News & Insights

Cogencis WorkStation users are always first to spot the trend. They always know what is likely to happen next.

Exclusive news coverage from Informist provides a blow by blow account of what's happening in the markets and more importantly help users identify current and emerging trends.

Cogencis WorkStation offers incisive and consistent reporting covering markets, policy, data releases, regulations and even politics. Perhaps the most comprehensive coverage of corporate earnings and fundraising by Indian companies.

Global news and analysis on markets, central banking policies and deals from Dow Jones and the Wall Street Journal. NSE Cogencis WorkStation users have access to actionable insights on global forex and fixed income markets published by Market News Internationals (MNI) and Action Economics.

Learn more about Cogencis WorkStation

Exclusives

IIFCL eyes Asia for FX loans, may meet Japan agency next wk-source

Informist, Friday, Apr 12, 2024 --IIFCL source: Held roadshows in Japan, China to raise funds --IIFCL source: Roadshows also held in Singapore, Taiwan --IIFCL source: Found Tokyo market favourable to raise funds --IIFCL source: To meet Japan agency next week to raise 100 bln yen --IIFCL source: Aim to disburse loans worth 250 bln rupees in FY25 --IIFCL source: Aim to sanction loans worth 500 bln rupees in FY25 --IIFCL source: To set up credit lines with ADB for blended finance By Priyasmita Dutta and Sagar Sen NEW DELHI – In a bid to diversify its sources of raising external debt, India Infrastructure Finance Co Ltd is negotiating with investors from a bunch of Asian countries, a senior official with the state-owned company said. "We have held roadshows in Japan, China, Singapore and Taiwan to explore the possibility of raising external commercial borrowings. We are also looking at the United Arab Emirates," the official told Informist. Out of these countries, IIFCL has found the Tokyo market favourable as the hedging cost is beneficial in the current scenario, the official said. "Let us see, if it (the yen market) is cheaper than the domestic market, we will go ahead. Merchant bankers will have to revert to us on the pricing," the official said. The exercise is part of the infrastructure financier's 290-bln-rupee borrowing plan approved by the board for 2024-25 (Apr-Mar), the official said. In 2023-24, the company had borrowed 130 bln rupees through a mix of instruments out of the 160 bln rupees approved by the board. The significantly higher borrowing plan for the current financial year is in line with the company's aim of disbursing loans to the tune of 250 bln rupees and sanctioning 500 bln rupees, the official said. On Wednesday, Informist had reported that IIFCL had disbursed loans aggregating 224 bln rupees and sanctioned 423 bln rupees in 2023-24. IIFCL's net interest margin in 2023-24 was 2.2%, down from 2.4% in the previous year. It is not just IIFCL, a few of its peers are also looking at a mixed basket of domestic and external commercial borrowing to manage the challenges of a high interest rate scenario. REC, formerly called Rural Electrification Corp Ltd, had tapped the Tokyo market in January with three yen-denominated green notes. IIFCL's delegation will visit Japan next week to negotiate with Japan International Cooperation Agency about raising 100 bln yen, or 54.4 bln rupees, the official said. Though funds raised from the Japanese agency may not be called green bonds, they would automatically be treated as green funding as the government-backed agency has its own conditionalities, the official said. Japan International Cooperation Agency is an implementing agency of Japanese official development aid for the purpose of helping with the socio-economic development and economic stability of developing regions. These funds will likely be used for funding sustainable projects. IIFCL has already prepared a Sustainability Financing Framework and the company will look at sustainability financing from the Asian Development Bank, the official said. "We are setting up lines of credit with ADB. They would be giving us blended finance," the official said. Blended finance is the strategic use of development finance for the mobilisation of additional finance towards sustainable development in developing countries. The Sustainability Financing Framework would help streamline the process of taking environmental, social and governance considerations into account when making investment decisions, leading to more long-term investments in sustainable economic projects. Set up in 2006, IIFCL provides long-term financial assistance to infrastructure projects. The company plans to get listed on the bourses in the next year or two.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Move to monthly sale of key bonds ruled H1 borrow plan - govt sources

Informist, Friday, Apr 12, 2024 --Govt source: Want to move to issuing benchmark gilts once a month --Govt source: Don't want fortnightly issuance of benchmark gilts --Govt source: Selling 10-yr bond tri-weekly on high borrow in bucket --Govt source: Selling 15-yr bond tri-weekly on high borrow in bucket --Govt source:Issuance pattern change led to swings in gilt sale size --Govt source: Gilt mkt mature enough to handle varied auction size --Govt source: Monthly issuance of benchmark gilts to boost trading --Govt source: Benchmark gilts' monthly sale to aid price discovery --Govt source:Benchmark gilts' monthly auction to boost mkt liquidity By Krity Ambey and Sagar Sen NEW DELHI – The government's borrowing calendar for Apr-Sep was drafted with a conscious effort to move towards monthly auction of benchmark securities, breaking away from the practice of issuing these papers on a fortnightly basis, a senior government official said. The change in issuance pattern is also the reason behind the large variation in the size of weekly bond auctions in the first half of the year, the official said.  "The government, in consultation with the RBI (Reserve Bank of India), has been working towards moving from fortnightly issuance to monthly issuance of benchmark securities," the official told Informist. "It is expected that such monthly issuances will ensure higher secondary market trading, better liquidity and price discovery of securities in due course."   On Mar 27, the government released its borrowing calendar, which lined up 7.50 trln rupees worth of bond issuances in Apr-Sep, out of the gross borrowing target of 14.13 trln rupees for 2024-25 (Apr-Mar). The government will issue benchmark papers of 5-year, 30-year, and 50-year tenor once every month during Apr-Sep. "However, considering the higher amount of issuances in the 10-yr and 15-yr benchmarks, these securities have been planned for auction once in three weeks in H1 (Apr-Sep) of FY2024-25," the official said. Monthly auctions of benchmark securities would be in line with the pattern followed by developed markets such as the US and Europe. This comes at a time when Indian gilts are set to be included in global bond indices. While JP Morgan will include Indian gilts on its Government Bond Index – Emerging Markets from Jun 28, Bloomberg has proposed to add Indian bonds on its Emerging Markets Local Currency Index from September.  A striking feature of the government's Apr-Sep borrowing calendar is the large variation in weekly auction sizes – as large as 380 bln rupees in certain weeks and as small as 200 bln rupees in others. Prior to this, the government would spread out its borrowing evenly across weeks, with small variations depending on its cash requirements. The weekly amount was simply split between papers of various maturities. This time around, the size of auctions was dictated by the combination of securities turning up for auction in the respective week as per the stated frequency, finance ministry officials said. Of the total borrowing in the first half of the year, the biggest chunk of around 24% would be through 10-year bonds. The next are 40-year bonds and 15-year bonds, through which the government will conduct 19.5% and 13.9% of the Apr-Sep borrowing, respectively. In Apr-Sep, 10-year benchmark bonds will be issued as part of nine auctions, raising 200 bln rupees by themselves on every occasion. The 40-year bonds will be part of 13 issuances, worth 110 bln rupees each time. "It (variation in auction sizes) is not by design as such. You look at it with the combination of securities," another finance ministry official said. "If you look at the entire calendar, the 10-year and 40-year securities have the highest weightage. These two securities account for about 50% of the total borrowing in H1. So, the weeks which have a combination of these securities, that week has a higher size. That will explain why the auction size differs like that." The proposal to switch to monthly auctions of benchmark securities was discussed at meetings with market participants, who had some misgivings about it. Selling a large amount of a given security at one go poses a risk of the auction failing if investor appetite for that paper happens to be weak at the time. The added risk could prompt primary dealers to demand higher fees for underwriting the auctions, indirectly resulting in a higher cost of borrowing for the government, bond dealers said. However, government officials are not at all perturbed. "The government securities market is mature and robust to handle such variations, and it will get streamlined in due course," the first official said.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

FADA head sees passenger car sales growth moderating in FY25

Informist, Tuesday, Apr 9, 2024 --FADA head: See FY25 passenger car sales growth in low single digit --CONTEXT: India's passenger car sales grew 8% in FY24 --FADA head: See 2-wheeler sales up in high single digit in FY25 --CONTEXT: India's two-wheeler retail sales grew 9% in FY24 --CONTEXT: FADA head Singhania's comments in interview to Informist --FADA head: See FY25 tractor sales up in mid-single digit vs 8% FY24 --FADA head: See FY25 CV sales up in mid-single digit vs 5% FY24 By Darshan Nakhwa  MUMBAI – Growth in India's passenger vehicle sales is expected to slow down to a low single digit in 2024-25 (Apr-Mar) from nearly 8% the previous financial year, Manish Raj Singhania, president of the Federation of Automobile Dealers Associations, told Informist in an interview. However, sales may be better if rainfall is sufficient, borrowing costs fall, and demand picks up after the General Elections, he said. By comparison, sales of two-wheelers, commercial vehicles, and tractors are seen growing at more or less the same pace as in 2023-24, he said. "The passenger vehicle segment is starting next (new) financial year on a high note and surpassing any kind of peak is always difficult," Singhania said. In the year ended Mar 31, car sales rose to an all-time high of 3.95 mln units. The growth was driven by several factors. First, the availability of cars improved as the industry overcame the supply chain disruptions caused by the COVID-19 pandemic. Second, strong demand for sport utility vehicles helped offset the weak demand for small cars; in fact, sport utility vehicles accounted for half the passenger vehicle sales in 2023-24. Lastly, new launches and improved road infrastructure helped boost demand. In the current financial year, the introduction of new electric vehicles is expected to boost demand for passenger vehicles. India's top four automakers--Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Tata Motors Ltd, Mahindra & Mahindra Ltd--which have a combined market share of 80%, are expected to introduce at least one electric vehicle each during the year. "There is a lot of excitement in terms of new model launches. Though the electric vehicle penetration is still very low at around 2.5% (of total passenger vehicle sales), the excitement is there," Singhania said. "Currently, customers are buying electric passenger vehicles out of passion, not out of necessity. This is in spite of the electric vehicle being expensive compared to an internal combustion engine option." Electric vehicle penetration in India is expected to increase as battery prices, which account for nearly half the vehicle cost, come down as new production capacity gets added across the world and mining of precious minerals needed for batteries becomes more efficient, he said.  BUMPY ROAD FADA expects the Reserve Bank of India's decision to keep the benchmark repo rate unchanged at 6.5% to negatively affect retail sales of all vehicles in the near term, especially sales of entry-level vehicles, as buyers in this segment are extremely price-sensitive. The entry-level passenger vehicle segment is already struggling and needs support, Singhania said. High interest rates are a dampener for sales as most first-time vehicle purchases are funded by loans. On Friday, the RBI's Monetary Policy Committee left the repo rate unchanged for the seventh consecutive time since the rate-tightening cycle began in May 2022. The RBI has raised the benchmark rate by 250 basis points since May 2022. The Lok Sabha elections are also likely to affect demand for most vehicle sales, Singhania said. "We saw a dip in sales of passenger and commercial vehicles during the last Vidhan Sabha elections in large states - Chattisgarh, Madhya Pradesh and Rajasthan - because of restrictions on carrying cash. But immediately after the election, we saw a huge spike in retail sales," he said. The trend is likely to be repeated during the Lok Sabha elections, to be held in April and May, Singhania said. Consumers who want to pay in cash are expected to defer their purchases for a short term, but sales are likely to spike post elections. Sales of two-wheelers, which account for around 70% of vehicle sales, are expected to grow by high single digits in 2024-25, almost the same as the 9% growth clocked in 2023-24. However, there is a chance these sales may grow by double digits if government spending increases after the elections and if the monsoon is better than last year, according to Singhania. As per initial predictions, rainfall is expected to be above average this year, with the El Nino effect tapering off. The combination of better crop output and higher minimum support prices by the government is expected to boost rural demand, which in turn is likely to drive two-wheeler sales, Singhania said. In India, most two-wheelers are sold in rural areas. In 2023-24, two-wheeler sales rose slightly over 9% to 17.51 mln units, driven by strong demand for premium models and electric vehicles, as also new launches, according to FADA. However, sales of two-wheelers are yet to cross their 2018-19 record of 21 mln units. Over the last few years, prices of two-wheelers have shot up sharply owing to an increase in raw material costs and as manufacturers have had to comply with new emission norms.  The two-wheeler segment has had a mixed growth trajectory over the last few years. While sales in the segment in 2020-21 were nearly 32% lower than in the previous year on account of the COVID-19 pandemic, sales saw a slight improvement of around 4% in 2021-22. In 2022-23, sales surged nearly 19%, but were still the lowest in the last seven years, according to the association.    Singhania said tractor and commercial vehicle sales are expected to grow by mid-single digit in 2024-25. Commercial vehicle sales will depend on government spending after the election, he said. Demand for commercial vehicles is expected to be muted in the first half of the year due to elections, but is likely to pick up in the second half as government spending resumes, he said. In the year-ended Mar 31, commercial vehicle sales rose nearly 5% to 1.01 mln units, but the sales growth moderated after an upswing of nearly 33% in 2022-23. After the industry transitioned to the second phase of the Bharat Stage-6 emission norms in April 2023, prices of commercial vehicles rose by mid-single digits, which slightly affected demand. Tractor sales rose 8% on year to 892,313 units in 2023-24, far better than expected. At the beginning of 2023-24, a lot of manufacturers were sceptical about closing the year on a positive note due to the El Nino weather phenomenon, Singhania said. Tractor sales have surged as the COVID-19 pandemic-induced migration has boosted demand not only for agriculture but also for transport and for carrying construction material, Singhania said.  End   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Source says high gold price may push customs mop-up above FY24 aim

