In this edition, we talk about how Chinese companies are again looking to expand their operations in India as tensions between the two countries ease. We also talk about India’s $1 trillion FDI milestone, the new RBI boss and the challenges he faces, and why November was not such a good month for mutual fund inflows.
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For decades now, India has been known to produce chess prodigies. The likes of Viswanathan Anand, Koneru Humpy, R Praggnanandhaa, Tania Sachdev and Arjun Erigaisi are storied names in the annals of global chess.
So, when eighteen-year-old prodigy D Gukesh entered this venerable hall of fame by becoming the youngest world chess champion, emulating Anand, few should have been surprised.
Gukesh’s victory was indeed significant and a matter of national pride. But to the discerning few who cared to look beyond the headlines, what stood out was the fact that he had beaten the reigning world champion Ding Liren of China.
But not all the mind games between India and China are being played out on chess boards. A few silent battles are also being waged across Indian and Chinese corporate boardrooms. As relations between the two neighbours thaw, news reports say many Chinese companies are slowly looking to expand their operations again in India.
Chinese companies operating in India have been facing intense scrutiny since a deadly border clash in 2020 over allegations of tax evasion, money laundering, asset seizures, investment curbs and even the arrest of some executives.
With border tensions between the two countries receding, at least for now, Chinese smartphone companies like OnePlus, Vivo, Oppo and Xiaomi are again investing in brand promotions, getting further into manufacturing and appointing distributors. These Chinese companies are looking to bring in big money. While OnePlus has announced a Rs 6,000 crore investment to beef up its India operations, Vivo is putting more than Rs 3,000 crore on the table, having opened a 170-acre manufacturing facility in Greater Noida that can make 120 million mobile phones in a year.
In fact, even the Indian government seems to be in a mood to make things easy for Chinese businesses operating in India. In May, news reports had said that after paving the way for joint ventures such as between JSW and MG Motor India, the Indian government was willing to give a green light to Chinese companies to dilute their stakes in Indian ventures, albeit on a case-by-case basis. This, the report had said, could lead to the likes of Xiaomi expanding their footprint in the country. In July, it was reported that billionaire Mukesh Ambani’s Reliance Retail Ventures was set to launch Chinese fast fashion label Shein in India, four years after it was forced to leave the country.
In 2020, following a land border skirmish with China, India had tweaked its foreign direct investment (FDI) norms to check Chinese inflows. While the government had said in July that it had no plans of supporting Chinese FDI into India, economists like finance commission chairman Arvind Panagariya say that India could welcome investments from China in certain sectors where large economies like United States and Germany conduct business with Beijing.
So, what is your view on this? Should India welcome Chinese businesses and FDI once again? Let us know!
Trillion-dollar dreams
Talking of FDI, government data released this week showed that foreign direct investments into India crossed the $1 trillion mark since the turn of the century. With this, India crossed a major milestone as a top global investment destination.
The data showed that between April 2000 and September 2024, the cumulative FDI inflows including equity, reinvested earnings and other capital, stood at $1.033 trillion. Of this, $667 billion, or two-thirds, came in just the last decade.
According to government figures, more than 25% of this investment was routed via Mauritius, closely followed by Singapore, with the US coming in a distant third. Other top sources of FDI into India include the Netherlands, Japan, the UK, the UAE, the Cayman Islands, Germany and Cyprus.
Among the sectors that attracted the most investment during this period were services and allied sectors including computer software and hardware, telecommunications, trading, construction, infrastructure development, automobile, chemicals, and pharmaceuticals.
Governor Malhotra
Meanwhile, India’s central bank got a new boss this week as revenue secretary Sanjay Malhotra took charge at its Mint Street headquarters. He succeeds Shaktikanta Das, who was RBI boss for almost six years.
Malhotra, a career bureaucrat from the Indian Administrative Service (IAS) who holds an IIT degree in computer science, will have his task cut out as he enters the corner office at the Reserve Bank of India (RBI).
For one, he faces some challenges with the economic growth decelerating to 5.4% in the second quarter ended September. This slowdown had prompted the RBI’s monetary policy committee to revise its growth forecasts to 6.8% and 7.2% for the third and the fourth quarters, respectively, earlier this month from 7.4% each earlier.
