Market Pulse | 2nd February, 2024

ECONOMIC HIGHLIGHTS

INDIA

?IMF raises India's growth forecast to 6.5% for next financial year: The strong growth projection for India came even as the report projected that growth in the wider region of "developing Asia" will decline to 5.2% in 2024 and 4.8% in 2025 from an estimated 5.4% in 2023.

?India's factory growth hits a four-month high in January on robust demand: India's manufacturing industry improved substantially at the start of 2024 with factory activity expanding at its fastest pace in four months in January on robust demand and an upbeat year-ahead outlook.

?India's April-December steel imports hit a five-year high as demand soars: India's steel imports touched a five-year high in the first nine months of the fiscal year to the end of March, turning the country into a net importer of finished steel. However,? a spurt in economic activity and a revamp of broader infrastructure have turned India into a bright spot for both Indian and global steel makers. Although steel demand is slowing down in Europe and the United States, India’s steel demand is likely to stay strong.

GLOBAL HIGHLIGHTS

?US Fed keeps key rates unchanged at 5.25%-5.5% for 4th straight meeting: The US Federal Reserve decided to keep interest rates unchanged for the fourth straight meeting, as was widely expected. The Federal Open Market Committee (FOMC) unanimously voted to hold the policy rate at the 23-year high, in the range of 5.25% - 5.50%. This was the US central bank’s first policy-setting meeting of? 2024.

?Factories deliver mixed performance globally in January: Global factories delivered a largely patchy performance at the start of 2024 as soft Chinese demand left Asia's economies on a shaky footing while disruption to Red Sea shipping delayed deliveries in Europe. The prolonged downturn in eurozone manufacturing activity eased for a third month. Almost all sub-indices moved in a positive direction while those covering pricing showed inflationary pressures may have weakened last month. The downturn in Germany's manufacturing industry, which accounts for about a fifth of Europe's largest economy, eased in January and it was a similar picture in France. In Britain, which left the European Union four years ago, factories recorded an 18th consecutive month of contraction.

?U.S. home sales rise by most in over 3 years: Pending U.S. home sales shot up in December by the most since June 2020 indicating stabilizing mortgage rates may be beginning to draw prospective buyers from the sidelines and could fuel an anticipated residential real estate rebound this year.

MARKET HIGHLIGHTS

?Market reaction to Interim Budget: Rupee rises to 82.9325 against 82.9800 before the budget speech. 10-year benchmark govt bond yield falls to lowest level since July 19 after 2024/25 govt borrowings pegged at lower than market estimates.

?Indian shares surged in their best session in eight weeks on Monday, driven by gains in energy heavyweights Reliance Industries and ONGC as oil prices climbed, and by a rebound in beaten-down financials.

?RIL shares record best day in over 3 years: Reliance Industries (RIL) stock rallied 7% on Monday to a lifetime high of Rs 2,905, increasing its market capitalization by Rs 1.2 lakh crore. This was the stock's single largest gain in the last three years. Investors also anticipate a 20% hike in telecom tariffs in Q2FY25 after the Lok Sabha elections.

?Paytm shares sink 20% after RBI curbs payments bank business: Paytm's stock fell to a six-week low of 609 rupees, erasing around $1.2 billion in value from the company also known as One 97 Communications. The RBI ordered Paytm Payments Bank to stop accepting fresh deposits in its accounts or popular digital wallets from March, raising worries over revenues from the company's main payments business.

?L&T slides most in four years on elusive margin growth: Shares of Larsen and Toubro tumbled as much as 7% on Wednesday, in their steepest drop in nearly four years, as India's largest infrastructure company struggled to improve its profit margins. L&T's core margins in infrastructure projects, its biggest business, contracted to 5.5% in the third quarter, from 7.7% a year earlier, on continuing cost pressures in a few legacy projects that are now nearing completion.

?AU SFB stock falls nearly 12% on weak Q3 results: AU’s slippages elevated resulting in its gross and net non-performing assets rising for the quarter. The small finance bank is facing increased challenges in its credit card business, and despite this, it has reduced its provision coverage ratio.

? Tata Motors passenger vehicle sales saw a 12% rise this month and its shares hit a life high, while its market capitalization surpassed that of Maruti Suzuki India Ltd. after over seven years to become the most valuable auto company in India.

?The Nifty volatility index jumped 16.14% in two sessions this week, to a 10-month high of 16.10 due to key events such as the U.S. Federal Reserve's policy decision and India's interim union budget.

QUARTERLY RESULT HIGHLIGHTS

?Piramal Enterprises (PEL) posted a surprise loss of Rs 2378 Cr for Q3 as it made more provisions for its exposure to Alternative Investment Funds (AIF). In Dec 23,? RBI directed NBFCs and banks under it to either liquidate certain AIF investments within 30 days or make 100% provisioning for such an investment in AIF. PEL seems decided to make provision, rather than liquidate of such an investment in AIF. This news flow is sensitive for all NBFCs as it acquired the second biggest housing finance company Dewan Housing Finance Ltd through IBC resolution, and renamed it as Piramal Capital & Housing Finance. PEL’s provisioning seems made for an exposure in DHFL through an AIF.