Informist, Monday, Apr 8, 2024 --Govt source: FY24 customs mop-up may top FY24 aim by 140 bln rupees --CONTEXT: Budget set FY24 customs mop-up target at 2.19 trln rupees --Govt source: Mar customs collections up on high gold prices --Govt source: FY24 indirect tax mop-up may top aim by 115 bln rupees --CONTEXT: Budget pegged FY24 indirect tax mop-up at 14.92 trln rupees By Priyasmita Dutta and Sagar Sen NEW DELHI – While record-high gold prices may have hurt trade volumes, they have helped the government to exceed its customs duty collection target of 2.186 trln rupees for the year ended Mar 31, a senior finance ministry official said. As per provisional figures, customs duty collection in 2023-24 (Apr-Mar) is over 140 bln rupees higher than the revised target and closer to the initial Budget estimate of 2.33 trln rupees, the official said. "We have exceeded the target by roughly 140 bln rupees... these are provisional figures. The final figure will be known in some time," the official told Informist. After robust growth in collections in the first few months of 2023-24, on-year growth in customs duty collections moderated and even dipped briefly. As per latest data released by the Controller General of Accounts, collections under this head in the first 11 months of the year rose 3.9% on year to 1.96 trln rupees, making up nearly 90% of the revised full year aim. The 2.19 trln rupee target was 2.8% higher on year. A chunk of customs duty collections is dependent on gold prices and the quantum of imports, the official said. India is the world's second-largest consumer of the yellow metal and demand is met primarily through imports. Customs duty collections are higher because of the sharp rise in gold prices and the consequent increase in the base import price. The base import price of gold was at $696 per 10 gm for the fortnight started Mar 16, up $84 from six months ago. The base import price is the price at which import duty is levied on gold, irrespective of the import price. The government also increased the import duty on gold and silver findings and coins of precious metals by 4 percentage points to 15% in line with gold bars to remove arbitrage. Gold prices climbed more than 8% in March and scaled new heights on the back of rising geopolitical tensions, increased buying by global central banks, and expectations of interest rate cuts by the US Federal Reserve later this year. Today, gold prices on COMEX hit a new lifetime high of $2,372.5 per ounce as tensions in West Asia continued to spur safe-haven demand for the precious metal. "Collections from overall indirect taxes have exceeded the target by about 115 bln rupees with some dip seen in excise collections," the official said. The Controller General of Accounts will detail the full year's data on May 31. The Interim Budget set a revised tax collection target of 34.37 trln rupees for 2023-24, up 763.53 bln rupees from the Budget estimate of 33.61 trln rupees. Of the total, 14.92 trln rupees are from indirect taxes and 19.45 trln rupees are from direct taxes. Under indirect taxes, besides customs, the government aims to collect 9.57 trln rupees from goods and services tax and 3.04 trln rupees from excise in 2023-24. Central Board of Indirect Taxes and Customs Chairman Sanjay Kumar Agarwal, in a letter to officers, said the government had exceeded the indirect tax collection target. GST collections touched a record 20.18 trln rupees in 2023-24. More than half of this amount is shared with the states. Latest data also show the government's excise duty collections contracted 5.8% on year in Apr-Feb to 2.54 trln rupees. In the corresponding period in 2022-23, a windfall gains tax helped the government shore up revenue under this head. However, these taxes are currently lower as they are benchmarked to the movement in global oil prices.  End Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Dr Reddy's preps to tap post-COVID pharma boom in China - CEO Ramana

Informist, Friday, Apr 12, 2024 --Dr Reddy's CEO: China pharma mkt seeing rapid growth post pandemic --Dr Reddy's CEO: Co has two-pronged approach for China sales growth --Dr Reddy's CEO: To sell cos' India-made products in China --Dr Reddy's CEO: To sell China JV-made pharma pdts in that market --Dr Reddy's CEO: To collaborate with Indian cos for China mkt --Dr Reddy's CEO: Pipeline for product launch in China as per plan --CONTEXT: Dr Reddy's aims to launch 70 products in China near term --Dr Reddy's CEO: Got China regulator's nod for 18 products so far --Dr Reddy's CEO:Of 18 pdts cleared by China regulator, 8 came in FY24 --Dr Reddy's CEO: Completed construction of China JV facility --Dr Reddy's CEO: Co's China JV facility has got regulatory nod --Dr Reddy’s CEO: Increasing pdt filings in oncology segment in China --Dr Reddy's CEO: Working with China cos to leverage their portfolio By Narayana Krishna HYDERABAD – China's pharmaceutical sector is witnessing rapid growth in the post-pandemic era due to the increase in public spending on healthcare, and Dr Reddy’s Laboratories Ltd is gearing up to tap the opportunity by increasing product filings and new launches, Chief Executive Officer (India and Emerging Markets) M.V. Ramana told Informist. "We have two-pronged approach to launch products in China. One is that we import our in-house products from India and launch them in China, and second, we launch the products that are locally manufactured through our JV (joint venture) KRRP. We are in line with our strategy," Ramana said in an e-mail response to Informist's queries on the company's plans for China. He said China, the world's second-largest pharmaceutical market after the US, offers significant opportunities, though the regulatory process is tough to navigate. "China's pharmaceutical market is currently witnessing rapid growth as a result of increased government investment in healthcare and a growing middleclass. The industry is expected to grow at an annual growth rate of 7.22% (CAGR 2024-2028), with expected market volume of $157.30 bln by 2028," Ramana said, quoting market research firm Statista. Dr Reddy's entered China through its joint venture Kunshan Rotam Reddy Pharmaceutical Co Ltd in 2000, partnering with Kunshan Double-Crane Pharmaceutical in China's Jiangsu province and Canada Rotum Enterprises. The company holds around 51.33% stake in the joint venture. The company has also opened a representative office through its wholly-owned subsidiary Dr Reddy's (Beijing) Pharmaceutical Co Ltd. In 2022-23 (Apr-Mar), Dr Reddy's joint venture Kunshan Rotam Reddy Pharmaceutical reported a net profit 725 mln rupees on sales of 9.32 bln rupees while Dr Reddy's (Beijing) Pharmaceutical booked revenue of 430 mln rupees. The comparative year-ago figures for these entities were not available. Dr Reddy's categorises its China operations under its emerging markets segment and revenues from this country were part of this segment in its consolidated financials. For 2022-23, the company reported a consolidated net profit of 45.1 bln rupees on net sales of 245.9 bln rupees. Beside launching its own products, Dr Reddy's is also collaborating with Indian pharmaceutical companies for its China operations. The company had in 2019 said it aimed to launch at least 70 new products in China in the near term.  Ramana said that the company was increasing its product filings with the Chinese drug regulator, the National Medical Products Administration, across categories but mainly targeting the oncology segment. Dr Reddy's has so far got approval for 18 products. "For this financial year 2023-24, we received 8 product approvals till date. Furthermore, our JV has completed construction of a new facility which has received GMP (good manufacturing practices) approval. We are working with our JV to provide technology transfers in order to file for both oncology and non-oncology products," he said, adding that it was tough to understand the regulatory requirements of the NMPA. Ramana said olanzapine, the company's first generic product, is still its top imported drug, with robust sales in China. The company had launched olanzapine, used to treat schizophrenia/bipolar disorder, in 2014. "It (olanzapine) became the first product from a global generic pharma company to get qualified in line with China's QCE (quality consistency evaluation) in 2019, and the first to participate and win in the VBP (volume-based procurement programme) tender. To date, 25% of schizophrenia/bipolar disorder patients in China have been treated with our olanzapine. Over half a million patients are currently using it with more than 5,000 hospitals across China prescribing it," Ramana said. Dr Reddy's is now working to secure VBP (value-based pricing, a tender-based procurement system in China) nod for oncology drugs abiraterone and lenalidomide, along with atomoxetine, which is used to treat attention deficit hyperactivity disorder. The company is also working to bring several orphan drugs to meet the needs of the Chinese population. There is also collaboration with local companies at play. "We realised that the top Chinese companies are proving their strength in innovation. With our strong footprint, both in India and the emerging markets, we are working with local companies to leverage their portfolios too," Ramana said. "For example, we recently entered into a strategic collaboration for toripalimab with Shanghai Junshi Biosciences and signed an in-licensing agreement for pyrotinib with hengrui in China."  As part of its growth plans for China, Dr Reddy's is also invested in two new facilities in Kunshan Rotam Reddy Pharmaceutical: one for non-oncology oral solid dosage and another for oncology. In a weak market today, shares of Dr Reddy's closed at 6,083.85 rupees on the National Stock Exchange, down 1.2% from the previous close.  End    Informist Media Tel +91 (22) 6985-4000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

IIFCL FY24 net profit up 53% to 16.5 bln rupees, says official

Informist, Wednesday, Apr 10, 2024 By Priyasmita Dutta and Sagar Sen NEW DELHI – India Infrastructure Finance Co Ltd's net profit rose 53% to 16.50 bln rupees in 2023-24 (Apr-Mar) from 10.76 bln rupees a year ago, a senior company official said. The healthy growth in profit came on the back of robust loan disbursements during the year, which increased 62% to cross 224 bln rupees, the official told Informist. In 2022-23, the company disbursed to various infrastructure projects loans amounting to 138.26 bln rupees. The consolidated net profit of IIFCL, which is wholly owned by the government, is expected to cross 19 bln rupees during the year, the official said. IIFCL has three subsidiaries--India Infrastructure Finance Co (UK) Ltd, IIFCL Projects Ltd, and IIFCL Asset Management Co Ltd. The infrastructure financier sanctioned loans amounting to 423 bln rupees in 2023-24, up 45% from 291.71 bln rupees sanctioned in 2022-23. During 2023-24, the company borrowed 130 bln rupees through a mix of instruments, the official said. The board had approved borrowing up to 160 bln rupees. In terms of asset quality, the company's net non-performing assets ratio as of Mar 31 was below 1% while the gross non-performing assets ratio was below 3%, in the range of 2.4-2.5%, the official said. In the last fiscal, the company's net non-performing assets ratio was 1.41%. This represents a sharp turnaround from 2019-20, when the company registered a gross non-performing assets ratio of 19.7% and a net non-performing assets ratio of 9.75%. The official said more than 80% of the company's loans are now to projects rated "A", "AA", and "AAA". The company has been aiming to halve its non-performing assets every fiscal. While there is not much scope to further reduce net non-performing assets from the current level, the company will aim to bring the gross non-performing assets ratio to less than 1% in 2024-25, the official said. IIFCL's net interest margin fell to 2.2% in 2023-24 from 2.4% the previous year, the official said. IIFCL was set up in 2006 to provide long-term financial assistance to infrastructure projects. The company plans to get listed on the bourses in the next year or two.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Informist Poll