High inflation remains another challenge for the RBI, although retail inflation cooled to 5.48% in November from 6.21% the previous month. The October print had forced the central bank to lift its inflation projection for FY25 to 4.8% from 4.5% earlier. And then there is the drop of the rupee to new record lows near 85 to the dollar.
Still, the change of guard at the RBI and cooling inflation could pave the way for a rate cut next year. If the consumer price inflation for 2024-25 remains close to the projected 4.8%, the new RBI chief should be in a position to push for a cut in the benchmark lending rate in the next bi-monthly monetary policy committee meeting due in February next year. While a rate cut is very much on the cards, what remains to be seen is whether it will be 25 basis points (bps) or 50 bps.
Having said that, Malhotra’s departure from North Block, where the finance ministry is located in New Delhi, has left a key position vacant just ahead of the union budget in February. While the budget making exercise has already begun, the government is yet to announce the name of the new revenue secretary, a position that demands extensive expertise in both direct and indirect taxation.
Mutual fund blues
Retail inflation is not the only metric that has seen a slowdown over the past month. The latest figures released by the Association of Mutual Funds in India (AMFI) show that inflows to equity mutual funds in November declined 14% to Rs 35,943.49 crore from Rs 41,886.69 crore in October.
Among various categories of equity mutual funds, thematic funds saw the maximum inflow among equity funds but the amount was still 37.6% lower at Rs 7,657 crore against Rs 12,278 crore in the previous month. This was followed by flexi-cap funds, which saw inflows of the order of Rs 5,084 crore.
Hybrid mutual funds saw a decline of 75% to Rs 4,123 crore in November from the previous month while index funds recorded a fall of 45% to Rs 4,342.8 crore. Further, inflows into large-cap funds slipped 26.2% but small-cap and mid-cap funds recorded an increase of 9% and 4.3%, respectively, during the month.
However, investments via the systematic investment plan (SIP) route stood steady in November at Rs 25,319.66 crore. The corresponding figure was Rs 25,323 crore last month and Rs 24,509 crore in September.
Market Wrap
Both the benchmark indices ended the week in the green, thanks to a strong rebound on Friday when they came back from losses of 1% to close almost 0.9% to 1.0% higher.
For the week, the 30-stock Sensex performed better and ended the last five trading sessions with gains of 0.76% while the 50-stock NSE Nifty rose about 0.4%.
Nifty stocks that gained the most during the week included Bharti Airtel, Wipro, Infosys, Bajaj Finance and Bajaj Finserv. Other Nifty counters that also ended the week in the green were UltraTech Cement, HCL Technologies, Power Grid Corp of India, Adani Enterprises, Tata Consultancy Services and ICICI Bank.
Nifty stocks that were most in the red over the week included Tata Consumer, Axis Bank, Hindustan Unilever, Reliance, Tata Motors and NTPC. Others like Cipla, Coal India, ITC, ONGC, SBI Life and Hero MotoCorp also clocked losses.
Other Headlines
- SEBI to allow optional T+0 or same-day settlement for top 500 stocks by market cap
- Bluestone Jewellery and Lifestyle files for IPO, to raise Rs 1,000 cr in fresh issue
- Vishal Mega Mart’s Rs 8,000-crore IPO fully subscribed on second day of issue
- ReNew Energy Global to delist from Nasdaq
- Continuum Green Energy files for Rs 3,650-crore IPO
- Airport lounge operator Travel Food Services files for IPO
- Digital payments firm MobiKwik’s Rs 572-crore IPO fully covered as retail investors line up to bid
- India’s industrial output rises to a three-month high of 3.5% in October vs 3.1% in September
- Jubilant Bhartia Group to buy 40% stake in Coca-Cola bottler Hindustan Coca-Cola Beverages
- Govt seeks parliament’s approval for additional spending of Rs 86,730 crore for FY25
- Govt may table bills to roll out ‘One nation-one election’ in ongoing session of Parliament
- Talks on India-UK free trade agreement to resume by January-end
- ADB cuts India growth projection to 6.5% for 2024 from 7.0% previously, and to 7.0% for next year from 7.2%
- Renewable energy ministry mandates use of locally made solar cells in govt projects from June 2026
- Tata-owned Air India confirms multi-billion-dollar order for another 100 Airbus aircraft
- Tax department orders Zomato to pay Rs 804 crore in taxes and fines
That’s all for this week. Until next week, happy investing!
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