In this edition, we talk about why the Finance Ministry thinks India’s growth momentum will sustain. We also talk about how promoters and private equity firms are cashing out on the surge in the capital markets, what’s holding up the Disney-Reliance deal, and Commerce Minister Piyush Goyal’s broadside against E-Commerce companies.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
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Isaac Newton was one of the smartest men that ever lived. Not only did his laws of physics revolutionize science and mathematics, but also made a significant impact on economics, medicine and even the social sciences.
“What goes up must come down,” he is said to have remarked, a comment that eventually explained the force of gravity. This is so fundamental that rarely does any phenomenon not follow it.
But the Indian economy seems to have a mind, and a trajectory, of its own. It has been on an accelerated growth path for over three decades now (with a minor blip during the pandemic), and it is set to continue to keep growing, or so says India’s finance ministry.
The finance ministry said in a report this week that the momentum in the Indian economy was intact and that it was set to grow at 6.5-7% in 2024-25. This estimate, the report said, was in line with the projections of the Economic Survey of 2023-24.
It highlighted several positive factors, including the high reservoir levels and robust Purchasing Managers’ Indices that show continued expansion in both the manufacturing and services sectors. Tax collections have been upbeat, loan growth is returning to a healthy path, stock markets are at record highs, and foreign direct investments have remained strong.
Moreover, inflation seems to be under check, at least for now. Pointing out that retail inflation dropped to 3.5% in July, the report did not anticipate any shock. “With moderate core inflation and positive progress in the monsoon, the headline inflation outlook is positive,” it said.
In fact, the report added that food inflation, especially vegetable inflation, showed a strong decline. Cereal inflation also came down. Assuming a normal monsoon, CPI inflation for FY25 is projected at 4.5% by the Reserve Bank of India (RBI), with Q2 inflation estimated at 4.4%.
Having said that, one needs to be cautious. Taking a cue from an RBI survey, it noted that consumer confidence in the current economic situation, employment, price level, and income has declined. Reduced optimism about the general economic situation, employment and prices has led to a moderation in the future expectations.
Another note of caution stems from the central bank’s industrial outlook survey released earlier this month. The survey showed that indices of business sentiment declined with first quarter assessment in the first quarter assessment as well as expectations the next three months. Production, order books, employment and export sentiments moderated.
Still, these hiccups aside, there is little doubt the economy is on a sustained growth path. Enjoy the ride!
Milking the bull run
As the economy remains buoyant, nudging the equity markets to record highs every now and then, promoters as well as private equity investors of listed companies have been booking some profit.
According to an analysis published by The Hindu Business Line newspaper, block and bulk deals have gained momentum and sell-downs through such transactions in 2024 have risen over 88% year to date to $51.4 billion, on the back of one of the longest sustained bull runs in the markets.
The report, citing data provided by Prime Database, said June saw the highest sell-offs at over $12 billion. While the first quarter of 2024 saw over $23 billion of sell-offs, the second quarter saw a slight dip, especially in the first two months, due to uncertainty in the markets as the country was in the midst of the Lok Sabha elections. The share sales are motivated by the soaring stock market valuations – both on the primary market and in secondary trades.
So, who all are taking benefit of the stock market boom?
Among the promoters leading the sale chart were BAT Plc and Vodafone Plc. While the tobacco major sold stake in its Indian subsidiary ITC for Rs 17,485 crore, the telecom giant sold stake in Indus Towers for Rs 15,637 crore.
Private equity investors were not far behind. American buyout firm Blackstone sold a 15% stake in Mphasis for Rs 6,736 crore and Canada’s Brookfield Asset Management partially cashed out of Data Infrastructure Trust with Rs 6,647 crore in the kitty.
The momentum is upbeat in the third quarter, the report said. Already in August, Antfin sold over 2% stake in Zomato for Rs 4,772 crore, and Blackstone nearly halved its stake in Nexus Select Trust for Rs 4,239 crore.