Nifty 50 cos' earnings growth to slow down in Jan-Mar

Informist, Friday, Apr 12, 2024 By Anshul Choudhary and Apoorva Choubey MUMBAI – Most companies in the Nifty 50 index are likely to report moderation in net profit for the March quarter as revenue growth remains muted and tailwinds arising out of lower commodity prices, as seen during Apr-Dec, have largely abated. The moderation will throw spotlight on corporate commentary as equity investors want to know how companies plan to navigate through challenges such as persistently high interest rates, subdued global demand, and rising crude oil prices.  For Jan-Mar, the cumulative net profit of 46 companies in the Nifty 50 index is expected to rise 8% on year, according to estimates compiled from 17 brokerage firms. The bottomline growth for the March quarter is expected to be lower than the 12% seen during Oct-Dec and 20% in Apr-Dec. These projections exclude Axis Bank Ltd and Oil and Natural Gas Corp Ltd as they had reported net losses for the corresponding quarter a year ago. In addition, estimates for two Nifty 50 companies – Adani Enterprises Ltd and Bajaj Finserv Ltd – were unavailable at the time of writing this report. Sequentially, the set of 46 companies in the benchmark index are expected to report growth of 9% in net profit for Jan-Mar. The muted growth in the bottomline will be led by domestic cyclical sectors such as banks and automobile, as the Indian economy continues to show resilience in growth, according to analysts. "Domestic cyclicals, as has been the case during the past year, may drive earnings growth in Q4 (Jan-Mar) while commodity-oriented sectors such as metals, energy and chemicals might drag," brokerage Elara Capital said in an earnings preview report. Healthcare, cement and utility companies are likely to post robust year-on-year growth, while consumer staples players may have seen moderate growth, it added. When it comes to revenue growth, a slowdown will be seen across the board, Nuvama Institutional Equities said in a recent report. Excluding Adani Enterprises and Bajaj Finserv, the cumulative revenue for 48 companies in the Nifty 50 index is expected to grow 5% for Jan-Mar. The growth is similar to that seen in the first nine months of 2023-24 as inflation continues to hit rural demand in India, while the global economy is also reeling under certain pressures. Sequentially, the revenue of the 48 companies is seen growing 4%.  With margin tailwinds fading, it is essential for topline growth to recover, or there could be risks to consensus earnings per share forecasts of 15–16% over the next two financial years, Nuvama Institutional Equities warned. When it comes to demand, domestic-oriented sectors could be more vulnerable as consumption and capital expenditure for the private sector remain weak and government spending has also moderated, the brokerage said.  Corporate profits are also at risk from high inflation, particularly in the US, rising crude oil prices, and geopolitical tensions, several analysts said. On Wednesday, US inflation for March came in higher than expectations, fuelling concerns that the US Federal Reserve may have to push its plans of three interest rate cuts of 25 basis points each in 2024. This led to a decline in US equity markets on Wednesday, and pushed yields on US bonds higher. The CME FedWatch tool now shows a 23% probability of an interest rate cut in June by the US Fed, compared with over 50% probability before the inflation data. A high interest rate environment is a deterrent to companies' growth as it leads to higher cost of capital and reduces overall risk-taking in the economy. Prevailing geopolitical tensions in West Asia have raised fresh concerns around disruptions in trade and supply of crude oil. Crude oil futures have already risen above $90 a barrel from the lows of $72 a barrel seen in December. What's more, with the model code of conduct in force for the General Election, analysts expect government orders to come down significantly. This is likely to hurt order inflows of several sectors for Apr-Sep, analysts said. Given that corporate earnings are facing threats on several fronts, the commentary by companies on demand and overall health of the business will assume significance, they added. While predictions of a normal monsoon could help some consumption-oriented sectors, the outlook for other large sectors is still murky, said the head of research at a local brokerage.  SECTORAL TRENDS  Companies that primarily rely on the domestic economy, such as automobiles and financials, are expected to fare better than export-oriented companies such as those operating in the information technology, metals, and chemicals sectors. "Most of the domestic high-frequency indicators have trended higher during the quarter, which is likely to translate into good demand momentum for the domestic corporate segment," Axis Securities said in a note on Wednesday.  Companies in other domestic-focussed sectors such as capital goods and cement are likely to report better earnings, along with those in healthcare and pharmaceuticals, brokerages said. However, within the companies focused on domestic demand, fast-moving consumer goods companies are expected to report muted growth in revenue and net profit. Banks, which have the highest weight in the Nifty 50 index, are set to report 8% and 10% growth in cumulative net profit and net interest income, respectively, during the March quarter. The net profit projection excludes the data of Axis Bank, which had reported a net loss the previous year. The bank is expected to report a net profit for Jan-Mar. Analysts expect pressure on net interest margins to have eased slightly as deposit growth has picked up, though this growth is coming at a higher cost. "We expect banks to report 10-15 bps sequential decline in NIMs, but expect lenders to indicate that we are closer to the end of the deposit re-pricing cycle," Kotak Institutional Equities said in a recent note. Automobile companies, which were among the most sought out stocks last year, are expected to stay on the growth path with slight moderation in earnings. This moderation is due to a high base from a year ago, and as pent-up demand in the sector is fading, Nuvama said. The five automobile companies in the Nifty 50 index are expected to report a cumulative net profit growth of 35% on revenue growth of 15%. Within these, the two-wheeler and passenger vehicle segments are expected to show strong growth which is likely to offset the lower volumes of commercial vehicles and tractors. The earnings are largely led by urban demand with a slight uptick in rural demand as well. In fact, robust urban demand in India is expected to help other companies such as Titan, which is in the business of selling luxury items such as diamonds and gold jewellery. Among others, Larsen & Toubro is expected to benefit from a robust order book and Ultratech Cement is likely to report better earnings due to higher volumes even as they took price cuts during the quarter. The stable prices of generic drugs in the US, along with better demand in domestic markets, has helped companies in the pharmaceutical and healthcare sectors. The four pharmaceutical companies' cumulative net profit growth is seen at 33%, just behind automobiles, while revenue growth is seen at 11%. For Apollo Hospitals Enterprise, the net profit growth is seen even higher at 69%, with revenue growth of 13% on year. On the other hand, rural demand is seen facing the brunt of high inflation, which may lead to muted growth in net profit and revenue for the five FMCG companies in the Nifty 50 index. These companies' cumulative net profit is seen rising a mere 1% on year on revenue growth of 3%. Sequentially, the net profit is seen 3% lower. The two steel companies in the index--Tata Steel Ltd, and JSW Steel Ltd--are seen reporting lower revenue and net profit on year, hurt by lower prices of steel. However, Hindalco Industries is likely to increase its profits on account of stable prices of base metals. Overall, the three companies are expected to post a cumulative decline of 26% in net profit and 5% in revenue. The weak Chinese economy is another pain point for the sector, as it has led to lower demand for metals from China. Meanwhile, lower demand for information technology services from the US and Europe has hurt the growth prospects of IT companies. On top of this, uncertainty around the interest rate trajectory is making it difficult for analysts to assess when the demand will recover for these companies. "Despite robust US real GDP growth in 2023 and what looks likely to be a decent 1QCY24 (Jan-Mar), enterprise clients of Indian IT services firms are yet to open their purses for discretionary spending," Nirmal Bang Institutional Equities had said in a note in March. Moreover, announcements around mega or large deals have been weak since September, it said. Overall, the five IT companies in the Nifty 50 index are likely to report a cumulative net profit growth of 1% on revenue growth of 2%. Sequentially, the net profit is seen growing 4%, while revenue is seen flat. Within these companies, Tech Mahindra and Wipro are expected to post a decline in revenue as well as net profit on year. Index heavyweight Reliance Industries Ltd is expected to report mixed earnings. The company's oil-to-chemicals segment is seen weak due to lower refining margins, while its retail and telecom segments are expected to grow as both businesses attracted new customers. Overall, Reliance Industries' net profit is likely to decline 3% while revenue may grow 10% on year.  Following are the Jan-Mar consensus earnings estimates of companies that constitute the National Stock Exchange's Nifty 50 index. These estimates are based on reports compiled by Informist Media from 17 brokerage houses. Company   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 Bajaj Auto 1,11,125 18,516 24.79 29.22 (8.26) (9.32) 22,003 Apr 18 10 Eicher Motors + 42,370 10,618 11.37 17.25 1.39 6.61 11,350      -- 9 Hero MotoCorp 93,992 10,483 13.15 22.04 (3.34) (2.34) 13,327      -- 10 M&M 2,41,107 20,079 6.62 29.63 (5.97) (18.18) 29,521      -- 8 Maruti Suzuki 3,87,651 41,110 20.96 56.69 16.38 31.34 49,690 Apr 26 10 Tata Motors + 12,05,772 72,054 13.82 33.24 9.04 2.57 1,75,259      -- 8 Total 20,82,017 1,72,861 14.64 35.28 6.47 3.38         BANK AXIS Bank * 1,28,347      N.A. 9.30     N.A. 2.41     N.A.      N.A.      -- 9 HDFC Bank * 2,91,988 1,74,318 25.04 44.69 2.55 6.47      N.A. Apr 20 10 ICICI Bank * 1,88,774 1,02,470 6.85 12.33 1.06 (0.24)      N.A. Apr 27 9 Kotak Mahindra * 66,599 32,913 9.13 (5.84) 1.62 9.53      N.A.      -- 8 SBI * 4,07,922 1,33,685 0.99 (19.92) 2.45 45.88      N.A.      -- 9 IndusInd Bank* 55,008 23,344 17.80 14.40 3.87 1.59      N.A.      -- 10 Total 11,38,638 4,66,730 9.56 7.54 2.26 13.53         CEMENT Grasim Industries 62,843 1,419 (5.44) 51.73 (1.81) (39.96) 4,800      -- 5 UltraTech Cement + 1,98,027 20,562 6.11 21.96 18.30 15.71 37,181 Apr 29 12 Total 2,60,869 21,981 3.08 23.52 12.73 9.18         CHEMICAL Asian Paints + 90,703 13,297 3.22 7.74 (0.36) (8.16) 19,439 May 9 10 Total 90,703 13,297 3.22 7.74 (0.36) (8.16)         DIVERSIFIED Adani Enterprises +      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.      N.A.      -- 0 Total      N.A.      N.A.     N.A.     N.A.     N.A.     N.A.         ENGINEERING - CAPITAL GOODS L&T + 6,56,531 44,310 12.54 11.14 19.09 50.34 74,288      -- 4 Total 6,56,531 44,310 12.54 11.14 19.09 50.34         FINANCE Bajaj Finance +* 87,133 37,686 12.13 19.34 13.82 3.56      N.A. Apr 25 5 Bajaj Finserv +*      N.A.      N.A. N.A. N.A. N.A. N.A.      N.A. Apr 26 1 HDFC Life Insurance Co# 2,27,412 4,394 17.06 22.51 49.27 20.36      N.A. Apr 18 1 Shriram Finance* 51,798 20,261 16.51 54.86 1.69 11.42      N.A. Apr 26 4 SBI Life Insurance Co# 2,37,220 7,239 19.22 (6.82) 6.30 124.99      N.A.      -- 1 Total 6,03,563 69,580 17.10 24.21 19.99 13.25         FMCG Britannia Industries + 41,461 5,444 3.05 (2.54) (2.59) (2.15) 7,895      -- 11 Hindustan Unilever  1,50,359 24,719 0.96 (3.14) (1.00) (1.87) 34,771      -- 12 Nestle India 51,596 8,595 6.81 16.68 12.16 31.10 12,586 Apr 25 11 ITC 1,68,581 50,724 2.81 (0.28) 2.27 (8.97) 61,432      -- 12 Tata Consumer Product + 39,601 3,662 9.43 36.33 4.11 31.31 5,887      -- 5 Total 4,51,598 93,143 3.19 1.21 1.87 (2.79)         HEALTHCARE Apollo Hospitals Enterprise + 48,829 2,447 13.50 69.36 0.67 (0.23) 6,239      -- 4 Total 48,829 2,447 13.50 69.36 0.67 (0.23)         IT HCL Tech + 2,85,211 40,750 7.20 2.31 0.26 (6.32) 62,835 Apr 26 10 Infosys + 3,86,926 61,902 3.34 1.02 (0.33) 1.38 87,076 Apr 18 10 LTIMindtree + 89,973 11,538 3.52 3.60 (0.21) (1.29) 15,587 Apr 24 10 TCS + 6,14,518 1,19,897 3.87 5.25 1.43 8.43 1,67,516 Apr 12 11 Tech Mahindra + 1,29,741 7,783 (5.42) (30.36) (0.97) 52.50 14,428 Apr 25 10 Wipro + 2,21,331 27,662 (4.56) (10.03) (0.32) 2.67 42,698 Apr 19 10 Total 17,27,700 2,69,532 2.35 0.54 0.35 4.12         Jewellery Titan Co 1,12,399 8,205 31.41 11.78 (12.95) (21.11) 12,554      -- 6 Total 1,12,399 8,205 31.41 11.78 (12.95) (21.11)         METAL Hindalco Industries + 5,42,161 29,793 (2.94) 23.57 2.67 27.81 65,944 May 24 5 JSW Steel + 4,41,540 17,572 (4.83) (52.04) 5.28 (27.24) 50,884 May 17 6 Tata Steel + 5,91,914 9,970 (5.99) (41.52) 7.01 94.21 60,640      -- 7 Total 15,75,616 57,335 (4.63) (26.30) 5.00 9.01         OIL & GAS BPCL 11,69,583 60,012 (12.33) (7.36) (10.02) 76.65 97,603      -- 9 ONGC 3,42,925      N.A. (5.51)     N.A. (1.42)     N.A. 1,72,030      -- 9 Reliance Ind + 23,72,802 1,86,281 9.72 (3.48) 4.08 7.90 4,21,331      -- 9 Total 38,85,311 2,46,293 0.66 (4.45) (1.07) 19.20         PHARMA Cipla + 62,302 9,120 8.55 73.50 (5.66) (13.63) 13,829 May 10 8 Divi's Laboratories 20,850 4,638 9.28 45.40 12.40 29.56 5,953      -- 5 Dr. Reddy's Lab + 71,925 12,988 13.89 35.28 (0.61) (5.95) 19,926 May 7 9 Sun Pharma + 1,22,132 23,711 11.73 19.48 (1.35) (6.05) 30,835      -- 7 Total 2,77,208 50,458 11.36 33.16 (1.27) (5.13)         POWER & ENERGY NTPC  4,53,841 58,158 9.84 2.53 15.03 27.21 1,35,779      -- 4 Coal India + 3,64,526 78,128 (4.46) 41.20 0.83 (13.85) 94,469      -- 5 Power Grid 1,34,506 43,498 17.01 3.15 25.98 9.56 1,15,147      -- 4 Total 9,52,873 1,79,783 4.75 16.57 10.43 2.08         TELECOM Bharti Airtel + 3,86,612 31,662 7.37 5.34 2.01 29.65 1,89,158      -- 6 Total 3,86,612 31,662 7.37 5.34 2.01 29.65         PORTS Adani Ports and SEZ + 70,184 23,793 21.07 105.31 1.42 7.74 44,313      -- 3 Total 70,184 23,793 21.07 105.31 1.42 7.74         Nifty Total 1,43,20,650 17,51,408 5.01 7.71 3.71 9.03       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: Antique Stock Broking Ltd, Axis Securities Ltd, Centrum Broking Ltd, Elara Securities (India) Pvt Ltd, Emkay Global Financial Services Ltd, HDFC Securities Ltd, ICICI Securities Ltd, IDBI Capital Market Services Ltd, Jefferies Group, Kotak Institutional Equities, Motilal Oswal Financial Services Ltd, Nirmal Bang Equities Pvt Ltd, Nomura Equity Research, Nuvama Wealth Management 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.

