roads and connectivity," Bagla said. Sudeep Chandran, Founder and CEO of YOURS, a platform for fractional ownership of luxury second homes, said allocating funds for infrastructure development in metros, suburbs, tier II cities, and holiday destinations is essential to drive real estate demand. "Additionally, co-ownership and fractional ownership are becoming increasingly popular in India. The government should implement better rules and regulations, along with incentives, to regulate and promote these innovative property ownership models," he said. Rakesh Kumar, Founder of Square Insurance, said increasing the tax exemption limit on health insurance premiums to Rs 75,000 would make healthcare more accessible. Further, he said that offering tax deductions for home insurance premiums under Section 80C of the Income Tax Act will encourage homeowners to protect their assets. To enhance cybersecurity, he noted, "Tax incentives for cyber insurance, particularly for SMEs, are essential." Earlier this week, Sitharaman participated in a traditional 'halwa' ceremony, marking the final stage for preparation of the Union Budget 2024-25 to be unveiled on July 23. PTI 

Rising F&O trade becomes macro issue now, household savings going into speculation: SEBI chief

Mumbai, Jul 19 (PTI) Sebi chairperson Madhabi Puri Buch on Friday said the capital markets regulator is "compelled" to warn against speculative bets in the futures and options (F&O) segment because it has become a "macro issue", affecting the broader economy now. Household financial savings are going into the speculative bets, belying the expectations of being used for capital formation and the youth is losing tonnes of money in such trades, Buch said. "...it has gone from being a micro issue of an investor to a macro issue of the economy itself. And therefore, we felt compelled," Buch said, speaking at a SBI MF event here. A research carried out by the regulator had found that investors lose in 9 out of 10 trades in the F&O segment. Starting from a level where it insisted on disclosing risks, Sebi has been proactively trying to dissuade investors from the segment lately. Buch said Sebi chose to change itself because of the data on the huge rise in volumes in the segment, and reminded everybody of the regulator's responsibility on market development to justify such a warning. She said that recently, the regulator chose to flag asset price froth in certain equity segments because no other stakeholders were doing their jobs, and exuded confidence of there being sufficient aspects in place to stop it now. Meanwhile, Buch also said that Sebi feels that the fininfluencers are indulging in a regulatory arbitrage at the moment by getting registered as investment advisers and the regulator will soon come up with a consultation paper on the same. Speaking at the event to mark the fund house's assets under management crossing Rs 10 lakh crore, Buch said the growth in the industry will ensure that the AUM doubles to Rs 20 lakh crore in three years. PTI

Govt to make intervention to address challenges faced by chemical industry, boost growth: Min

New Delhi, Jul 20 (PTI) Union Chemicals and Fertilizers Minister Jagat Prakash Nadda on Saturday said the government will make necessary interventions in its policies and programmes to address challenges faced by the chemicals and petrochemicals industry and boost the sector's growth. The minister was speaking after launching the 13th edition of the India Chem 2024 event to be held in October this year in Mumbai. "The Prime Minister desires that we have to become a USD 5 trillion economy. If we have to become a 5 trillion economy, we have to align our programmes or policies accordingly, to see to it that this petrochemical industry chemical industry also goes in the same way and aligns itself, so that we all together contribute to that USD 5 trillion economy," Nadda said. The minister mentioned that industry representatives have talked about the challenges faced by the chemicals and petrochemicals industry and also offered various suggestions to address those