Market Pulse | 26th January, 2024

ECONOMIC HIGHLIGHTS

INDIA

?India business growth at a four-month high in January – PMI: India's business activity expanded at the fastest pace in four months in January on stronger demand, input costs also rose at the quickest rate since August. Factory new orders grew at the quickest pace in four months while new business in the services sector increased at its fastest rate since July 2023.

?India bank liquidity deficit hits record high: India's banking system liquidity deficit hit a record high amid outflows towards tax payments and limited government spending, with traders anticipating that the central bank will infuse more cash to address the shortfall. The deficit widened to 3.34 trillion rupees ($40.18 billion) as on Jan. 23, nearly tripling from the start of the month.

?RBI expects real GDP to touch 7% next year: The Indian economy is expected to touch real GDP growth 7% next year, Reserve Bank of India Governor Shaktikanta Das said. India has recovered from recent volatilities and uncertainties, such as the health crisis and the geopolitical tensions, and emerged better. Our macroeconomic stability is better than that of most other countries and our financial sector is also doing well.

GLOBAL HIGHLIGHTS

?US business activity picks up in January; inflation cooling: U.S. business activity picked up in January and inflation appeared to abate, with a measure of prices charged by companies for their products falling to the lowest level in more than 3-1/2 years, suggesting that the economy kicked off 2024 on a strong note.

?China cuts bank reserves to defend markets, and spur growth: China's central bank announced a deep cut to bank reserves in a move that will inject about $140 billion of cash into the banking system and send a strong signal of support for a fragile economy and plunging stock markets.

?UK retail sales dive in January at the fastest pace in 3 years: The Confederation of British Industry's (CBI) monthly retail sales balance, a gauge of sales versus a year ago, fell in January to -50 from -32 in December, the lowest reading since January 2021 when Britain was in a COVID-19 lockdown.

?German business activity deteriorates in Jan – PMI | Services sector posted its steepest drop for five months:? Germany's economic downturn worsened this month as both manufacturing and services activity contracted, with signs of Red Sea disruption hitting delivery times.

?Japan Jan factory activity languishes, but service sector picks up – PMI:? Japan's factory activity shrank for the eighth consecutive month in January amid weak demand, but the service sector saw strong gains as new business picked up.

MARKET HIGHLIGHTS

?Indian shares log worst week since late Oct on Thursday as financials extend losses: Indian Indices have fallen about 1.3% each over the three sessions this holiday-truncated week, logging their worst performance since the week ending Oct. 27.

?After two years of hurdles, Sony calls off merger with Zee. Zee shares erode 30% in a day: Shares in India's Zee Entertainment plunged by as much as 30% on Tuesday, set for their worst day ever after the collapse of its $10 billion merger with Sony's local unit fanned concern that it will fail to thrive.

?IFCI soars 68% in the week as investors see strong growth prospects: As IFCI manages the implementation of the production-linked incentives schemes of the Indian government, investors are expecting to see some announcements in the upcoming budget regarding the same. IRFC and IREDA too, which belong to the same industry that lends to multiple companies within the sectors IFCI does, have rallied big time in the past few weeks.

?Tech Mahindra sees worst day in over three years on Q3 profit miss: The country's fifth-largest IT services company reported a 60.6% slump in profit causing its stocks to fall as much as 6.3% to post their worst day in more than three years on Thursday. This is the fourth straight quarter that the company has reported a double-digit dip in profit.

?ICICI Bank hits record high on profit beat, margin comfort: Shares of ICICI Bank hit a record 1,059.4 rupees on Tuesday after its third-quarter profit beat estimates on robust loan growth and margins met expectations. ICICI's performance is in sharp contrast to that of larger rival HDFC Bank whose shares declined after margins declined due to rising cost of deposits and intense competition.

?S&P Global upgrades Adani Ports, Adani Electricity on cash flow optimism: S&P Global Ratings revised its outlook for India's Adani Ports and Special Economic Zone and Adani Electricity Mumbai to stable from negative on signs of robust cash flow in the next 12 to 24 months. The recovery is expected to be driven by a rise in power demand, consistent collections from tariffs and the recuperation of revenue that was lower during 2021 and 2022 due to regulatory measures.

?NHPC shares gained 17% in the last week: Power generation public sector undertaking NHPC is in focus as the government is selling up to 3.5% in the company. In an exchange filing the PSU said that the government proposes to sell 2.5% of the equity shares held in the company and kept a green shoe option of 1%

SECTOR HIGHLIGHTS

?Nifty Media tumbled 10.8% this week, the most since March 2020: The main reason this time was the 30.55% plunge in Zee Entertainment its biggest weekly fall ever, after its $10 billion merger with Sony's local unit collapsed.?

?Nifty Realty dives on Oberoi Realty’s lower-than-expected sales: Oberoi Realty shares fell the most since April 2020 after its net profit halved from last year for the December quarter while revenue declined by 35%. EBITDA margin fell nearly 900 basis points to 48.3% from 57.7% last year.

?Metals and Mining: The Union Cabinet has approved a Rs 8,500 crore incentive scheme for coal gasification projects, aiming to reduce India's dependency on natural gas, methanol, ammonia, and other imports. The government aims to gasify 100 million tonnes of coal by 2030, utilizing the gasification process to produce syngas for power generation and methanol production.

?Healthcare: Sun Pharma shares rise 4% after strong set of earnings from Taro: Shares of Sun Pharmaceutical Industries Limited rallied 4% after its subsidiary Taro Pharmaceutical Industries reported better-than-expected numbers in the third quarter. In other news, NIMHANS and DIA signed a MoU to collaborate on dementia care to improve the quality of life for persons with dementia and their caregivers. They will work together on advocacy, outreach, training, research, and support services.

INDUSTRY HIGHLIGHTS

?FMCG Q3 results to be bleak on sluggish rural demand: Consumer goods giants, including HUL peers Nestle India and Britannia Industries have been struggling with a spending pullback in the rural regions as prices of essentials have shot up. While incremental price cuts are small, companies are increasing advertising and offering extra incentives to channels to remain competitive with regional brands.

?United Spirits third-quarter profit climbs on premium liquor demand: United Spirits which makes Smirnoff vodka, reported a rise in third-quarter profit buoyed by strong demand for its premium brands of alcohol as a greater number of affluent Indians are choosing more expensive cars and consuming pricier food and liquor, unaffected by inflation.

?Tata and France's Airbus to manufacture helicopters together: Tata Group and France's Airbus have signed an agreement to manufacture civilian helicopters together. The agreement was signed during French President Emmanuel Macron's ongoing state visit to India. Tata and Airbus are already cooperating to make C-295 transport aircraft in Prime Minister Narendra Modi's home state of Gujarat. Further cooperation in the defense sector was also discussed during the state visit, including the possibility that French engine maker Safran would assist in manufacturing fighter jet engines in India.

?JSW Group to invest $5 bln in EV projects in eastern India: JSW Group is set to invest 400 billion rupees ($4.81 billion) in electric vehicle (EV) manufacturing projects in India's coastal state of Odisha, as it takes on both domestic and international players in India's small but booming EV market. JSW Group and China's SAIC Motor formed a joint venture in India in November, with a focus on green mobility and developing the electric vehicle ecosystem.

?Zee quits $1.4 bln cricket rights deal with Disney:? In August, Zee signed a strategic license agreement with Disney to take over certain International Cricket Council TV broadcast rights for four years, starting in 2024, while Disney would retain streaming rights. However, following the merger fallout with Sony, Zee is not in a position to pay. Zee was to pay for the rights over time but it missed the first $200 million payment to Disney in recent weeks and told the U.S. company it was walking back on the deal.