WPI inflation seen at 3-month high of 0.6% in March

Informist, Wednesday, Apr 10, 2024 By Shubham Rana NEW DELHI – India's WPI inflation is likely to have risen to a three-month high of 0.6% in March after falling to a four-month low of 0.2% in February, according to an Informist poll of 16 economists. In March 2023, WPI inflation was 1.41%. At 0.6%, the overall WPI index will rise 0.5% on a sequential basis in March. In the last 11 years, on an average, the overall index has risen 0.4% in March from the previous month. The commerce and industry ministry is scheduled to release WPI inflation data for March at 1200 IST on Monday. Even though WPI inflation is expected to rise in March, it is still seen below 1% for the 12th consecutive month, primarily on account of disinflation in fuel and manufactured products groups. "Sequentially we expect core inflation to have witnessed a positive momentum for the first time in six months, led by the impact of higher global commodity prices," Kotak Mahindra Bank Chief Economist Upasna Bhardwaj said. Wholesale core inflation fell to a six-month low of (-)1.3% in February. Prices of commodities, including crude oil, rose in March. Brent crude oil prices rose over 6% during the month, while gold prices rose more than 8%. Food prices showed a mixed trend in March. Wholesale prices of tomato and onion fell 3.0% and 0.8%, respectively, compared to the previous month, data collated by the Department of Consumer Affairs shows. Prices of potato, on the other hand, jumped up 7.2% sequentially in March. WPI inflation continues to be sharply below CPI inflation, primarily due to softening of non-food commodity prices that are better captured in the WPI. CPI inflation, which will be released on Friday, is expected to moderate to a five-month low of 4.9% in March from 5.1% in February, according to an Informist poll of 18 economists. "Going ahead, WPI inflation is likely to trend even higher amid adverse base effect and higher commodity prices," Bhardwaj said. The following is a summary of the poll by Informist on WPI inflation in March and the details of estimates by respondents, in ascending order: Range of expectations: 0.0-1.5% Mean: 0.6% Median: 0.6% Mode: 0.4%     ORGANISATION WPI INFLATION ESTIMATE Nirmal Bang Institutional Equities 0% Equirus Securities 0.3% ICICI Securities Primary Dealership 0.4% India Ratings and Research 0.4% Emkay Global Financial Services 0.45% Kotak Mahindra Bank 0.5% Motilal Oswal Financial Services 0.5% ICICI Bank 0.52% Nomura 0.6% STCI Primary Dealer 0.6% YES Bank 0.62% Sunidhi Securities 0.66% CareEdge 0.7% Capital Economics 0.8% ICRA 1.0% Bank of Baroda 1.5%   End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Feb IIP growth seen at 4-month high of 6.0%

Informist, Wednesday, Apr 10, 2024 By Shubham Rana NEW DELHI – Growth in India's industrial production is likely to have risen to a four-month high of 6.0% in February from 3.8% in January, according to an Informist poll of 19 economists. Industrial output had expanded 6.0% in February 2023. Industrial output, as measured by the Index of Industrial Production, is expected to have risen in February as high frequency indicators like core sector output, merchandise trade, e-way bills, Manufacturing Purchasing Managers' Index suggested a sharp upward momentum in February. The National Statistical Office will detail the Index of Industrial Production for February at 1730 IST on Friday. 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 a three-month high of 6.7% in February from 4.1% a month before. The manufacturing PMI in February rose to a five-month high of 56.9 in February, while growth in e-way bills generated rose to a four-month high of 18.9%. Merchandise trade also rose sharply in February. Growth in India’s exports in February rose to a 21-month high of 11.9% in February, while imports increased 12.2%, the highest in 17 months. Vehicle production in February grew by 30.7% on year compared to 22.0% in January. Apart from the high frequency indicators, the fact that this is a leap year would also help to show a higher industrial production. Industrial output typically contracts in February from January because of lower number of working days during the month. However, this year the number of days in February were 29 instead of the normal 28 because of leap year. At 6.0% growth, the overall index will be 3.5% lower month-on-month in February. This sequential fall would be lower than the normal decline in industrial production for February. In the past 11 years, the Index of Industrial Production has contracted 4.1% sequentially in February on an average. Following is a summary of the details and estimates of respondents for IIP growth in February, in ascending order: Range of expectations: 4.3-7.5% Mean: 6.0% Median: 6.0% Mode: 6.2%   ORGANISATION IIP GROWTH ESTIMATE Moody's Analytics 4.3% QuantEco Research 5.0% Nomura 5.1% Motilal Oswal Financial Services 5.2% India Ratings and Research 5.5% Kotak Mahindra Bank 5.5% CareEdge 5.8% YES Bank 5.8% Nirmal Bang Institutional Equities 5.9% Deutsche Bank 6.0% ICRA 6.0% STCI Primary Dealer 6.09% Bank of Baroda 6.2% ICICI Bank 6.2% Standard Chartered 6.50% Sunidhi Securities 6.56% ICICI Securities Primary Dealership 7.1% HDFC Bank 7.3% Capital Economics 7.5% End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Mar CPI inflation seen easing to 5-month low of 4.9%

Informist, Tuesday, Apr 9, 2024 By Shubham Rana NEW DELHI – India's annual inflation rate based on the Consumer Price Index is likely to have moderated to a five-month low of 4.9% in March from 5.09% a month earlier, according to a poll of 18 economists by Informist. The slight moderation in headline inflation is mainly on account of the statistical effect of a higher base, economists said. In March last year, headline inflation was 5.66%. The National Statistical Office is scheduled to release inflation data for March at 1730 IST on Friday. The base effect is such that even if the overall index remains unchanged in March compared to the previous month, CPI inflation will ease to 4.9%. At 4.9% inflation, the overall CPI for March will remain unchanged or rise 0.1% from the previous month. The overall index had risen 0.2% month-on-month in February. Historically, the overall index has risen by an average 0.3% sequentially in March in the current CPI series, which began in 2012-13. The cut in prices of liquefied petroleum gas, petrol and diesel will help the downward movement in inflation, Kaushik Das, chief economist, India and South Asia, Deutsche Bank, said in a report. Oil marketing companies had cut the price of domestic cooking gas by 100 rupees per cylinder, and the price of petrol and diesel by 2 rupees per ltr last month, ahead of the General Elections in Apr-Jun. The reduction in prices of petrol and diesel is expected to lead to downward pressure on core inflation, economists said. However, this impact may be balanced by a surge in international prices of gold in March. During the month, gold prices climbed more than 8% to $2,238.4 per ounce. Core inflation, which strips out food and fuel items, is expected to have stayed close to February's print of 3.3%, economists said. Core inflation eased to 3.3% in February, the lowest core inflation print in the current CPI series. Food prices, including vegetable prices, showed a mixed trend in March. According to data from the Department of Consumer Affairs, tomato and onion prices declined 2.0% and 0.4% on month, respectively, in March, while potato prices rose 6.1%. If the CPI print for March comes in at 4.9%, the average inflation for Jan-Mar would be 5.0%, the same as the Reserve Bank of India's projection for the quarter. Following is a summary of the poll on CPI inflation in March, with details of estimates by respondents, in ascending order: Range of expectations: 4.6-5.2% Mean: 4.9% Median: 4.9% Mode: 4.9%   ORGANISATION CPI INFLATION ESTIMATE QuantEco Research 4.57% Barclays 4.7% ICRA 4.7% ICICI Bank 4.8% Societe Generale 4.8% Deutsche Bank 4.9% Emkay Global Financial Services 4.9% HDFC Bank 4.9% IDFC FIRST Bank 4.9% Motilal Oswal Financial Services 4.9% Nomura 4.9% CareEdge 5.0% Moody's Analytics 5.0% Standard Chartered 5.05% YES Bank 5.07% Nirmal Bang Institutional Equities 5.08% India Ratings and Research 5.1% Goldman Sachs 5.2% End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

RBI's hand to keep rupee steady at 83.30/$1 Apr-end

Informist, Monday, Apr 1, 2024 By Sourabh Kumar and Vaishali Tyagi MUMBAI – After touching a record low last month, the rupee is expected to remain largely steady against the dollar this month as the Reserve Bank of India is likely to neutralise the impact of a weakening offshore Chinese yuan and a strong dollar index through sale of dollars, market participants said. According to the median of forecasts of 21 respondents from banks, corporate, and brokerage houses polled by Informist, the rupee will end the month at 83.30 a dollar, compared to 83.40 on Mar 28. Eight poll respondents see the rupee falling below its lifetime low of 83.45 a dollar in April. In March, the rupee fell 0.6% against the dollar, declining the most in a month in nine months. Market participants expect weakness in the offshore Chinese yuan to continue to weigh on the Indian currency. The yuan had declined to a four-month low last month on expectations of monetary policy easing in the world's second-largest economy. "The risk view is that if yuan is allowed to weaken materially, the RBI may also follow suit to maintain currency competitiveness," Dhiraj Nim, FX strategist at ANZ Banking Group, said.  A strong dollar index may also pressure the Indian unit, according to poll respondents. Inflation in the world's largest economy has still not cooled off, which has led to the belief that the US Federal Reserve may cut rates later than previously thought. Comments of several US Federal Reserve officials also indicate that the US central bank might not hurry in cutting rates. Fed fund futures traders now see a 58.5% chance of the first-rate cut in June, according to the CME FedWatch tool. "I think Fed is going to be far more reluctant to cut rates and that may actually lead to a re-pricing of rate cuts and hence push the dollar high," Anindya Banerjee, head of research for FX and Interest Rates at Kotak Securities, said.  Rising crude oil prices will also go against the local currency. Since India is the third-largest importer of crude oil, rising oil prices spell trouble for the rupee as it increases India's import bill. Brent crude oil futures surged almost 7% last month due to concerns of tighter oil supply. Last month, the Organization of the Petroleum Exporting Countries and its allies agreed to extend their voluntary cuts to crude oil production through Apr-Jun. "I think we are fine till the crude does not hit $90 a barrel; however, once oil prices cross $90 a bbl, problems could crop up for the rupee," Sajal Gupta, senior vice president and head forex & rates at Edelweiss Financial Services, said. Market participants expect continued foreign fund inflows, especially into the Indian debt market, to be a source of relief for the rupee this month. While foreign portfolio inflows into domestic equities may dry up ahead of elections, market participants expect robust inflows into the debt market ahead of inclusion of Indian government bonds in global bond indices. In September, JP Morgan announced the inclusion of Indian gilts in its Global Bond Index – Emerging Markets suite over 10 months starting Jun 28. Bloomberg Index Services last month said it would add India's bonds to the Bloomberg Emerging Market Local Currency Index over 10 months starting Jan 31. Last month, as on Mar 27, FPIs infused funds to the tune of $1.7 bln into the Indian debt market. Market players are of the view that India's record-high foreign exchange reserves will help the RBI to easily provide a cushion for the rupee. The RBI's forex reserves were at a lifetime high of $642.63 bln as on week ended Mar 22. "I think exchange rate stability will remain a dominant theme, but within a wider trading band than before," Nim of ANZ Banking Group said. "Now that FX reserves are comfortable, the rupee's relative moves versus other regional peers may not be very muted." Looking at last month's movement, market participants expect volatility in the foreign exchange market to increase in the near term, although not much. However, the lull that the currency market was going through in the latter part of 2023, seems to be finally over. POLL DETAILS Participant Apr-end Jun-end ANZ Bank 83.00-83.20 82.70 CR Forex 82.80 82.00 CSB Bank 83.28 82.90-83.25 Edelweiss Securities 83.50-83.60 83.70 Emkay Global Financial Services 83.30-83.40 - Finrex Treasury Advisors LLP 83.50 83.30 HDFC Bank 83.00-83.50 82.50-83.00 IBM India 83.50 83.90 IDBI Bank 83.60-83.75 -  IDFC FIRST Bank 83.10 82.90 Karur Vysya Bank 83.10 82.90 Kotak Mahindra Bank  82.75-83.00  - Kotak Securities                 83.50 84.00 Large Engineering Co 83.10 - Large State-owned oil co 83.40-83.45 - LKP Securities 83.70 82.00 Mecklai Financial Services 83.00 82.75 RBL Bank 83.20-83.40 - Reliance Securities 83.50   Shinhan Bank India 82.90-83.70 82.65-83.80 SMC Securities 82.80-83.00 82.30-82.50 Median 83.30 82.90 End   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Yield on 10-yr gilt seen 7.03% Apr-end on low H1 supply