issues. "I, as a minister, can assure you that whatever interventions are needed in policies, in programmes, whatever changes in the strategies are needed, the government is committed to it, and we will go forward with that commitment," Nadda said. The minister also asked the industry to focus on reducing imports, research & development and skill improvement. Nadda also launched the brochure for the 13th edition of India Chem. Anupriya Patel, Minister of State for Chemicals & Fertilizers, and Nivedita Shukla Verma, Secretary, Department of Chemicals and Petrochemicals, were also present on the occasion. Nadda said the theme of India Chem 2024, "Advantage Bharat: Indian Chemicals and Petrochemicals Paving the Future" aligns well with Prime Minister Narendra Modi's vision of making India a USD 5 trillion economy. The 13th edition of India Chem is going to be held on 17th-19th October in Mumbai. Nadda said the government is committed to the growth of the industry and has initiated numerous structural reforms to support industrial development in general and strengthen the chemical sector in particular. Patel said the chemical and petrochemical sector plays a crucial role in the economic development of key sectors like automotive, construction, electronics, healthcare, textiles, and FMCGs. She highlighted the increasing contribution of the chemical sector in economic development as well as the opportunities for future development. Patel stated that India is the second largest exporter of chemical dyes and dyestuff as well as agrochemicals in the world. It also contributes about 3 per cent of global chemical sales. "With a clear focus on investment-friendly reforms, the removal of policy bottlenecks is a top priority for the government," she said. India Chem 2024, the flagship event of the department, is one of the largest composite events of the industry in the Asia-Pacific, comprising an International Exhibition and Conference. The India Chem exhibition aims to showcase the huge potential of the Indian chemical industry and its different industry segments (including chemicals, petrochemicals, agrochemicals etc.) and to provide a platform for ground-breaking discussions, visionary ideas, and strategic collaborations among industry representatives. The Indian chemical industry is currently valued at USD 220 billion and is expected to reach USD 300 billion by 2030 and USD 1 trillion by 2040. Rajendra V Gogri, Co-Chairman, FICCI National Chemical Committee and Aarti Industries Chairman and Managing Director, highlighted the global chemical industry's shift towards emerging markets like India, citing advantages in costs, logistics, labour, and equipment. He emphasised the long-standing request for a production-linked incentive (PLI) scheme in the chemical and petrochemicals sector to boost manufacturing and reduce imports, according to the FICCI statement. Gogri also stressed the importance of improving the ease of doing business, particularly in expediting projects and streamlining environmental regulations. Furthermore, he underscored the need to promote effective circularity to capitalise on opportunities in the chemical industry. PTI 

Earnings Review: RIL Apr-Jun consol PAT misses view; revenue rises 12%

Informist, Friday, Jul 19, 2024   --RIL: Apr-Jun consol net profit 151.38 bln rupees --RIL: Analysts saw RIL Apr-Jun consol net profit 165.43 bln rupees --RIL: Apr-Jun consol revenue 2.36 trln rupees --RIL: Apr-Jun consol net profit 151.38 bln rupees vs 160.11 bln --RIL: Apr-Jun consol revenue 2.36 trln rupees vs 2.11 trln --RIL: Apr-Jun oil-to-chemicals sales 1.571 trln rupees vs 1.33 trln --RIL: Apr-Jun oil-to-chemicals EBITDA 130.93 bln rupees vs 152.86 bln --RIL: Apr-Jun oil and gas EBITDA 52.10 bln rupees vs 40.15 bln --RIL: Apr-Jun retail sales 756.30 bln rupees vs 699.62 bln rupees --RIL: Apr-Jun oil and gas sales 61.79 bln rupees vs 46.32 bln rupees --RIL: Apr-Jun digital svcs EBITDA 149.44 bln rupees vs 137.22 bln --RIL: Apr-Jun digital svcs sales 354.70 bln rupees vs 320.77 bln --RIL: Apr-Jun retail EBITDA 56.72 bln rupees vs 