?Kalyan Jewelers India's Q3 profit rises on strong festive-season demand: Kalyan Jewelers India reported a nearly 22% rise in its third-quarter profit lifted by festive season-fueled demand across India (40% jump in sales) and the Middle East markets.

?Dixon Technologies posts 86% rise in Q3 profit on electronics boom: Dixon Technologies reported an 86% growth in third-quarter profit benefiting from growing demand for technology gadgets and rapid expansion of electronics manufacturing in the country. The $155-billion electronics industry has gained from technology giants diversifying their supply chain from China, while the local government's production-linked incentives have further boosted production.

?Chemical makers Coromandel International and SRF's quarterly profit halves on subdued global demand: Chemicals and polymers manufacturer SRF’s third-quarter profit more than halved, which was its fourth straight quarterly profit drop as it was mainly hurt by sustained weakness in global demand for its mainstay chemicals business. India's agricultural chemicals sector is seeing mixed demand, with a slight pick up in the north, central, and southeast regions, but weaker demand in the western and southwestern parts due to an erratic monsoon season, analysts said.

?UltraTech Cement, ACC, Shree Cement and Dalmia Bharat reported significant rise in their profits on strong infrastructure demand: Cement companies have been reporting substantial profit growth over the past couple of quarters, led by strong volume growth, building of premium products, softening of fuel prices, housing and infrastructure push by the Indian government ahead of this year's general elections. However,? India Cements saw a 106% decrease in its net profit on subdued demand due to a slowdown in construction activity ahead of elections and cyclone in some states.

?Pharma firm Dr Reddy's beats Q3 profit view on strong US, European businesses: Dr Reddy delivered another quarter of highest ever sales and robust financial performance, aided by new products performance and base business market share gain in the U.S., new products launch momentum and strong performance in Europe.

SECTOR HIGHLIGHTS

Sector reaction to Interim Budget:

? PSU Banking was the best-performing sector of the day by gaining over 3%

? FMCG gained as although there was no immediate relief for consumers or FMCG players, the increase in capital expenditure by 11.1% to Rs 11.1 lakh crore would indirectly boost consumption. With regard to rural consumption demand, the budget sustains agricultural growth by promoting crop insurance, encouraging nano fertilizer use, fostering oilseed self-sufficiency, and enhancing micro food processing investments. These will provide employment opportunities for the rural economy. Rural consumption will also benefit from infrastructure spending and investments in housing

? Fisheries stocks surged as the government doubled the export target in the budget, while power stocks advanced as the budget proposed providing free electricity via solar rooftops to 10 million households.

?Nifty Auto gained 1% in a day as companies reported sales data for January:? Passenger vehicles saw a 14% rise on increased wholesale inventory, new launches, production growth, and robust economic growth. Domestic two-wheeler sales also rose, helped mostly by improved demand for entry-level models in rural India and steady sales of mid-level motorcycles in cities.

?Consumer Durables lost 2.40% on Tuesday after Delhi High Court upheld anti-profiteering provisions under GST: In some instances, Govt/GST council reduces tax on certain Goods/Services, to give relief from rising prices & and inflation to its consumers. But companies do not pass out the full benefit of this reduction in the tax rate, hence keeping some margin as an ‘unjust enrichment’. The market feared this ruling as after this, the Govt will unleash its agencies, to recover large sums from Consumer companies, reducing their profits, especially Consumer Durables companies than Consumer Staples companies, as their product prices are much higher.

?Nifty Oil and Gas gains as crude oil prices soar amid Red Sea crisis: Oil-linked stocks, including explorers Oil India and ONGC, rose on Monday on the back of a surge in benchmark crude oil prices amid supply disruption-related worries following a missile strike on a Trafigura-operated fuel tanker in the Red Sea. Oil marketing companies were also in demand, with shares of Indian Oil, BPCL and HPCL trading around 1.5-3% higher each.

BUSINESS-INDUSTRY UPDATES

?Bajaj Finserv Health acquires 100% stake in Vidal Healthcare Services: The acquisition which took place at an enterprise value of Rs 325 crore, will bring Vidal Health Insurance TPA Pvt Ltd and VH Medcare Pvt Ltd, two wholly owned subsidiaries of Vidal Healthcare Services, indirect wholly owned subsidiaries of Bajaj Finserve Health.

?Wistron Corp to set up laptop making unit in India's Karnataka for $181 million: Taiwan's Wistron Corp has signed a non-binding agreement to invest 15 billion rupees ($180.7 million) in setting up a laptop manufacturing unit in Karnataka. The south Indian state is being seen as a lucrative ground to set up manufacturing facilities as companies such as Foxconn look for ways to diversify away from China following COVID-19 disruptions and geopolitical tensions.

?Suzlon Energy shares rally on winning 642 MW wind power project: Suzlon Energy has won an order for the supply of wind turbines for a 642 MW wind power project from Evren, which is a joint venture between Brookfield and Axis Energy.