Informist, Monday, Apr 1, 2024 By Anupreksha Jain and Siddhi Chauhan MUMBAI – Government bond yields are likely to ease a bit in April, the first month of the new financial year, on account of sharply lower than expected government borrowing in the first half of 2024-25 (Apr-Mar). The favourable demand-supply dynamics may help ease yields somewhat, but are not expected to trigger a large fall, market participants said. According to the median of estimates of 15 money managers, treasury heads, and economists polled by Informist, the yield on the 10-year benchmark 7.18%, 2033 bond is seen at 7.03% at the end of April against 7.06% on the last trading day of March. Money markets were shut on Friday for Good Friday and today on account of for banks' closing of yearly accounts. The government on Wednesday said it will borrow 7.50 trln rupees through dated securities in Apr-Sep compared with 8.88 trln rupees borrowed in the same period of last year. The Apr-Sep borrowing accounts for 53.08% of the gross market borrowing target of 14.13 trln rupees in 2024-25, down from 57.55% the previous year. "Less supply in the H1 (Apr-Sep) is the major boost to the market," Dhawal Dalal, president and chief investment officer of fixed income, Edelweiss Asset Management, said. "However, the market is not seeing any sharp fall in yields (in 7.18%, 2033 bond) in April as the supply of the 10-year bond is more." The central government is set to borrow 24% of its first half needs through the 10-year paper, as against 20.5% a year ago. Money market participants said the government may have avoided front-loading its borrowing, as it would expect increased demand for gilts from foreign investors after the inclusion of India's gilts in global bond indices operated by JP Morgan in June and Bloomberg in January, both of which will happen in a phased manner over 10 months. Earlier today, DBS Bank said it expects $30 bln-$40 bln worth of debt inflows due to the index inclusions. Respondents expect inflows from foreign portfolio investors to be moderate this month and not impact gilt yields too much, particularly ahead of the US Federal Open Market Committee's rate decision on May 1. FPIs have bought nearly 770 bln rupees worth of index-eligible gilts since October. In March, foreign investors bought 70.98 bln rupees worth of these fully accessible route bonds, down from 176.71 bln rupees in February, as per data from Clearing Corp of India. The inflows are expected to be more robust in May and June, closer to the inclusion of Indian government bonds in the JP Morgan index. Despite the positives on supply, the yield on the 10-year benchmark gilt has not fallen below the crucial mark of 7.0% since Jun 13. One of the main reasons for this is the uncertainty over rate cuts, with expectations of rate moderation in the US constantly being pushed back as the world's largest economy shows robust growth and employment, while inflation has not fallen uniformly. Traders expect any delay in US Fed rate cut to further push back domestic rate cuts. Market participants expect status quo on both rates and policy stance in Reserve Bank of India's Monetary Policy Committee meeting this week. "On the domestic front, RBI policy will be a status quo policy and hopefully FPI invest flows will pick up," said Deepak Agrawal, chief investment officer – debt at Kotak Mahindra Asset Management Co. "Bond inclusion will keep the yields supported." Despite a fall in the share of supply in short-term papers in Apr-Sep from the previous year, respondents don't see yields of bonds maturing below five years falling immediately. The current policy stance of the RBI is "withdrawal of accommodation", which suggests that it will keep liquidity conditions in the banking system a little tight. This, in turn, is expected to limit the fall in yields of short-term bonds, they said. Though liquidity in the banking system is now in surplus due to year-end government spending, it is again expected to turn into deficit soon. The liquidity in the banking system was in a surplus of 612.64 bln rupees as on Sunday. "Fundamentally, we are quite bullish, but on the technical side we still need confirmation on where our and US yields will go. Demand-supply looks favourable, and on the policy, we don't think the RBI will make any changes this time around either," Harsimran Sahni, executive vice president head - treasury at Anand Rathi Global Finance, said. The new RBI norms on investments by banks that came into effect today are unlikely to have a major impact on the trajectory of bond yields, respondents said. According to the new norms, banks can classify their entire bond investment portfolio under any of three categories – held-to-maturity, available-for-sale, and fair value through profit and loss. The norms have done away with the 90-day ceiling on holding period under held-for-trading books and the statutory ceiling on held-to-maturity bonds, which was 23% of net demand and time liabilities. However, since this is the first month, participants will try and assess its impact on trading activity. The following are the estimates for yield levels/range in percentage for the 10-year benchmark bond at the end of April: Institution   Yield on 10-year benchmark bond Anand Rathi 6.98-7.08% Axis Mutual Fund 7.00-7.05% CSB Bank 6.98-7.00% Edelweiss Mutual Fund 7.00-7.10% Emkay Global Financial Services 7.10% HDFC Bank 7.00-7.10% IDBI Bank 6.95-6.90% IDFC First Bank 7.05% Kotak Mahindra Bank 7.05-7.10% Kotak Mutual Fund 6.95-7.05% Ujjivan Small Finance Bank 6.95-7.00 State-owned bank 7.00% State-owned bank 7.00-7.10% LIC Mutual Fund 7.00-7.15% RBL Bank 7.00-7.05% End   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Deep Dives

Govt food plans may jeopardise commodity market play

Informist, Friday, Apr 12, 2024 Abhijit Doshi MUMBAI - The breakneck pace at which the official agencies have been procuring food grains this year is emblematic of the government's determination to sustain its welfare measures, such as free food supply to a large section of the population as also to ensure food availability at reasonable prices to others. As of Apr 11, the official agencies had procured 1.22 mln tn of wheat, a huge jump from 941,086 tn a year ago. The government has an ambitious wheat procurement target at 37 mln tn for 2024-25 marketing season, although market believes 32 mln tn may be a more realistic figure. Similarly, official agencies have procured 71 mln tn of paddy, equivalent to 47.41 mln tn of rice, as of Monday, in the procurement operations that began in October. While this is slightly lower than 73 mln tn of paddy procured in comparable period last year, it is important to note that the government has covered up more than 76% of its procurement target at 62.10 mln tn. The government had to undertake such a largescale operation to meet the requirement for its various welfare measures, the most ambitious among them being providing free food to as many as 800 mln people, said to be the world's largest welfare scheme of its kind. Under this scheme, people are provided with free supply of wheat, rice, pulses, and edible oil, in a pre-defined proportion. And then there are a few other schemes under which the government provides subsidised food grains to people who qualify for the schemes.  Given the speed with which the government is buying grains, mostly from farmers, it is no surprise that many experts believe it may overshoot its procurement targets. The government has also hiked the minimum support prices at which it undertakes procurement from growers, to incentivise them to sell their crops to the official agencies like Food Corp of India and National Agricultural Cooperative Marketing Federation of India. What is pressing the government to pace up its procurement is a sharp fall in the stocks with the Food Corporation of India, its main buying and selling agency. According to data by the FCI, wheat stocks with the government dipped to a seven-year low of 9.7 mln tn as of Mar 1, and slipped below the buffer norm of 13.8 mln tn--operational stock of 10.8 mln tn and strategic reserve of 3 mln tn--thanks to record open market sales, free food grain scheme and lower output last year. The open market sales scheme of rice and wheat, under which the government used to auction the grains to the market, has been discontinued. With the government taking away a major portion of farm output--roughly estimated at 30% in case of wheat in 2024-25 season--and the auction sale abandoned, market could be majorly deprived of supply. The high levels of procurement achieved so early in the year is attributable to a number of measures the government adopted to meet the targets. It started procurement operations early this year in March rather than the usual norm of April. The government has also taken other measures this year to facilitate its procurement campaign, not only for cereals but also for sugar, pulses et al. It has raised the minimum support prices at which it procures the grains for various crops, some of the raises being hefty. A few state governments have also announced bonus over and above the MSP, to lure farmers. In addition, the government has, according to media reports, advised private traders to avoid purchasing grains from farmers for sometime, until the government is satisfied with its stocks. Besides, the government has imposed restrictions on stocks that private traders can hold, as well as restrictions on exports, so that grains are available for its procurement programmes. Market participants have also to declare their stocks of various grains on a weekly basis. For 2024-25 (Apr-Mar), the central government has set the minimum support price for wheat 7% higher on year, at 2,275 rupees per 100 kg. To encourage farmers to sell their wheat crop to the state government, Madhya Pradesh and Rajasthan have announced a bonus of 125 rupees per 100 kg over and above the minimum support price, taking to 2,400 rupees the total payable to farmers. Farmers are now selling their produce to the government as the minimum support price in Madhya Pradesh and Rajasthan is higher than the prices prevailing at the mandis in these states. The prices of mill-quality wheat in the Indore mandi were at 2,360-2,445 rupees per 100 kg, which is below the minimum support price notified by the government. On other hand, in cases where the market prices are higher, the government has, at least in some cases, decided to buy the product at the higher market prices. For instance, the government has, according to media reports, decided to buy chana at market prices, which are higher than the MSP, pan-India, from farmers.  It is not a new thing for the Indian government to worry about food inflation and adopt measures like stock restrictions to curb it. What is noteworthy, however, is that this is for the first time that the government has entered the field of retail distribution of food grains. It has started selling Bharat atta, Bharat chawal or rice and Bharat dal directly to retail customers, at subsidised rates. This ambitious programme of the government has resulted in some unexpected, probably unintentional, outcomes. The increasing responsibility that New Delhi has adopted of collecting these food items from farmers and distributing them to consumers at subsidised rates is slowly pushing the retail trade to the sidelines. Anecdotal and conversational evidences, too, support this narration. This is also evident from the recent decline in arrivals of grains in the open market. For example, wheat arrivals in the markets at Indore, Madhya Pradesh, last week were 5,200-6,200 bags (1 bag = 60 kg) a day, compared with 10,000 bags last year, traders said. According to the agriculture and farmers' welfare ministry's AgMarknet, arrivals in Kota, Rajasthan, were 18,213 tn in the first week of April, against 33,610.5 tn at the same time last year. As the Food Corporation of India sells grains and other products to consumers, retail traders seem to have a much smaller role, if any, to play. Although some circles believe that these measures are aimed at national elections, scheduled in the next few weeks, and could be reversed later, experience shows that steps taken in the interest of people’s welfare are difficult to reverse. Any government would find it difficult to drop schemes like free food for 800 mln people. Moreover, the government, as per media report, is now planning to penetrate the millets market. Obviously, all this would leave much smaller role for private trade in the country. Concretely, the position could aggravate. Traders suspect that the government's estimates of output of various crops this year are on the higher side, and actual crop may be lower. And the government would endeavour to take away a large portion of whatever supply is available. Moreover, the government is selling much of the grains at a fixed price, leaving little scope for prices to move according to market forces. While the government is busy executing its welfare measures, the retail traders' span may shrink and market play may be a collateral damage. 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.

Headline inflation eases in March but elephant has miles to go

Informist, Saturday, Apr 13, 2024 By Shubham Rana NEW DELHI – The March print of India's headline inflation had many positives. The CPI inflation print of 4.85% was the lowest in 10 months, and was the first sub-5% reading since October. Core inflation, at 3.3%, was at the lowest level since 2012. Sequentially, too, the reading was positive as the overall index remained flat from the previous month, against the average month-on-month rise of 0.3% seen in March every year since 2013. The inflation outlook is also benign. The Reserve Bank of India forecasts CPI inflation will average 4.5% during the current financial year that started Apr 1, down from 5.4% in 2023-24. But economists have flagged several risks which could push headline inflation higher this year than the central bank's expectation. The risks mainly emanate from weather-related vagaries and geopolitical tensions, both the factors whose ramifications cannot be controlled by the monetary policy. These are what are generally known as supply-side risks to inflation.   "The key risk to inflation outlook remains from food inflation which remains elevated," IDFC FIRST Bank Economist Gaura Sen Gupta said in a report after the latest inflation numbers were announced. While food inflation, which makes up for nearly half of the CPI basket, eased to 8.52% in March from 8.66% a month ago, it has stayed above 6.00% for six consecutive months now. Within food inflation, both perishable and non-perishable food items are seeing price pressures. Vegetable inflation moderated to 28.34% in March from 30.25% in February. However, vegetable inflation has been in double digits since November, and above 20% for four straight months. While the prices of onion and tomato have been relatively stable in recent months, after rising sharply several times last year, the prices of potato are now on the rise. Among non-perishable food items, prices of cereals and pulses remain sticky. Cereals' inflation rose in March after falling for seven consecutive months, while pulses' inflation has been in double digits since June. Inflation in eggs and spices also remains in double digits, which is another cause of concern. "Food inflation impacts people at the bottom of the pyramid more than the people belonging to upper income group. The unfavourable base affect may aggravate vegetables inflation further at least till June 2024," India Ratings and Research said in a note on Friday. Vegetable inflation was negative between January and June last year. Apart from the base effect, the above normal maximum temperature, as projected by the India Meteorological Department for Apr-Jun, may lead to sporadic supply shocks for vegetables. The IMD has forecast there will be more heat wave days than usual during Apr-Jun. The weather agency expects 10–20 days of heat wave conditions in different parts of the country during Apr-Jun compared with the average of four to eight days for the period. "As we enter the summer months, vegetable prices are likely to rise on a month-on-month basis. The impact of heatwave conditions will need to be monitored," Sen Gupta noted.   According to QuantEco Reserach, a severe heat wave could add around 200 basis points to inflation for perishable food items. "This could potentially translate to 25-30 bps of upward bias to headline CPI inflation estimates for 2024-25, ceteris paribas," QuantEco Research said in a report. But inflation in items such as vegetables tends to be transient. On other hand, inflation in perishable items remains sticky for a longer period. Fortunately, the outlook on key non-perishable food items is a positive one. Private weather forecaster Skymet has projected southwest monsoon rainfall to be normal during the Jun-Sep season. As per Skymet, India is likely to see rainfall to the tune of 102% of the long-period average during the period.  "A normal monsoon holds the key for the upcoming kharif season as reservoir levels remain low compared to 10-year average in certain regions of the country. The arrival of the rabi harvest in the market is also expected to contribute to the cooling of food inflation," CareEdge Ratings said in a report after the release of inflation data on Friday. The water level in 150 key reservoirs of the country was 58.308 bln cubic mtr as of Friday, down 17% from a year ago and 5?low the average of the last 10 years, according to data from the Central Water Commission. The current water level is 33% of the total live storage capacity of these reservoirs. The lower water levels have already affected the rabi crop and the prospects of kharif crops would depend on the monsoon rains. Water-intensive crops such as rice and sugarcane are likely to see a shortage in production. The sowing of summer crops, including pulses and paddy, in southern states of Telangana and Andhra Pradesh is significantly lower compared with the year-ago period. Andhra Pradesh and Telangana are among the top 10 producers of pulses. Telangana and Andhra Pradesh are also among the top three producers of rice during the rabi season. In such a scenario, a normal monsoon becomes a key factor to get any respite from high food inflation, economists said. The second factor which can hinder a moderation in inflation is geopolitical risk. "The external risks to the inflationary outlook have risen over the past couple of months," CareEdge Ratings said in the report. Amid the ongoing conflict between Israel and Palestinian militant group Hamas, Iran has vowed to take revenge on Israel for the Apr 1 airstrike on its embassy compound in Damascus that killed a top Iranian general and six other military officers. As tensions rise, Brent crude oil prices have risen to above $90 per barrel for the first time since October. Prices of other global commodities such as industrial metals have also surged since February. "Elevated commodity prices have the potential to percolate into the domestic consumption basket, particularly at a time when both rural and urban demand is experiencing a recovery aiding higher pass-through." Economists see limited impact of the rise in crude oil prices on India's CPI inflation as long as retail prices of petrol and diesel are not increased. Despite these potential risks, inflation is projected to ease this year unless these risks play out. The reduction in prices of cooking gas, as well as retail prices of petrol and diesel, helped reduce headline inflation in March. Economists expect this trend to continue over the next few months as long as these prices are not increased. Some analysts expect these prices could be raised after the General Elections are over. "While vegetable prices are currently showing some increase (especially for potatoes), the effect from the reduction in LPG (Liquefied petroleum gas) prices as well as petrol and diesel prices should continue to have a dampening impact on April inflation," said Shreya Sodhani, regional economist, Barclays, in a report on Friday. Barclays expects inflation to be 4.8% in April. The RBI has reiterated that it is committed to aligning inflation to its 4% target. "Two years ago, around this time, when CPI inflation had peaked at 7.8 per cent in April 2022, the elephant in the room was inflation," RBI Governor Shaktikanta Das had said on Apr 5. "The elephant has now gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis," Das had said while detailing the outcome of the Monetary Policy Committee meeting earlier this month. The RBI forecasts inflation will fall below 4% during Jul-Sep, before it rises to above 4% in the second half of the financial year. Considering the projections, and the risks to the inflation outlook, the elephant appears considerably far from the forest even though it has gone closer to the forest. As such, economists believe that the central bank is unlikely to lower the repo rate from the current 6.50?fore August.  End   Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Rise in paddy prices vis-a-vis rice hits millers

