This week, we talk about how local and foreign companies made a beeline to unveil investment plans worth billions of dollars in Gujarat and Tamil Nadu. We also talk about mutual fund assets crossing a new milestone, auto sales bouncing back and the third-quarter earnings of India’s top IT companies.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
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If you fail to plan, you are just preparing to fail. Benjamin Franklin said it over two hundred years ago, and as did Winston Churchill in the last century. And the start of a new year is just the perfect time to make a plan. So, every year, millions of people make new resolutions in January—to learn a new job skill, travel, make healthier choices, start saving and investing for life goals, and so on. And scores of companies do that, too.
That’s exactly what happened this week.
From Apple and Google parent Alphabet to billionaires Mukesh Ambani and Gautam Adani, foreign and local companies and businessmen made promises to invest a staggering $200 billion in just two Indian states—Gujarat and Tamil Nadu.
In Gujarat, where Prime Minister Narendra Modi talked about India’s economic prospects at the Vibrant Gujarat summit, the focus was on semiconductors, electric vehicles, renewable energy and infrastructure.
The state government signed initial investment agreements worth $120 billion with over 200 companies, including with steelmaker ArcelorMittal’s Indian joint venture.
Adani said his group will invest $24 billion over five years in renewable energy. Carmaker Maruti Suzuki plans to spend $4.6 billion to boost manufacturing capacity. Tata Group plans to build a semiconductor fabrication plant while the UAE’s DP World signed agreements worth $3 billion to develop new ports, terminals and economic zones.
Not to be left behind, the Tamil Nadu government said this week it had signed agreements totalling almost $80 billion in investments across automobile manufacturing, energy and electronics industries.
Tata Power Renewable Energy plans to invest $8.5 billion, Singapore’s Sembcorp pledged almost $4.4 billion and Adani group signed investment pacts worth over $5 billion in green energy, cement and gas. Microsoft committed to invest in a data centre while Apple suppliers Salcomp, Pegatron and Tata signed agreements to boost manufacturing capacities. Hyundai Motor, Royal Enfield and Vietnamese electric vehicle maker VinFast also pledged investments.
So, why are companies both local and global making such mega investment plans? For one, The Indian economy is among the few bright spots worldwide and has been growing at a brisk pace despite geopolitical troubles around the globe. The economy is projected to grow 7.3% in the year ending in March, the highest rate among major countries.
Moreover, global manufacturers are betting on India as they seek to diversify some production from China. And then there are the upcoming elections. With Lok Sabha polls just months away, PM Modi-led BJP and other parties including Tamil Nadu Chief Minister MK Stalin’s DMK would want to showcase their achievements.
To be sure, not all these initial agreements will eventually materialize into actual investments. Still, we do hope that a big portion of these pacts manage to make progress, creating new jobs and boosting the economy.
And we hope we also manage to stick to our own new year resolutions for 2024, whatever those might be—learn new skills, stay healthy, invest for the future, and enjoy life.
Mutual fund milestone
While corporate houses are just talking about planned investments, retail investors are actually walking the talk.
This week, India’s mutual funds industry crossed a new milestone with net assets under management climbing past Rs 50 trillion for the first time ever, per data from the Association of Mutual Funds in India (AMFI). Net assets under equity schemes are over Rs 21 trillion while debt schemes account for nearly Rs 13 trillion, hybrid schemes over Rs 6 trillion and index funds almost Rs 2 trillion, AMFI data show.
AMFI CEO Venkat Chalasani noted that the MF industry had taken almost 50 years to build the first Rs 10 trillion of AUM but amassed the last Rs 10 trillion in just over a year thanks to continued inflows by retail investors through systematic investment plans. Indeed, SIP contributions touched a new record of Rs 17,610 crore in December and the number of SIP accounts hit a new high of 76.37 million.
AMFI data show also that inflows into equity schemes rose in December to Rs 16,997 crore last month from Rs 15,536 crore in November. This is the 34th consecutive month of inflows on a net basis. Small-cap funds accounted for most of the investments for the 15th month in a row at Rs 3,857 crore. Inflows into mid-cap funds nearly halved month-on-month to Rs 1,393 crore while large-caps recorded outflows of Rs 281 crore in December.
Revving it up
India’s mutual fund industry isn’t the only one on an upward trajectory. The automobile sector is also showing steady growth and has, in fact, bounced back from the pandemic lows.
Retail vehicle sales in 2023 grew 11.1% to 23.9 million, topping the 2019 figure of 23.4 million, according to figures released by the Federation of Automobile Dealers Associations, or FADA. Three-wheelers notched up the highest sales growth rate of 58.5%, followed by passenger vehicles at 10.6%. Sales of two-wheelers grew 9.45% but the absolute number at 17.1 million still lagged the 2019 figure of 18.2 million.
