Market Pulse | 15th March, 2024

ECONOMIC HIGHLIGHTS

INDIA

?February retail inflation remains almost unchanged: Annual retail inflation eased slightly to 5.09% in February from 5.10% in January, but a significant cooling on a year on year (YoY) basis from a 6.44% CPI in February 2023. Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.66% in February 2024, compared with a 8.30% rise in January 2024.

?February wholesale prices rise 0.20% on year, pace slows: India's wholesale price index in February rose at a slower pace of 0.20% year-on-year, compared with a 0.27% gain in January, mainly due a sharper fall in manufactured products and power prices.

?Feb trade deficit at $18.71 bln, exports at 11 month high: India's merchandise trade deficit in February stood at $18.71 billion rebounding from a nine-month low in the previous month with merchandise exports at $41.40 billion, while imports were $60.11 billion, In the previous month, merchandise exports were $36.92 billion, while imports stood at $54.41 billion. In February, services exports were $32.35 billion, while imports were $15.39 billion. In January, services exports were $32.80 billion and imports were $16.05 billion.

?Rupee logs worst day in 3 weeks as outflows, weak Asian peers weigh: The Indian rupee logged its worst day against the dollar in nearly three weeks on March 13, pressured by foreign outflows (BAT stake sale), while weakness in regional peers following hotter-than-expected inflation data in the United States also weighed. The rupee closed at 82.8625 to the dollar, down from its previous close of 82.7675, recording its biggest single-session decline since Feb. 23.

GLOBAL HIGHLIGHTS

?Gasoline, food boost US producer prices in February: U.S. producer prices increased more than expected in February amid a surge in the cost of goods like gasoline and food, which could fan fears that inflation was picking up again. T. A 1.2% jump in the prices of goods accounted for nearly two-thirds of the increase in the PPI. Goods prices were driven by energy products, which surged 4.4% after declining 1.1% in January. Excluding food and energy, goods prices rose 0.3%, matching January's gain. This suggests that goods deflation, the major driver of lower inflation, was drawing to an end and services would need to pick up the slack in easing price pressure.

?China's home prices extend declines despite support measures: China's new home prices dropped for an eighth straight month in February, suggesting the fragile property market is struggling to find a bottom despite a slew of measures to shore up the sector. New home prices fell 0.3% month-on-month, in line with January's decline, On a year-on-year basis, prices fell 1.4%, faster than the 0.7% drop in January and the biggest decline in 13 months.

MARKET HIGHLIGHTS

?Nifty Smallcap and Mid-cap index post worst week in 15 months; blue-chips drop 2% each:? Small- and mid-cap stocks logged their worst week in 15 months on rising concerns of froth in the segments and as stress test results indicated a disparity in the durations that funds would take to liquify their portfolios. Nifty Smallcap100 and Midcap100 5.5% and 4.66% this week, the biggest weekly drop since December 2022, losing $47 billion in combined market value this week. Nifty 50 and Sensex dropped about 2% this week, their worst since Oct. 2023.

?Fund houses disclose stress test results on small, mid-cap portfolios: India's fund houses disclosed their stress results on Friday which essentially is assessing the time required by fund houses to liquidate portions of portfolios under a predefined "stress" scenario. This came as SEBI cautioned about a build-up of froth in the small- and mid-cap segments of the market. A delay in exiting holdings of such stocks could defer the return of funds to investors, who expect to receive their money back within two to three days. Among the disclosures made so far, SBI Mutual Fund required the longest time of 30 days to liquidate a quarter of its small cap fund, followed by Tata Mutual Fund, which said it needs 18 days.

?ITC settles higher as BAT's $2 bln share sale sails through: ITC's shares settled more than 4.5% higher on Wednesday after rising over 8% during the session, as top shareholder British American Tobacco’s 166.9 billion rupees (about $2 billion) stake sale in the company went through smoothly, making it India's third-largest block deal ever, disposing 436.9 million shares, or roughly 3.5% of ITC's outstanding shares.

?Paytm jumps as digital payments app survives banking unit shutdown: Shares of Paytm rose a stock exchange-allowed maximum of 5% on Friday March 15, a day after it got a third-party application provider license that will allow it to offer digital payments after its banking unit ceases operations. The license came as Paytm Payments Bank will cease most operations on March 15, after the RBI ordered the banking unit to stop accepting fresh deposits in its accounts or popular wallets, following persistent compliance breaches.