Informist, Wednesday, Apr 10, 2024 By Taniva Singha Roy MUMBAI – Millers are facing the heat of an inverted market as paddy prices have risen even as rice prices have remained more or less stable. The increase in paddy prices due to lower output has squeezed the profit margin of millers as prices of common rice have stagnated, market participants said.  Since the government is procuring paddy at the minimum selling price of 2,183 rupees per 100 kg, millers have to offer competitive rates to farmers. On the contrary, rice prices have remained stagnant as the restrictions on export and the diversion of subsidised rice have led to higher availability in the market, they said. The price of paddy has risen by about 200 rupees in the past two months, whereas common rice has stabilised after falling 200–300 rupees since January, a rice miller from Burdwan said. Higher paddy rates and processing costs are adding to the expenses, the rice miller said, adding that the average price of paddy is around 2,320 rupees per 100 kg, whereas common rice is around 3,200 rupees per 100 kg. It takes about 100 kg of paddy to produce about 66 kg of rice. The narrowing gap between paddy and rice prices is hitting the margins of rice millers. Millers are finding it difficult to pay employees and if this trend continues, mills will have to shut, the miller from Burdwan said. “I have 600 employees working for me. If the business shuts, everyone will lose their job,” he said. The problem has been aggravated by the entry of the government into the retail market in February through the sale of ‘Bharat’ rice at a subsidised rate of 29 rupees per kg, which has put a lid on rice prices. "People are buying cheap rice from the public distribution system and selling it in the open market or to traders at a higher price," said Neeraj Khandelwall of Jasoria Rice Mills in Burdwan. But at the same time, paddy prices have been rising due to tight supply. According to the agriculture ministry’s second advance estimates, kharif and rabi rice output is projected to decline 1.4% on year to 123.8 mln tn. Because of the rising prices, large-scale farmers have started to stock up on paddy, so rice millers have to pay a higher price, said a Delhi-based researcher in agri commodities.  Stricter monitoring of stocks by the government has also subdued rice prices. In February, the government directed traders, wholesalers, retailers and millers to disclose rice stocks held by them every Friday in a bid to control domestic prices. Traders are not holding stocks as they have to disclose stocks every Friday, said Ravi Shankar, a Telangana-based trader. "By this time we had expected rice prices to reach 90 rupees a kg (in retail markets)," Ravi Shankar said, adding that currently, the average price of non-basmati white rice in states ranges from 40 to 70 rupees per kg. The lower rice supply is also partly on account of lower production in West Bengal, one of the largest producing states. Production of rice in the state has slipped to 11.52 mln tn or a share of 9.3% in the national output in 2023-24 from 15.88 mln tn or 13.4% share in 2019-20, according to data from the agriculture ministry.  Rice prices, which had risen initially, fell before steadying, Naha Kumar Ghosh, a trader from Barashat in West Bengal, said. The price of Sona Masoori, a premium non-basmati variety rice, was steady at 5,500-5,600 rupees per 100 kg. Prices have been steady for more than a month as traders and retailers are buying to meet requirements and are not holding stocks in the pipeline. Rice prices are steady as a result of the export ban and as soon as the ban is lifted, prices will rise, Ravi Shankar said. "Common rice prices will be range bound due to the export ban on non-basmati white rice," the Delhi-based researcher on agri commodities said. The trend will reverse if the government resumes exports of non-basmati white rice after the elections, said market participants.  However, experts doubt whether the government will revoke the export ban on rice after the elections. "I don’t think the government will rethink the decision on rice export as production is very low. Rice procurement is also down, so I don’t think they will allow exports," said Rahul Chauhan, director of IGrain India, an agri commodity research centre. Chauhan said if the government removes the export duty of 20% on parboiled rice, then the market would behave differently. But it would not be in the interest of the government to allow exports anytime soon, he said. End   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.  

India's laggard private consumption growth seen perking up FY25

Informist, Tuesday, Apr 9, 2024 By Shubham Rana NEW DELHI - India’s consensus-beating economic growth, the fastest among major economies, is perplexing. The overall GDP expansion for the just concluded fiscal year is estimated close to 8%, investment growth in double digits, but private consumption is seen lagging at about 3%. Economists expect a turnaround in consumption growth in the current financial year started Apr 1, while investment growth is set to remain robust, ensuring what some term a "better quality" of growth. What has pulled down the private final consumption expenditure to a three-year low of 3.0% in 2023-24? The most often cited answer by economists is poor demand from the rural economy. Since the COVID-19 pandemic, India's consumption story has been a mixed one – the growth largely driven by urban India with rural demand struggling. "A lot of the weakness in consumption has come from the rural side," Sakshi Gupta, principal economist at HDFC Bank, said. Rural demand took a hit last year because of high food inflation and lower income due to erratic and below-normal monsoon rains, economists said. Last year, rains during the crucial southwest monsoon season saw a deficit of 5.6%. Food inflation averaged 6.8% in 2023, much higher than the pre-pandemic levels. In 2019, food inflation had averaged 3.8%. The rural scenario is, however, perking up. "We think rural demand will improve going forward, and there are early signs of that beginning to happen," Gupta said. Two-wheeler vehicle sales, considered a proxy for rural demand, picked up in the second half of the financial year ended Mar 31. Sales of two-wheeler vehicles surged 25.5% on year in Oct-Feb, as against a growth of 4.1% in the first half of the year, latest data from the Society of Indian Automobile Manufacturers shows. Food inflation is expected to moderate this year, thanks in largely to a statistical effect of a high base. Monsoon rains are also expected to be normal this year, with private weather forecaster Skymet having today projected southwest monsoon rainfall to be 102% of the long period average during the Jun-Sep season. "With rural demand catching up, consumption is expected to support economic growth in 2024-25," Reserve Bank of India Governor Shaktikanta Das had said on Friday. "Strengthening of rural demand, improving employment conditions and informal sector activity, moderating inflationary pressures and sustained momentum in manufacturing and services sector should boost private consumption," Das said after the Monetary Policy Committee's first meeting of the new financial year. HDFC Bank's Gupta sees a gradual recovery in consumption. "It will be a gentle recovery, things will incrementally be better in 2024-25 compared to 2023-24," Gupta said. Some economists expect the private final consumption expenditure for 2023-24 to be revised higher when the National Statistical Office releases the provisional estimates for 2023-24 GDP growth on May 31. "There are several reasons to believe that consumption growth is not as slow as GDP data suggests," Pranjul Bhandari, chief India economist at HSBC, said in a note last month. "Consumer goods imports, personal services, and non-housing personal loans have been rising quickly. We believe the private consumption data will be revised up in subsequent GDP revisions," Bhandari noted. CONSUMPTION-INVESTMENT WEDGE India's GDP expansion in 2023-24 has largely been led by robust investment growth, which in turn has been driven by the government's capital expenditure. The government has increased its capital expenditure by more than three times in the past five years. It has set a capex target of 11.11 trln rupees for 2024-25, as against a spending of 3.37 trln rupees in 2019-20. According to Bhandari, while the government's capex has risen meaningfully, public sector enterprises are cutting back on their capital spending, leaving the overall public investment ratio below pre-pandemic levels. "Instead, it is private investment that has risen, led by 'dwellings & structures'. This chimes well with the rise in house sales and housing loan growth," the HSBC economist said in the report. Bhandari, however, cautioned that it would be premature to call it the start of a new investment cycle at this point, as the other important component of investment, 'machinery and equipment', remains weak. Broadly, the outlook on private investment appears bright. "The prospects of investment activity remain bright owing to upturn in the private capex cycle becoming steadily broad-based," RBI Governor Das said after the policy review. According to the central bank, several industries are seeing an improvement in investment activity – sectors such as food processing, beverages and tobacco, textiles, chemicals and chemical products, cement and cement products, iron and steel, electronics, construction, telecommunications, and roads and railways. While the growth in investment is likely to stay higher than that in consumption, the difference between the two could narrow, Bhandari said. This, she added, would imply that the country’s overall growth is better balanced between consumption and investment than widely believed. "GDP growth in 2023-24 has been supported a lot by one-off factors," said Anubhuti Sahay, head of South Asia economics research (India) at Standard Chartered. "Inadequate monsoon allowed construction, mining activity to continue unabated and electricity demand increased. Secondly, corporate sector profitability was extremely good because commodity prices fell on a year-on-year basis in 2023-24. Public capex continued at a very strong pace. All these factors supported GDP growth," Sahay said. While the one-off factors cited above are likely to fade away, leading to a moderation in headline GDP growth from 7.6% in 2023-24 to 7.0% in 2024-25, the quality of growth is likely to be much better, driven by a revival of consumption demand, Sahay said.  End Informist Media Tel +91 (11) 4220-1000 Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

Prithvi Finmart's Jain expects gold, crude to rise more 2024

Informist, Tuesday, Apr 9, 2024 --Prithvi Finmart's Jain: See MCX gold at 75,000 rupees/10 gm by Dec --CONTEXT:Prithvi Finmart Director Manoj Jain's comments in interview --Prithvi Finmart:Gold may fall to 65,000 rupee if no US rate cut 2024 --Prithvi Finmart's Jain: Don't see much downside in gold currently --Prithvi Finmart Jain: MCX silver may hit 100,000 rupees/kg by Dec --Prithvi Finmart's Jain: See WTI crude at $94/bbl by June-end --Prithvi Finmart's Jain: Base metal prices to rise more in coming mos --Prithvi Finmart's Jain: Copper, aluminium look promising this year  --Prithvi Finmart's Jain: LME copper to hit $9,600/tn in Jun quarter --Prithvi Finmart's Jain: See LME aluminium at $2,600/tn by June --Prithvi Finmart's Jain: LME zinc to touch $2,850/tn in Jun quarter --Prithvi Finmart's Jain: Recovery in China econ aiding base metals  --Prithvi Finmart's Jain: Commodities to be highly volatile this year --Prithvi Finmart's Jain: No need for India to import wheat as of now By Sandeep Sinha, J. Navya Sruthi, and Romeo M. Raj MUMBAI – Prices of base metals, bullion, and crude oil are likely to rise further in 2024 due to the recovery seen in China's economy, expectations of rate cuts by the US Federal Reserve, and geopolitical tensions, said Manoj Kumar Jain, director at brokerage firm Prithvi Finmart.   "Actually, we are not surprised (by the recent rally in gold) because we have already released our buy report on gold in the month of January, and we were targeting $2,350 (per ounce on COMEX) odd levels and even in the domestic market we were targeting 70,000 (rupees per 10 gm) odd levels," Jain told Informist in an interview. Jain said the firm has scaled up its targets for 2024 due to the recent price rally in bullion, crude oil, and base metals. "We are expecting the rally could further continue in the next two to three quarters," he said. By the end of 2024, gold prices are likely to reach $2,500-$2,550 levels on COMEX and 75,000 rupees per 10 gm on the Multi Commodity Exchange of India, Jain said.   On Monday, the yellow metal touched a new all-time high of $2,372.5 per ounce on COMEX. On the domestic exchange, it hit a new lifetime high of 71,249 rupees per 10 gm today. The reason behind the rally was aggressive buying of physical gold by central banks, geopolitical tensions in West Asia, and rising rate cut hopes by the US Federal Reserve, Jain said. The firm sees the possibility of at least three rate cuts in the US this year. Similarly, the firm expects crude oil prices to rise to $94 per bbl by the end of June. Increasing hopes of early rate cuts by the US Fed, rising crude oil demand from China and the US, and production cuts by the Organization of the Petroleum Exporting Countries and allies, are likely to drive crude oil prices higher, Jain said.  At the same time, rising crude oil prices will lead to a rise in inflation, which may defer rate cuts in the US beyond this year. In such a scenario, Jain sees gold prices correcting to $2,260 per ounce on COMEX. If this level is breached, and in the worst case, gold prices could fall to $2,100 per ounce once again and 64,000-65,000 rupees per 10 gm on the MCX. "As of now, I am not expecting any worst case," Jain said. If crude oil prices rise above $92 per bbl, then there is a possibility that the OPEC and allies will ease their output cuts and "there will not be any impact on the rate cut side," Jain said.  When asked about the demand for physical gold amid high prices, Jain said initially there would be a slack in physical gold buying. However, the upcoming marriage and festival season would lead to a surge in demand, he said. Also, there will be recycled gold coming into the market, where people will exchange the old jewellery for new, he added. "So, initially there may be some decline in the physical demand. But gradually it will pick up," Jain said. "Every time is a good time for buying gold," Jain said. We have seen gold's track record for the last 40–50 years, on a yearly basis, and we observe that gold has always given a positive return due to the geopolitical tensions, depreciation of many global currencies, and inflation continuously supporting gold prices. "I see this momentum will continue for the coming years. For those who missed the rally and want to start the investment in gold, then every time is the right time," he said. INDUSTRIAL METALS Jain expects silver prices to reach $35-$36 per ounce on COMEX and above 100,000 rupees per kg on the MCX, by the end of 2024. Developments in the automobile and solar energy sectors and positive cues from base metals are major silver price boosters. Commenting about base metals, Jain said improving China's economic data and the market’s expectations of early rate cuts by the US Fed are supporting base metals prices. "Copper prices hit around a 14-month high on the London Metal Exchange and prices crossed $9,300 per tn last week. And even the aluminium and zinc prices are also catching the rally of copper," Jain said. For the current year, Jain is bullish on copper and aluminium, due to increased demand from the power sector, especially the green energy sector. "We are expecting $9,600 per tn for copper on the LME in the next quarter. And for aluminium, we are expecting $2,600 per tn and for zinc $2,800-$2,850 on LME," Jain said. Similarly, on the MCX, the firm has kept a target for copper at 840–850 rupees per kg, zinc at 260 rupees per kg, and aluminium at 245 rupees per kg. EQUITY MARKETS With the Indian equity market sustaining at higher levels, Jain said the Indian equity market is behaving totally differently compared to other global markets. The main supporting factor is, we have a stable government at the Centre for two terms and market reports suggest that this government is returning to power for the third term, Jain said. "The government policy will continue for another five years, which is positive for the market." Due to the US elections in November, the volatility in crude oil, gold, and base metals would definitely increase, Jain said. He expects the volatility to rise from the June quarter. Despite international reports and domestic experts saying that India might have to import around 1 mln-2 mln tn of wheat, Jain believes that the country is self-sufficient in terms of food grain. "As of now, there is no need to import (wheat) and looking at the better monsoon predictions...La Nina condition will emerge from June onwards. So, I don't think there will be any need for importing wheat," Jain said.  This year's wheat production is normal compared to the previous year's, Jain said. Even though there were some adverse monsoon conditions during March in some areas, the overall production of the food grain crop is good, he said.  End US$1 = 83.31 rupees   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.