51.39 bln rupees --RIL: Apr-Jun consol EBITDA margin 16.6% vs 18.1% year ago --RIL: Apr-Jun consol EBITDA 427.48 bln rupees, up 2% on year --RIL: Retail Apr-Jun consol EBITDA margin 8.5%, up 30 bps on year --RIL: RJio Apr-Jun ARPU 181.7 rupees, unch on qtr --RIL: Apr-Jun oil-to-chemicals EBITDA margin 8.3%, dn 320 bps on yr --RIL: Apr-Jun oil and gas EBITDA margin 84.3%, down 240 bps on year --RIL: Apr-Jun oil-to-chemicals ops total throughput 19.8 mln tn --RIL: RJio customer base 489.7 mln on Jun 30 vs 481.8 mln qtr ago --RIL: Apr-Jun oil-to-chemicals ops total throughput up 0.5% on year --RIL: RJio Apr-Jun data traffic 44.1 bln GB vs 40.9 bln GB qtr ago --RIL: Apr-Jun oil-to-chemicals total output for sale 17.7 mln tn --RIL: Apr-Jun oil-to-chemicals total output for sale up 2.9% on year --RIL: Reliance Retail total store count at 18,918 as on Jun 30 --RIL: Jio Platforms' Apr-Jun EBITDA margin 49.7%, unch from qtr ago --RIL: Reliance Retail store footfalls 296 mln in Apr-Jun, up 19% YoY --RIL: RJio Apr-Jun depreciation up due to higher network utilisation --RIL: RJio Apr-Jun depreciation up due to addition to gross block --RIL: Apr-Jun capex 287.85 bln rupees vs 396.45 bln year ago --RIL: Consol cash, cash equivalents as on Jun 30 at 1.93 trln rupees --RIL: Apr-Jun oil-to-chemical ops muted on tough operating environ --RIL: Energy mkt volatility impacting short-term oil-to-chemicals sales --RIL: Expanding Jio wallet share across connectivity beyond BFSI --RIL: Subscriber growth drove RJio operating revenue in Apr-Jun --RIL: India gas demand resilient amid high global prices --RIL: Firm demand for fuel, petroleum products to aid oil-to-chemical ops   By Sayantan Sarkar   NEW DELHI – The Apr-Jun earnings of index heavyweight Reliance Industries Ltd missed the Street's expectations as robust performance of retail and telecom sectors were offset by lower profitability of the oil-to-chemicals vertical. The company posted a consolidated net profit of 151.38 bln rupees, significantly lower than analysts' expectations of 165.43 bln rupees.    Additionally, the company's bottomline fell 5.5% on a year-on-year basis and as much as 20% sequentially. In the Jan-Mar quarter, RIL had posted a consolidated net profit of 189.51 bln rupees.    However, the oil-to-telecom conglomerate's consolidated revenue from operations grew 12% on year to 2.36 trln rupees, beating analysts' estimate of 2.31 trln rupees. The company said the topline for the June quarter was supported by higher oil and product prices and strong growth in volumes in the oil and gas business segment, according to a media release. "Steady growth in consumer businesses also contributed to increase in revenue," RIL said.    The consolidated cash profit from operations, or earnings before interest, tax, depreciation and amortisation, rose 2% on year to 427.48 bln rupees, comfortably beating the Street's estimate of 396.85 bln rupees. The metric was driven by strong contributions from the oil and gas, and consumer-facing businesses.   Among all the business segments, RIL's oil and gas vertical reported the largest increase in earnings before interest, taxes, depreciation and amortisation. The vertical's EBITDA surged 29.8% on-year to 52.10 bln rupees. The cash profit from retail operations rose 10.5% on year in Apr-Jun, and that from the digital services segment grew 11.6%. In the case of oil-to-chemicals vertical, EBITDA fell 14.3% on year during the June quarter.   Consequently, the consolidated EBITDA margin for the quarter was 16.6%, as against 18.1% a year ago. In the March quarter, the consolidated EBITDA margin was 17.8%, according to the release.   In Apr-Jun, the company's total expenses rose 14% on year to 2.17 trln rupees with depreciation and amortisation increasing 15% to 135.96 bln rupees. Cost of materials consumed rose 14% on year to 1.09 trln rupees.    During the quarter, the company's total cash and cash equivalents were 1.93 trln rupees against 1.92 trln rupees in the year-ago period. Capital expenditure was 287.85 bln rupees compared with 396.45 bln rupees in the same quarter last year.   