Another bit of news that will make the environment warriors happy was a two-fold rise in electric passenger vehicle sales to 82,105 units during the year.
In December 2023, sales growth was robust thanks to attractive year-end discounts dealers offered to clear the inventory. Total vehicle sales grew 21.1% to nearly 2 million in December. The highlight was 27.6% growth in two-wheeler retail sales at 1.5 million.
A separate set of data by the Society of Automobile Manufacturers (SIAM), which collates wholesale numbers, showed that total local vehicle sales rose 10% in 2023 to 22.84 million from 20.79 million units in 2022.
Many car companies announced best-ever annual sales in 2023. These include market leader Maruti Suzuki, Hyundai Motors, Tata Motors and Toyota Kirloskar.
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Tech earnings
India’s biggest software services companies kicked off the quarterly earnings season this week.
Tata Consultancy Services (TCS) reported just 2% year-on-year growth in the October-December quarter consolidated net profit to Rs 11,508 crore and a 4% rise in revenue to Rs 60,583 crore. Infosys fared worse with consolidated net profit falling 7.3% year-on-year to Rs 6,106 crore and consolidated revenue up just 1.3% year-on-year at Rs 38,821 crore. This was the first quarterly drop in Infosys’ profit in almost four years.
Both companies also reported a drop in headcount and tightened their revenue guidance. This raised concerns of a wider slowdown in the IT industry.
“From our perspective, the (macro) situation hasn’t changed much,” TCS CEO K. Krithivasan said. The optimism related to potential interest-rate cuts has not resulted in any decisions towards new investments, he said.
However, the results were not as bad as feared, and stock markets took heart from something else, too—deal pipeline. TCS said it won deals worth $8.1 billion during the quarter. Infosys declared $3.2 billion in deal wins despite scrapping of a potential $1.5 billion artificial intelligence contract.
Shares of TCS climbed almost 4% on Friday while Infosys surged nearly 8%, making their investors richer by over Rs 1 trillion on Friday. This rubbed onto other IT stocks as well, with the Nifty IT index rising 5.1% during the day.
Market Wrap
Both the benchmark indices started the new year on a muted note, with the Nifty faring slightly better than the Sensex. The 50- Nifty ended the last five trading sessions flat while the 30-share Sensex slipped 0.3%.
Stock markets touched new record highs on Friday and ended the week with a gain, driven by sustained foreign portfolio inflows as well as mutual fund investments.
The 30-stock Sensex hit a peak of 72,720.96 and clocked an increase of 0.75% for the week. The 50-stock Nifty touched an all-time high of 21,928.25 and rose 0.84% for the week.
Reliance Industries, India’s biggest company by market value, climbed to a new record high on Friday and jumped more than 5% for the week,
Among the Nifty 50 companies, Hero MotoCorp added almost 10% during the week while rival Bajaj Auto rose 4.6%, helped by robust monthly sales.
The IT pack led the list of biggest gainers during the week with HCL Tech, Infosys, Tech Mahindra, LTI Mindtree and TCS and Wipro all ending the week sharply higher. Two Adani Group companies – Adani Ports and Adani Enterprises – and four Tata Group companies – Tata Motors, Tata Consumer, Tata Steel and Titan – were also among the gainers.
Banks and NBFCs mostly ended lower this week, with Bajaj Finserv, HDFC Bank, Axis Bank, SBI and Kotak Mahindra Bank closing in the red. Consumer goods companies Nestle India, Hindustan Unilever, ITC and Britannia slipped, too.
Other headlines
- India Dec retail inflation 5.69%
- India Nov industrial growth 2.4%
- World Bank forecasts 2024 global growth at 2.4%, slowing for third year in a row
- Nasdaq stock exchange talks to India about overseas listings for local companies
- SEBI proposes rule changes for fundraising and disclosure requirements for listed firms
- India’s net direct tax collections jump 19.4% year on year in April-January
- Govt mulls import duty cuts on components for high-end mobile phones
- Polycab under tax dept’s scrutiny for unaccounted sales; shares slump
- Starbucks aims to more than double India store count to 1,000 by 2028
- The University of Oxford starts human testing of Nipah virus vaccine
- Bajaj Auto to buy back shares for Rs 4,000 crore; shares jump to record highs
- Mukesh Ambani re-enters $100 bn club as net worth climbs to $101.8 bn
That’s all for this week. Until next week, happy investing!
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