FADA head sees passenger car sales growth moderating in FY25

Informist, Tuesday, Apr 9, 2024 --FADA head: See FY25 passenger car sales growth in low single digit --CONTEXT: India's passenger car sales grew 8% in FY24 --FADA head: See 2-wheeler sales up in high single digit in FY25 --CONTEXT: India's two-wheeler retail sales grew 9% in FY24 --CONTEXT: FADA head Singhania's comments in interview to Informist --FADA head: See FY25 tractor sales up in mid-single digit vs 8% FY24 --FADA head: See FY25 CV sales up in mid-single digit vs 5% FY24 By Darshan Nakhwa  MUMBAI – Growth in India's passenger vehicle sales is expected to slow down to a low single digit in 2024-25 (Apr-Mar) from nearly 8% the previous financial year, Manish Raj Singhania, president of the Federation of Automobile Dealers Associations, told Informist in an interview. However, sales may be better if rainfall is sufficient, borrowing costs fall, and demand picks up after the General Elections, he said. By comparison, sales of two-wheelers, commercial vehicles, and tractors are seen growing at more or less the same pace as in 2023-24, he said. "The passenger vehicle segment is starting next (new) financial year on a high note and surpassing any kind of peak is always difficult," Singhania said. In the year ended Mar 31, car sales rose to an all-time high of 3.95 mln units. The growth was driven by several factors. First, the availability of cars improved as the industry overcame the supply chain disruptions caused by the COVID-19 pandemic. Second, strong demand for sport utility vehicles helped offset the weak demand for small cars; in fact, sport utility vehicles accounted for half the passenger vehicle sales in 2023-24. Lastly, new launches and improved road infrastructure helped boost demand. In the current financial year, the introduction of new electric vehicles is expected to boost demand for passenger vehicles. India's top four automakers--Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Tata Motors Ltd, Mahindra & Mahindra Ltd--which have a combined market share of 80%, are expected to introduce at least one electric vehicle each during the year. "There is a lot of excitement in terms of new model launches. Though the electric vehicle penetration is still very low at around 2.5% (of total passenger vehicle sales), the excitement is there," Singhania said. "Currently, customers are buying electric passenger vehicles out of passion, not out of necessity. This is in spite of the electric vehicle being expensive compared to an internal combustion engine option." Electric vehicle penetration in India is expected to increase as battery prices, which account for nearly half the vehicle cost, come down as new production capacity gets added across the world and mining of precious minerals needed for batteries becomes more efficient, he said.  BUMPY ROAD FADA expects the Reserve Bank of India's decision to keep the benchmark repo rate unchanged at 6.5% to negatively affect retail sales of all vehicles in the near term, especially sales of entry-level vehicles, as buyers in this segment are extremely price-sensitive. The entry-level passenger vehicle segment is already struggling and needs support, Singhania said. High interest rates are a dampener for sales as most first-time vehicle purchases are funded by loans. On Friday, the RBI's Monetary Policy Committee left the repo rate unchanged for the seventh consecutive time since the rate-tightening cycle began in May 2022. The RBI has raised the benchmark rate by 250 basis points since May 2022. The Lok Sabha elections are also likely to affect demand for most vehicle sales, Singhania said. "We saw a dip in sales of passenger and commercial vehicles during the last Vidhan Sabha elections in large states - Chattisgarh, Madhya Pradesh and Rajasthan - because of restrictions on carrying cash. But immediately after the election, we saw a huge spike in retail sales," he said. The trend is likely to be repeated during the Lok Sabha elections, to be held in April and May, Singhania said. Consumers who want to pay in cash are expected to defer their purchases for a short term, but sales are likely to spike post elections. Sales of two-wheelers, which account for around 70% of vehicle sales, are expected to grow by high single digits in 2024-25, almost the same as the 9% growth clocked in 2023-24. However, there is a chance these sales may grow by double digits if government spending increases after the elections and if the monsoon is better than last year, according to Singhania. As per initial predictions, rainfall is expected to be above average this year, with the El Nino effect tapering off. The combination of better crop output and higher minimum support prices by the government is expected to boost rural demand, which in turn is likely to drive two-wheeler sales, Singhania said. In India, most two-wheelers are sold in rural areas. In 2023-24, two-wheeler sales rose slightly over 9% to 17.51 mln units, driven by strong demand for premium models and electric vehicles, as also new launches, according to FADA. However, sales of two-wheelers are yet to cross their 2018-19 record of 21 mln units. Over the last few years, prices of two-wheelers have shot up sharply owing to an increase in raw material costs and as manufacturers have had to comply with new emission norms.  The two-wheeler segment has had a mixed growth trajectory over the last few years. While sales in the segment in 2020-21 were nearly 32% lower than in the previous year on account of the COVID-19 pandemic, sales saw a slight improvement of around 4% in 2021-22. In 2022-23, sales surged nearly 19%, but were still the lowest in the last seven years, according to the association.    Singhania said tractor and commercial vehicle sales are expected to grow by mid-single digit in 2024-25. Commercial vehicle sales will depend on government spending after the election, he said. Demand for commercial vehicles is expected to be muted in the first half of the year due to elections, but is likely to pick up in the second half as government spending resumes, he said. In the year-ended Mar 31, commercial vehicle sales rose nearly 5% to 1.01 mln units, but the sales growth moderated after an upswing of nearly 33% in 2022-23. After the industry transitioned to the second phase of the Bharat Stage-6 emission norms in April 2023, prices of commercial vehicles rose by mid-single digits, which slightly affected demand. Tractor sales rose 8% on year to 892,313 units in 2023-24, far better than expected. At the beginning of 2023-24, a lot of manufacturers were sceptical about closing the year on a positive note due to the El Nino weather phenomenon, Singhania said. Tractor sales have surged as the COVID-19 pandemic-induced migration has boosted demand not only for agriculture but also for transport and for carrying construction material, Singhania said.  End   Informist Media Tel +91 (22) 6985-4000  Send comments to feedback@informistmedia.com © Informist Media Pvt. Ltd. 2024. All rights reserved.  

Others

Global trade growth to rebound this year; geopolitical tensions pose downside risks: WTO forecast

New Delhi, Apr 10 (PTI) The global trade growth is expected to pick up gradually this year after a contraction in 2023 but regional conflicts, geopolitical tensions and economic policy uncertainty pose substantial downside risks, according to a WTO forecast released on Wednesday. The World Trade Organisation (WTO), however, lowered the trade growth projection for 2024 to 2.6 per cent. In October last year, the organisation had projected that growth would be 3.3 per cent. "Global goods trade is expected to pick up gradually this year following a contraction in 2023 that was driven by the lingering effects of high energy prices and inflation," the WTO said in a statement. "It said the volume of world merchandise trade should increase 2.6 per cent in 2024 and 3.3 per cent in 2025 after falling 1.2 per cent in 2023. "However, regional conflicts, geopolitical tensions and economic policy uncertainty pose substantial downside risks to the forecast," it added. The decline in merchandise exports in 2023 was partly due to falling prices for commodities, such as oil and gas. "In 2024 and 2025, inflation is expected to gradually abate, allowing real incomes to grow again in advanced economies, boosting consumption of manufactured goods. A recovery of demand for tradable goods in 2024 is already evident. "This is related to an increase in household consumption linked to improved income prospects," it added. It also said conflict in the Middle East has diverted sea shipments between Europe and Asia while tensions elsewhere could lead to trade fragmentation. Rising protectionism is another risk that could undermine the recovery of trade in 2024 and 2025, the WTO said. WTO Director-General Ngozi Okonjo-Iweala said, "We are making progress towards global trade recovery, thanks to resilient supply chains and a solid multilateral trading framework, which are vital for improving livelihoods and welfare. "It's imperative that we mitigate risks like geopolitical strife and trade fragmentation to maintain economic growth and stability." The WTO report further said discussions of trade fragmentation are usually mostly concerned with goods trade, but fragmentation can also occur in services trade. It said the data from the US appears to show evidence of recent "friendshoring" in information and communication technology (ICT) services. During 2018 and 2023, the US imports from Asian trading partners (mostly India) fell from 45.1 per cent to 32.6 per cent. On the Red Sea crisis, it said the conflict in the Middle East has threatened sea shipments through the Red Sea and Suez Canal, disrupting trade links between Europe and Asia. Around 15 per cent of global trade passes through the Sea. The Suez Canal at its northern end handles around 12 per cent of world trade, connecting Asian ports to Mediterranean ports in Europe and North Africa. "Attacks on commercial ships in the Red Sea and the Gulf of Aden, which began on 19 November 2023, have had a significant impact on trade," it said, adding, "there are concerns that a prolonged crisis could deal a severe blow to the global economy and reignite global inflationary pressures". It added that attacks on commercial ships in the Red Sea and the Gulf of Aden have led several carriers to avoid transiting via the Red Sea altogether, causing the average number of weekly passages to plunge more than 45 per cent (264 in February 2024, compared to 489 a year earlier). The Red Sea attacks have caused many carriers to reroute vessels around Africa. As a result, the number of passages via the Cape of Good Hope has more than doubled to 2,387 in February 2024 from 1,159 a year earlier. "Rerouting increases the average distance of voyages between Asia and Europe by more than 55 per cent. This results in an extended travel time of six to 25 days, or 17 days on average, compared to the more direct Suez Canal route," the report said. It added that the risk of port congestion and cancelled shipments also increases with rerouting. For example, several car companies temporarily suspended production at European factories due to shipping delays. PTI

ADB raises India's GDP growth forecast for FY25 to 7%; to remain major growth engine in APAC region

