In this edition, we talk about inflation being under control, FM concerns about the global economy, IT companies reporting slow growth, Apple new stores in India, and more.
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“Inflation is the time when those who have saved for a rainy day get soaked.”
No one quite knows who said this, or when, but this does ring true—inflation singes all of us—rich or poor.
Ever since the world began reopening in 2021 and then Russia invaded Ukraine in early 2022, prices have been on the rise, and central banks, including our own Reserve Bank of India (RBI), have had to do a fair bit of firefighting to reign in soaring prices.
And it seems that inflation may finally be coming under control, if only just about. The National Statistics Office (NSO) on Wednesday released the inflation data that shows the consumer price index-based inflation came down to 5.66% in March from 6.44% in February. As per the data, rural inflation stood at 5.51% while urban inflation was at 5.89%. Food prices rose at a slower pace of 4.79% in March as against 5.95% in February.
The important thing is that inflation has cooled off below the RBI’s upper limit of 6%, meaning the central bank may not raise interest rates anytime soon and could continue with an extended pause for a while, if numbers remain below its tolerance limits. Moderation in inflationary expectation was one of the key variables for the recent decision by the RBI’s monetary policy committee to unanimously keep the repo rate unchanged at 6.5%.
Retail inflation eased on the back of moderating prices of most items, particularly in the food basket, and a base effect that came into play. Economists say the high base effect will mean that inflation could fall below the 5% mark in FY24. In fact, base effect is the primary reason for a lower number this year, as last year’s figure was higher.
Having said that, the moderation in consumer headline inflation in March is also supported by softening food prices, especially vegetables. Inflation in food and beverages eased to 5.11% in March from 6.19% in February. This is helped by deflation in vegetables by 8.11%, meat and fish by 1.42% and in oils and fats by 7.86%.
But does this mean we are out of the woods as far as the macro picture looks? Well, not really.
Economists say there are multiple factors pressurizing consumer inflation and these are likely to sustain at least in the medium term. Price pressures on non-food and fuel categories remain sticky. Also, price growth in categories such as clothing, household goods and services, etc. have remained elevated, denting households’ disposable income.
So, overall, we still need to keep our seat belts on, and keep saving and investing diligently but wisely. For, in the long run, a good investment always pays rich dividends.
Economic worries
Meanwhile, Finance Minister Nirmala Sitharaman, too, seems to be well aware of the fact that the state of the global economy continues to be a cause of concern.
On a visit to the US, she said India remained concerned about the global economic outlook and geopolitical environment despite this year’s projected growth rate of over 6% for the country’s economy. Sitharaman also called for timely debt restructuring as the solution to the global debt crisis is closely intertwined with addressing the global poverty challenge.
The International Monetary Fund (IMF) in its latest World Economic Outlook has warned that a sharp tightening of global financial conditions could have a dramatic impact on credit conditions and public finances, especially in emerging markets and developing economies. The IMF has estimated that global growth will bottom out at 2.8% in 2023 — a tad lower than the earlier estimate — before rising modestly to 3% next year.
For India, the IMF has projected the economy to grow at 5.9% in FY24, lower than the RBI’s estimate of 6.5%. The IMF said India’s growth momentum would slow as softening domestic demand offsets strong external services demand.
Tepid IT results
The impact of the global economic concerns as well as the banking crisis in the US was visible in the fourth-quarter results of Indian IT giants Tata Consultancy Services and Infosys, as they reported weak performances for the January-March period.
TCS reported slower revenue growth in Q4 and failed to meet its FY23 exit EBIT margin of 25% as some clients, especially in North America, paused projects and as rising onsite costs offset utilisation gains. Sequentially, the company’s revenue grew by just 0.6% on a constant currency basis, which was one of the slowest paces in over 11 quarters.