Commerce vs E-commerce
The union statistics ministry had once suggested that the government should conduct surveys covering e-commerce providers for data on income, expenditure, value-added, etc.
No such survey has officially been launched so far, but union commerce minister Piyush Goyal has made clear what he thinks about the sector.
“When Amazon says ‘we are going to invest a billion dollars in India’ and we all celebrate, we forget the underlying story that these billion dollars are not coming for any great service or investment to support the Indian economy,” said Goyal.
Accusing multinational e-commerce companies of predatory pricing, Goyal said such platforms must not disrupt the 100 million small retailers in India.
“There’s a large section out there who still deserves our help. When it comes to jobs and opportunities for the future of India, I think all of us will have to play our part.”
Goyal took a note from what he claimed was happening in some of the advanced economies. In the US and Europe, the rise of e-commerce has led to a decline of traditional corner shops – or ‘mom and pop’ stores, he said.
“I’m not wishing away e-commerce. It’s here to stay,” said Goyal. “But we must think carefully and cautiously about its role. Is predatory pricing good for the country?”
The commerce minister expressed his concern about the impact of e-commerce on local businesses and employment, particularly in sectors like pharmacies and mobile phone repair shops.
Goyal’s remarks come in the middle of a government exercise to draft a comprehensive e-commerce policy.
“It’s not a matter of pride that half of our market could possibly become part of e-commerce in the next 10 years; it’s a matter of concern. There are lies, damn lies, and statistics,” the minister said.
Competition Concerns
The $8.5 billion deal between the media business of billionaire Mukesh Ambani’s Reliance and Disney is stuck as India’s competition watchdog has reportedly flagged some concerns over the merger being anti-competitive as far as cricket broadcast rights are concerned.
The grip that the combined entity will have on the favourite sport of the country seems to have unnerved the anti-trust regulator, the Competition Commission of India (CCI). The Commission is reported to have sent a notice to Disney and Reliance, sharing its concerns on the issue. It has also asked the companies to explain within 30 days why an investigation should not be ordered.
The merged company, which would be majority owned by Reliance, would have lucrative rights worth billions of dollars for the broadcast of cricket on TV and streaming platforms, raising fears over pricing power and its grip over advertisers.
Disney and Reliance, too, seem to be not in a mood to take on CCI. According to another report, the two companies are reported to have dangled some carrots to get the deal cleared. Reuters said that the companies have offered to go easy on advertising rate hikes and not increase them unreasonably.
Market Wrap
This was a good week for the markets in general with both the Sensex and the Nifty ending up in the green. While the Sensex rose 0.82% since last Friday, the Nifty was up by 1.21%.
Nifty stocks that gained the most during the week were Hindalco, Bharat Petroleum, Grasim, Shriram Finance, Hero MotoCorp, Bajaj Finserv, Coal India, SBI Life, HDFC Life and Apollo Hospitals, just to name a few. ONGC was among the top Nifty losers in the week.
Q1 Earnings Snapshot
- Cognizant appoints Rajesh Varrier as global head of operations and CMD, India.
- Coal Ministry to raise Rs 45,000 crore via auctions in FY’25.
- Adani family plans to raise $3.6 billion via promoter stake sale.
- Adani Power gets NCLT nod for Rs 4,101 crore Lanco Amarkanta acquisition.
- Zomato to acquire Paytm’s entertainment ticketing business.
- India open to resolving $3.9 billion tax dispute with Infosys, says report.
- Govt discusses import data of laptops, PCs, tablets with stakeholders to decide on future policy
- Paytm proposes to cap Independent Directors’ remuneration.
- Joyalukkas to open 60 new stores in 3 years, drops IPO plans.
- Adani family to sell around 3% stake in Ambuja Cements.
- GST rate panel for keeping current 4-slab tax structure ‘for now’.
- ED searches premises of Religare’s Rashmi Saluja.
That’s all for this week. Until next week, happy investing!
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