Today, shares of RIL closed nearly 2% lower at 3,110.30 rupees on the National Stock Exchange.   DIGITAL Reliance Jio Infocomm Ltd reported a sequential increase of 2.0% in its net profit for the quarter ended June to 54.45 bln rupees, while its revenue for the same period also rose by 2.0% to 264.78 bln rupees.   All key expenses for Reliance Jio, such as network operating costs and licence fees, increased on a sequential basis for Apr-Jun, barring other expenses. Reliance Jio's network operating cost for the reporting quarter was 79.23 bln rupees, higher than 78.66 bln rupees in Jan-Mar. The company paid out 24.33 bln rupees by way of licence fees, higher than the 23.89 bln rupees in the March quarter.    Reliance Jio Infocomm's depreciation and amortisation costs rose slightly during the June quarter to 56.07 bln rupees, against 55.66 bln rupees in Jan-Mar. Overall expenses during the quarter amounted to 192.66 bln rupees, against 189.17 bln rupees in Jan-Mar.    The company's net profit for Apr-Jun rose 12% on year, while the topline grew 10% from the same period last year. Additionally, the company's operating margin rose slightly to 26.7% from 26.3% in the previous quarter. In the year-ago period, the operating margin was 26.2%.                                     Reliance Jio's average revenue per user during the quarter was unchanged on a sequential basis at 181.7 rupees. Its customer base increased over the same period to 489.7 mln, against 481.8 mln at the end of Jan-Mar. In a release, Reliance Industries Chairman and Managing Director Mukesh Ambani said, "Jio's True 5G network, covering ~85% of India's 5G capacity, continues to attract users, while the fixed broadband offerings are witnessing increasing consumer traction both in homes and enterprises".   The company said growth in the subscriber base aided the business segment's operating margin during the June quarter. In a post-earnings conference call, the company also said it is looking at expanding the Jio wallet share across connectivity beyond banking, financial services and insurance. Additionally, sales during the quarter were 354.70 bln rupees, up from 320.77 bln rupees last year.    Reliance Jio said the average revenue per user remained unchanged, and was partially offset by an increasing mix of promotional 5G traffic being offered on an unlimited basis to subscribers and not charged separately. On a sequential basis, the company's data traffic was up to 44.1 bln GB from 40.9 bln GB in Jan-Mar.   RETAIL Increasing footfall and number of stores, and streamlining operations helped Reliance Retail Ventures Ltd report strong Apr-Jun earnings.   Second-largest in terms of revenue, RIL's retail division managed to post a consolidated revenue growth of 6.6% on-year to 662.60 bln rupees. The revenue missed estimates by some brokerage houses such as YES Securities, which had pegged the topline at 797.8 bln rupees.  India's largest retailer clocked a net profit of 25.49 bln rupees for the June quarter, up 4.6% on year. Earnings before interest, taxes, depreciation, and amortisation were 56.64 bln rupees, up 10.5% on year, with EBITDA margin rising by 30 basis points from the previous year to 8.5%.   The company accounts for over 30% of RIL's revenue, and operates grocery, consumer electronics, and lifestyle stores such as Reliance Fresh, Reliance Smart, Reliance Digital, Reliance Trends, Hamleys, and AJIO.com.   The company opened 331 new stores in the June quarter, taking the total store count to 18,918 as on Jun 30. A higher store count and footfall translated to a higher number of transactions, which increased 6.4% on year to 334 mln. The company's customer footfall was 296 mln across formats, and the registered customer base was 316 mln in Apr-Jun. "The focus on scaling up Digital Commerce and New Commerce continued with these channels contributing to 18% of total revenue," RIL said in the release. Total sales from this vertical during Apr-Jun were 756.30 bln rupees against 699.62 bln rupees a year ago.    