Infosys, too, reported a sequentially weak quarter. The IT giant’s Q4 net profit came in at Rs 6,128 crore, down by nearly 16% on a quarter-on-quarter basis, while revenue fell by 2.2% sequentially to Rs 37,441 crore. In constant currency, the company’s revenue growth came in at 3.2% quarter-on-quarter and 8.8% year-on-year.
The fact that TCS missed meeting expectations sent the stocks of other IT majors like Wipro, Tech Mahindra and HCL Technologies tumbling, as the Tata group company’s numbers suggested that the banking and financial services clients remain in cash preservation mode, especially after recent volatility in financial markets.
Apple takes root
If you are an iPhone user, we have some good news. Apple is set to open its first two flagship stores in India—in Mumbai and Delhi. And Apple CEO Tim Cook is himself set to come down to India to inaugurate the two stores. Cook is also likely to meet top government officials and ministers, possibly even Prime Minister Narendra Modi, who is likely to ask him to manufacture more iPhones in the country.
This, even as Apple tripled its iPhone output from India to $7 billion in 2022-23. The company, however, continues to look to countries outside of China as production hubs, as it wants to reduce its reliance on India’s neighbour, as tensions between Beijing and Washington escalate.
So, will China’s loss be India’s gain? We sure hope so, and will let you know as soon as we know more!
Reliance’s streaming play
Viacom18 Media Pvt. Ltd, a joint venture of billionaire Mukesh Ambani-led Reliance Industries Ltd and US-based Paramount Global, has completed a transaction that brings the JioCinema app under its fold along with a cash pile of Rs 15,145 crore that it will use for expansion and gaining market share.
Reliance itself is investing Rs 10,839 crore into Viacom18 while Rs 4,306 crore is coming from Bodhi Tree Systems, a joint venture between James Murdoch and former Star India executive Uday Shankar.
Reliance made a big splash in the Indian streaming market last year when it bought the digital streaming rights for the Indian Premier League T20 cricket tournament from 2023 to 2027. The company is currently streaming all IPL matches free on its JioCinema app. It also streamed the FIFA World Cup in Qatar last year for free.
This strategy will surely help Viacom18 cement its position in the streaming market, just like offering phone and data services for free initially had helped Reliance Jio Infocomm decimate competition and become India’s biggest mobile-phone operator. So, will JioCinema do to Netflix what Reliance Jio did to Vodafone Idea and others? We’ll keep an eye.
Market Wrap
The last couple of weeks have not seen their full quota of five trading sessions each, and yet, the markets seem to have rebounded rather smartly from their downward streak of the previous few weeks.
While the market traded for just three days during the first week of April, the week gone by saw it trade from Monday to Thursday, with Friday being a holiday. The benchmark indices recovered some lost ground this week, with the Sensex and Nifty gaining about 1% each.
Stocks that gained the most during the week include auto majors Tata Motors, Eicher Motors and Bajaj Auto; pharmaceutical companies Divi’s Labs and Dr. Reddy’s Laboratories; Kotak Mahindra Bank, Adani Enterprises and JSW Steel. Other shares that ended in the green were ONGC, Apollo Hospitals, Hindalco Industries and HDFC Life.
Nifty stocks that lost the most ground during the week were Vedanta, and IT majors HCL Technologies, Tata Consultancy Services, Wipro, Tech Mahindra and Infosys. Hindustan Unilever, NTPC Ltd, Britannia and Ultratech Cement also ended in the red.
Other headlines
- RBI evaluating potential bidders for majority stake in IDBI Bank
- India, China to drive about half of global growth in 2023, says IMF
- Vedanta mandates Barclays to raise Rs 1,500 cr loan; Board approves raising Rs 2,100 crore through NCDs
- SoftBank looks to cut stake in FirstCry at a valuation of $3 billion
- SEBI says information not available on Adani Enterprises’ Rs 20,000-crore FPO subscribers
- NTPC drops plan to sell green energy stake to Petronas, may take unit public
That’s all for this week. Until next week, happy investing!
Interested in how we think about the markets? Read more: Zen And The Art Of Investing
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