?Multibagger Tata Investment shares drop 14% in 3 days: Tata Group stocks which include Tata Investment, Tata Consumer, Tata Steel, and Tata Motors shed upto 18% this week on reports, that Tata Sons' listing appeared improbable in the near term. RBI rule mandates Tata Sons to get listed by September 2025 as an upper-layer NBFC.

?Yes Bank gains over speculation of seeking new promoter: YES Bank share price has been skyrocketing in the last two days of the week over speculative buzz that the private sector lender is planning to sell up to 51% of its stake for a target valuation of between $8-9 billion, up from its current market capitalization of $7.2 billion.

?IRB Infrastructure shares surge 18% in two days: Shares of IRB Infrastructure Developers Ltd (IRB Infra) have been on a joyride, with the stock climbing 18% in the last two days of the week. The gains were backed by Cintra, a subsidiary of the Spanish infrastructure giant Ferrovial, acquiring stake in IRB Infrastructure Trust (IRBIT). IRBIT is a publicly listed SEBI-registered Infrastructure Investment Trust. IRB Infra owns 51% of the units in the Trust, with the remaining 49% held by Singaporean investment fund GIC and its affiliates. GIC affiliates will sell nearly half of their 49% stake in IRBIT to Cintra, IRB Infra informed the exchanges.

?DB Realty gains over 4% on Thursday on board nod to demerge hospitality business: DB Realty Ltd announced on Thursday that its board approved incorporating Advent International Ltd as its arm for the acquisition of the company’s hospitality business through a demerger scheme. The company’s hospitality business includes equity interests in more than 3,263 keys across a number of marquee hotels including Grand Hyatt in Goa, Hilton in Mumbai, Marriott Marquis and St Regis in Delhi, among others.

?Linde India rallies more than 15% this week on semiconductor sector opportunity: Investors are lapping up shares of Linde India, an industrial and medical gas maker, as the company is seen as one of the biggest beneficiaries of the growth in semiconductor manufacturing in India. Linde India has been doing well since the announcement of its third-quarter results and since the company has a very limited float, with promoters holding 75% of shares, and retail float being less than 10%, even a slight buying interest, has a significant impact on the the stock price.

?February 2024 SIP inflows at ?19,187 Crore; as SIP folios cross 8.2 Crore: The month of February 2024 saw the mutual funds once again create record on various fronts. For instance, the overall AUM of Indian mutual funds touched a record high of ?54.54 Trillion. The SIP set another record month with inflows jumping 40% on Y-o-Y basis to ?19,187 crore in February 2024 compared to inflows of ?13,686 crore in February 2023. More importantly, even as the gross SIP flows are growing, it is happening with a sharply lower stoppage ratio. That means, the net impact of SIP flows is much more that what this gross growth number shows on SIPs.

SECTOR HIGHLIGHTS

?Barring information technology, all the major sectors logged losses this week with Realty, Energy, and Public sector banks being among the worst hit, losing between 6.5% and 10% primarily due to excessive valuations after their sharp recent outperformance over the benchmarks.

?Nifty PSE index posts worst week in four years; all 20 stocks post losses: The Nifty PSE Index, an index comprising of 20 state-run companies ended with losses of 9% for the week. This was the worst weekly performance that the index had since March 2020. With this week's decline, the index has now posted weekly losses for six weeks in a row. All 20 constituents of the PSE index reported losses for the week. IRCTC was the best-performing stock on the index for the week, declining only 2.6%. On the other hand, NMDC was the worst performer on the index with a 17% drop for the week.

?OMC stocks plunge up to 8% on Friday on cut in petrol, diesel prices; HPCL top loser: Stocks of oil marketing companies (OMCs) witnessed up to 8% decline on Friday following a Rs 2 per litre cut in prices of petrol and diesel, the first in nearly two years. The price cut comes into effect from today and margins of OMCs are likely to take a hit following the decision. The top loser was Hindustan Petroleum Corporation (HPCL) whose shares fell nearly 8% to the day's low of Rs 461.10 on the NSE. It was followed by Indian Oil Corporation which plunged 5.25% and Bharat Petroleum Corporation which lost 4.15%

? Railway stocks surged up to 11% on Thursday: Railway stocks bounced back with sharp gains on March 14 after correcting up to 15% earlier in the week. RITES, IRFC RVNL, IRCON International Ltd were among the stocks clocking up to 11% intraday gains. Many of these stocks have a little free float, as the government holds up to 86% stake in some of the companies. Because of the low float, a surge in demand can trigger rapid price moves.