OIL-TO-CHEMICALS The revenue from the company's largest vertical grew 18.1% on-year to 1.57 trln rupees in Apr-Jun primarily on account of higher product prices, tracking a 9% increase in Brent crude oil prices, and higher volumes supported by strong domestic demand, the company said. However, the vertical's cash profit from operations, or EBITDA, fell 14.3% year-on-year to 130.9 bln rupees. This is the only vertical where the EBITDA witnessed a decline. The business segment's EBITDA margin fell to 8.3% in Apr-Jun compared with 11.5% in the year-ago period. In Jan-Mar, the vertical's EBITDA margin was 11.8%. The company said the fall in EBITDA was due to lower transportation fuel cracks, particularly petrol cracks, which were down 30% from the same quarter last year.    Brent crude oil prices averaged $84.97 a barrel in the June quarter, up $6.9 a bbl from the same quarter in 2023. "Crude oil benchmarks rose Y-o-Y due to continuing production cuts by OPEC+ (Organization of the Petroleum Exporting Countries and allies), rising geopolitical tensions in the Middle East and attacks on vessels in the Red Sea," the company said.    Among the transportation fuels, the company said Singapore Gasoline 92 RON cracks fell to $8.5 per bbl year-on-year in the June quarter from $12.1 a bbl in the year-ago period. The lower cracks were due to higher quotas of exports from China and muted Chinese gasoline demand with an increase in penetrations in electric vehicles. Singapore Gasoil 10-ppm cracks also fell during the quarter due to weak demand and the ramp-up of new refineries in West Asia and West Africa.    In a post-earnings conference call, RIL said firm domestic demand for fuel and petroleum products is likely to aid the oil-to-chemical business segment in the coming quarter. However, it also said volatility in the global energy markets affected the vertical's sales during the quarter amid tough operating environment.    The company said total crude oil throughput during the June quarter rose slightly to 19.8 mln tn from 19.7 mln tn in the year-ago period. Total throughput was flat on a sequential basis. Production meant for sale was 17.7 mln tn during Apr-Jun, which was higher than 17.2 mln tn in the same quarter last year.    Sales from RIL's oil-to-chemicals segment during the quarter ended June were 1.57 trln rupees against 1.33 trln rupees.     OIL & GAS Business from the exploration and production segment surged 33.4% year-on-year in Apr-Jun to 61.79 bln rupees, mainly on account of higher volumes, which was partly offset by lower price realisation from the KG-D6 and coal bed methane fields, the company said.     The segment's EBITDA increased 29.8% year-on-year to 52.10 bln rupees in the quarter ended June. The EBITDA margin, however, fell to 84.3% from 86.7% a year ago.   The average price realised for KG-D6 gas was $9.27 per mBtu in Apr-Jun, compared with $10.81 per mBtu in the year-ago period. The average price realised for coal bed methane gas for the quarter was $11.59 per mBtu, against $14.15 per mBtu in Apr-Jun 2023. "The oil and gas segment continued its growth trajectory with higher production, offsetting lower year-on-year gas price realizations," Mukesh Ambani, chairman and managing director of RIL, said in the media release.    "Reliance has made significant progress on the implementation of New Energy Giga-factories. On completion, these projects will provide India (with) a world-class, integrated green energy ecosystem which can propel the next leg of sustainable growth," Ambani further said in the release.    In the post-earnings call, the company said India's natural gas demand remains resilient amid higher global prices. The KG-D6 block is currently producing 30 mln standard cubic mtr per day of gas and 23,000 bbl of oil and condensate, the company said in the filing. In Apr-Jun, production from the block was 28.7 mscmd of gas, and 21,640 bbl per day of oil and condensate.    During the quarter, the vertical's sales were 61.79 bln rupees compared with 46.32 bln rupees in the year-ago period.  End   US$1 = 83.66 rupees   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.