New Delhi, Apr 11 (PTI) The Asian Development Bank (ADB) on Thursday raised India's GDP growth forecast for the current fiscal to 7 per cent, from 6.7 per cent earlier, saying the robust growth will be driven by public and private sector investment and improvement in consumer demand. In its April edition of the Asian Development Outlook, ADB said India would remain "a major growth engine" in the Asia and Pacific region. For the 2025-26 fiscal, ADB has projected India's growth at 7.2 per cent. Growth will be robust despite moderating in FY2024 and FY2025, it said. The growth estimates for the current fiscal is lower than 7.6 per cent estimated GDP expansion in 2022-23 fiscal. Strong investment drove GDP growth in the 2022-23 fiscal as consumption was muted, ADB said. The Manila-based multilateral institution in December last year projected the Indian economy to expand by 6.7 per cent in the 2024-25 fiscal. "The economy grew robustly in fiscal 2023 with strong momentum in manufacturing and services. It will continue to grow rapidly over the forecast horizon. Growth will be driven primarily by robust investment demand and improving consumption demand. Inflation will continue its downward trend in tandem with global trends," said the Asian Development Outlook. ADB's growth forecast for the current fiscal is in line with the projections made by the Reserve Bank of India (RBI). The RBI last week had said GDP growth in the current fiscal is projected at 7 per cent on expectations of normal monsoon, moderating inflationary pressures and sustained momentum in manufacturing and services sectors. The triggers for growth in FY2024 will come from higher capital expenditure on infrastructure development both by central and state governments, rise in private corporate investment, strong service sector performance and improved consumer confidence. Growth momentum will pick up in FY2025, backed by improved goods exports and an increase in manufacturing productivity and agricultural output, the ADB said. "Notwithstanding global headwinds, India remains the fastest growing major economy on the strength of its strong domestic demand and supportive policies," said ADB Country Director for India Mio Oka. The Indian government's efforts to boost infrastructure development, while undertaking fiscal consolidation and providing an enabling business environment will help in increased manufacturing competitiveness to augment exports and drive future growth, Oka said. ADB said exports are likely to be relatively muted this fiscal, as growth in major advanced economies slows down but will improve in FY2025. Imports will outgrow exports in 2024-25, driven by strong domestic demand especially for capital goods and intermediate goods. "Monetary policy is expected to remain supportive of growth as inflation abates, while fiscal policy aims for consolidation but retains support for capital investment. On balance, growth is forecast to slow to seven per cent in FY2024 but improve to 7.2 per cent in FY2025," it said To boost exports in the medium term, India needs greater integration into global value chains, ADB added. Net exports will continue to subtract from growth in the current fiscal but improve in 2025-26, ADB said, adding in recent years, India's share in global goods exports has remained stable. A healthy rise of 17 per cent in central government capital expenditure in FY2024 compared to the previous fiscal year together with transfers to state governments will boost infrastructure investment. A new government initiative to support urban housing for middle-income households is expected to further spur housing growth. Private investment is expected to get a boost with stable interest rates. "With inflation moderating to 4.6 per cent in FY2024 and easing further to 4.5 per cent in FY2025, monetary policy may become less restrictive, which will facilitate rapid offtake of bank credit. "Demand for financial, real estate and professional services will grow while manufacturing will benefit from muted input cost pressures that will boost industry sentiment. Expectations of a normal monsoon will help boost growth of the agriculture sector," ADB said. The government's focus on fiscal consolidation, with a targeted deficit of 5.1 per cent of GDP for FY2024 and 4.5 per cent for FY2025, will enable the government to reduce its gross marketing borrowing by 0.9 per cent of GDP in FY2024 and create further room for private sector credit. India's current account deficit will widen moderately to 1.7 per cent of GDP on rising imports for meeting domestic demand. Foreign direct investment will be affected in the near term due to tight global financial conditions but will pick up in FY2025 with higher industry and infrastructure investment. Unanticipated global shocks such as supply line disruptions to crude oil markets and weather shocks that impact agriculture output are key risks to India's economic outlook, it said. The overall health of the banking sector remains robust with the sector continuing to show improved asset quality with gross non-performing assets declining to a 10-year low of 3.2 per cent at the end of September 2023. Established in 1966, ADB, is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. ADB has 68 member countries, 49 of which are from the Asia and Pacific region. For developing economies in Asia and the Pacific, ADB forecast GDP to expand by 4.9 per cent on average this year, as the region continues its resilient growth amid robust domestic demand, improving semiconductor exports, and recovering tourism. "Policy makers should remain vigilant, however, as there are a number of risks. These include supply chain disruptions, uncertainty about US monetary policy, the effects of extreme weather, and further property market weakness in the PRC (People's Republic of China," ADB said. PTI

Middle East tensions: AI, Vistara opt for alternative flight paths for certain overseas flights

New Delhi, Apr 13 (PTI) Amid escalating tensions in the Middle East, Air India, and Vistara on Saturday said they have decided to opt for alternative flight paths for some of its flights to and from India. On Friday, India asked its citizens not to travel to Israel and Iran amid increasing fears that Tehran may launch an attack on Israeli soil in retaliation to a strike on the Iranian consulate in Syria 11 days ago. While Air India and Vistara did not elaborate on the alternative flight paths, two persons in the know said carriers are avoiding the Iranian airspace while flying to destinations in the West. "We are closely monitoring the developing situation in the Middle East. Presently, our aircraft will operate on alternative flight paths to and from India, according top priority to the safety of our passengers and crew," an Air India spokesperson said in a statement. Air India is the only Indian carrier that operates flights to Israel. It has four weekly flights connecting Delhi and Tel Aviv. In a statement, Vistara said due to the current situation affecting parts of the Middle East, "we are making changes to flight paths of some of our flights. Contingency routes, which are kept available to ensure operational continuity during such eventualities, are being used instead". This may result in longer flight times on certain routes and associated delays. The situation is being monitored closely and further changes will be made if required, a Vistara spokesperson said in a statement. PTI

Mutual Funds SIP investments rise to Rs 2 lakh core in FY24

New Delhi, Apr 11 (PTI) Buoyant economic outlook and increased market participation helped drive the inflows in the mutual fund industry through systematic investment plans or SIPs route to record Rs 2 lakh crore in 2023-24, marking a rise of 28 per cent year-on-year. In comparison, an inflow of 1.56 lakh crore was witnessed through this route in 2022-23, Rs 1.24 lakh in 2021-22 and Rs 96,080 crore in 2020-2021, data with the Association of Mutual Funds in India (Amfi) showed. Moreover, mutual fund SIP contribution has seen over four-fold rise during the last seven years. It was Rs 43,921 crore in 2016-17. Additionally, SIP book has also grown consistently from Rs 14,276 crore in March 2023 to an all-time high of Rs 19,270 crore in March 2024, indicating a growth of 35 per cent. The SIP contributions consistently exceeding Rs 19,000 crore for two straight months in February and March this year signal a shift towards a more disciplined investment strategy among investors. "This disciplined approach is further exemplified by the increased preference for equities, driven by their strong performance over the past year, indicative of investors conducting regular portfolio assessments and adjustments," Karthick Jonagadla, smallcase Manager and founder, Quantace Research, said. Mirae Asset Investment Managers Vice Chairman and CEO Swarup Anand Mohanty said the consistent surge in SIP flows signals a promising trajectory and anticipates this momentum propelling to achieve a milestone of Rs 25,000 crore by the end of 2024. Industry experts believe that a buoyant economic outlook, along with increased market participation from retail investors, helped in raising the SIP inflow. The investors' confidence in mutual funds continues, which is reflected by the SIP accounts hitting a record high of 8.4 crore in March 2024. The SIP AUM stood at Rs 10.71 lakh crore, surpassing February's figures of Rs 10.52 lakh crore. This underscores investors' unwavering commitment to disciplined wealth accumulation, AMFI Chief Executive Venkat Chalasani said. Notably, SIP is an investment tool offered by mutual funds, which allows an individual to invest a certain amount in a chosen scheme periodically at fixed intervals, like once a month, instead of going for a lumpsum investment. SIP instalments can be as small as Rs 500 per month. In December, Sebi chairperson Madhabi Puri Buch said the markets regulator is also working with mutual funds to make SIPs of Rs 250 possible for the general public, which will boost investments. The mutual fund industry majorly depends on SIPs for inflows, whereas equity mutual funds saw an inflow of Rs 1.84 lakh crore in FY24. The regular monthly increase in SIP flows facilitated the industry to grow its AUM by Rs 14 lakh crore or a gain of 35 per cent to Rs 53.4 lakh crore in FY24 from Rs 39.42 lakh crore in FY23. PTI

Next round of talks on proposed India-Peru trade agreement likely in Jun

New Delhi, Apr 11 (PTI) The chief negotiators of India and South American nation Peru are likely to hold the next rounds of talks for a proposed free trade agreement in June, an official statement said on Thursday. So far, seven rounds of talks have been completed. "The next round, expected in June 2024, will be preceded by intersessional negotiations over VC (video conference) to ensure that outstanding issues are resolved before the two parties meet again," the commerce ministry said. The seventh round of talks involved understanding priorities and mutual concerns and ensuring that the negotiations are rooted in mutual respect and benefit, it added. Commerce Secretary Sunil Barthwal said the basic principle of negotiations should be understanding strengths and respecting sensitivities of each other. The modalities of negotiation may emerge from appropriate stakeholder consultations, and feedback from the industry and the negotiating teams should engage in a gainful and explorative approach, he said. Rajesh Agrawal, Chief Negotiator and Additional Secretary, Department of Commerce, said holding two rounds of negotiation within two months is itself a testimony to the willingness between both countries to have a deeper economic cooperation. He emphasised the need for effective and fast-track negotiations. Peruvian Chief Negotiator Gerardo Antonio Meza Grillo, Director for Asia, Oceania and Africa, Ministry of Foreign Trade and Tourism, said that resuming negotiations after 2019 is significant and reflects the commitment and interest of both parties. He stressed that the negotiating teams may show flexibility and pragmatism to reach mutual solutions. In this round of negotiations, discussions across the chapters include trade in goods, trade in services, movement of natural persons, rules of origin, customs procedures and trade facilitation. Peru has emerged as the third-largest trading partner of India in Latin American and Caribbean regions. In the last two decades, the trade between India and Peru has increased from USD 66 million in 2003 to around USD 3.68 billion in 2023. "The trade agreement under negotiations shall play a pivotal role in future collaboration in various sectors, creating avenues for mutual benefit and advancement," the statement said. Negotiations for the agreement started in 2017. They were paused due to the coronavirus pandemic and later resumed with the special virtual round in October 2023. During 2022-23, the bilateral trade between India and Peru stood at USD 3.12 billion. India exported goods worth USD 865.91 million to Peru and imported goods valued at USD 2.25 billion. Key Indian exports to Peru include motor vehicles/cars, cotton yarn and pharmaceuticals, while imported items include gold, copper ores and concentrates. According to a report from think tank GTRI, duty concessions on gold, which accounts for 80 per cent of India's imports from Peru, is the most challenging issue for New Delhi under the proposed free trade agreement with the South American nation. "Tariff concessions on gold, accounting for USD 1.8 billion or 80 per cent of India's imports from Peru in FY23, is the most challenging issue for India," GTRI has said. PTI

World goods trade growth in value terms may dip 1.2 pc in 2024: GTRI

New Delhi, Apr 11 (PTI) The growth in the global merchandise trade is likely to decline by 1.2 per cent, in value terms, due to the ongoing geopolitical uncertainties, economic think tank Global Trade Research Initiative (GTRI) said on Thursday. The US dollar value of world merchandise trade fell 5 per cent in 2023 to USD 24.01 trillion, but this decline was mostly offset by a strong increase in commercial services trade, which rose 9 per cent to USD 7.54 trillion, it said. This allowed world goods and commercial services exports on a balance of payments basis to slip 2 per cent in 2023 to USD 30.8 trillion. "Despite the World Trade Organization (WTO) expecting a 2.6 per cent rise in trade volume for 2024, the value of world merchandise trade is still seen to decline by 1.2 per cent in 2024 from 2023, continuing the trend of trade values falling behind the trade volumes," the think tank said. The WTO has projected that the world merchandise trade volume will grow by 2.6 per cent in 2024 and 3.3 per cent in 2025. "The WTO forecast does not include impact on trade values, which is a commonly used parameter to measure trade performance. Calculating the trade value is straightforward, as it involves adding up the values of all transactions. However, calculating trade volume is not as simple as just adding up quantities of different goods like iron ore and diamonds, which could lead to inaccurate conclusions," GTRI founder Ajay Srivastava said. He said the WTO employs a complex method to calculate changes in trade volumes. He added that "probably" the WTO did not want to be the harbinger of bad news about slowing merchandise trade. "The WTO adjusts the value of trade to account for changes in prices, a process known as deflation. This involves using specific price indices for different categories of goods and services to ensure that the measured trade volume reflects the actual quantity of goods and services traded rather than their price changes," he noted. The WTO also uses data from international databases, including trade statistics and price indices, to make these adjustments, Srivastava said, adding that the WTO's methodology also includes adjustments for seasonal variations in trade. "It periodically updates the base year for its calculations to ensure that the data remains relevant and reflects current market conditions," he said. In 2023, merchandise exports totalled USD 23.8 trillion, while imports stood at USD 24.2 trillion. This represents a year-on-year decline of 4.5 per cent in exports and 5.4 per cent in imports. For commercial services, exports rose to USD 7.8 trillion and imports USD 7.2 trillion in 2023. Overall, the total trade (both merchandise and services) slightly decreased in 2023, with exports at USD 31.6 trillion (down by 1.1 per cent) and imports at USD 31.5 trillion (down by 2.1 per cent) compared to 2022. The decline in world merchandise trade was due to geopolitical tensions, the rising protectionist war in Ukraine, Red Sea shipping disruptions, lower primary commodity prices, and exchange rate fluctuations. Further, GTRI said that India's merchandise export values in 2023 decreased by 5 per cent over 2022, mirroring the global trends. However, the overall export growth for the year was positive, thanks to significant 9.9 per cent increases in services exports, again in sync with global trends. In exports, India ranked 17th globally, with a 1.8 per cent share in world trade, amounting to USD 432 billion, a 5 per cent fall from 2022. India's rank improved from 18 in 2022 to 17 in 2023. On imports, India ranked 8th, holding a 2.8 per share, with a value of USD 673 billion, marking a 7 per cent decline from the previous year. India's rank improved from 9 in 2022 to 8 in 2023. "GTRI forecast a 1.2 per cent drop in world merchandise trade values in 2024, over 2023," it said. PTI