?Twelve of the 13 major sectors in red on Wednesday, bubble bath on Dalal street:? March 13 marked the worst session in more than two years with 43 of the Nifty 50 stocks declining, 98 of 100 Nifty Smallcap stocks in the red with the overheated segments like realty, state-owned banks and energy stocks seeing the most selling pressure and losing between 4% - 6% on the day.

?Realty stocks tumbled 3.7% on Tuesday to log their worst session in seven weeks.

? Financials-linked indices Nifty Financials, Nifty Banks Nifty Private Banks and Nifty PSU lost between 0.65% and 2% on Monday: HDFC Bank fell 1.27% after CLSA flagged challenges for deposit growth and net interest margin recovery for the private lender. State Bank of India dropped 1.82% after Supreme Court rejected a plea by the state-owned lender, seeking more time to share political donors' names.

BUSINESS-INDUSTRY UPDATES

?Reliance to buy Paramount's stake in Viacom18: Reliance Industries has agreed to buy Paramount Global's entire 13.01% stake its majority owned local entertainment network Viacom 18 Media for about $517 million (42.86 billion Indian rupees)?

?Tata Motors to build $1.1 bln plant in Tamil Nadu: Tata Motors said it will build a cutting-edge vehicle manufacturing facility in Ranipet, Tamil Nadu, at an investment of ?9,000 crore. The Tata group company signed a memorandum of understanding (MoU) with the Tamil Nadu government to establish the facility, its second big ticket plant in southern India after Dharwad in Karnataka, following Vietnamese company VinFast's recent announcement.

?Aditya Birla Capital to merge with financial unit: Aditya Birla Finance, the wholly-owned subsidiary of Aditya Birla Capital? is to merge with its parent within 12 months to create a large unified operating NBFC. On a proforma basis, total assets of the merged company as of Dec. 31 stood at 1.10 trillion rupees.

?Biocon to sell branded formulations business to Eris Lifesciences for $150 mln: Biopharmaceutical company Biocon’s unit Biocon Biologics will sell its Indian branded formulations businesses to Eris Lifesciences in a deal worth 12.42 billion rupees ($150 million). The deal, which is expected to close by April 15, 2024, includes the acquisition of insulin brands Basalog and Insugen which Eris said will help its diabetes treatment franchise reach 10 billion rupees in revenue.

?L&T wins largest ever cross-country pipeline EPC project in the Middle East: Engineering & Construction conglomerate Larsen and Toubro Ltd. said L&T Energy Hydrocarbon recently secured a "major" onshore gas pipeline project from a client in the Middle East making it its largest cross-country pipeline EPC project till date. The scope of work will include engineering, procurement, and construction of two new 56" pipelines with associated scraper receivers and launches and mainline isolation valve (MLIV) stations running parallel to the existing pipeline corridor.

?Europe trade group commits to $100-billion 15-year deal: India will lift most import tariffs on industrial products from four European countries (Switzerland, Norway, Iceland and Liechtenstein) in return for investment of $100 billion over 15 years after an economic pact signed on Sunday that concluded nearly 16 years of negotiations. The trade agreement will help attract investment in critical sectors like medical devices, clean energy and expand exports to other countries by accessing Swiss and Norway technologies as Prime Minister Narendra Modi aims for annual exports of $1 trillion by 2030.

?Some of India's biggest companies were among the country's top political funders over the last five years: The political funding mechanism introduced in 2017 allowed companies and individuals to donate unlimited amounts anonymously to political parties. According to data released by SBI, Future Gaming and Hotel Services PR has emerged as the top purchaser of electoral bonds at Rs 1,368 crore, with Megha Engineering and Infrastructures Ltd at the second spot with Rs 966 crore followed by Qwik Supply Chain Pvt Ltd, Vedanta Ltd, and Haldia Energy Ltd among others.