In this first edition of 2024, we talk about why growth indicators are looking up and what this might mean for the Indian economy. We also talk about Brookfield’s big-ticket acquisition in India, how the RBI is watching out for the small investor, and what the Supreme Court had to say on the Adani-Hindenburg case.
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Cometh a new year, cometh some good cheer.
As 2024 dawns upon us, the news for the Indian economy seems to be looking good. Latest advance estimates by the government on India’s Gross Domestic Product (GDP) say that the country’s economy is likely to grow by 7.3% for the financial year 2023-24 as against earlier forecasts.
In fact, just last month, the Reserve Bank of India lifted its forecast to 7% for the current fiscal year from an earlier estimate of 6.5%. The revised forecast was a “conservative estimate” considering robust growth reflected in high-frequency indicators data for October and November, RBI Deputy Governor Michael Patra said last month.
Services activity, credit growth and foreign portfolio investments, too, seem to be picking up. India’s services activity picked up momentum in December aided by demand buoyancy, strong job creation and strength in business optimism, a private survey shows. The HSBC India Services Purchasing Managers’ Index rose to 59.0 in December from November’s one-year low of 56.9. With this, India’s services activity has expanded for 29 straight months.
Then there’s credit growth. Early data, published ahead of the month-long earnings season starting next week, showed that lenders are on track to report yet another quarter of robust performance, media reports said.
Bajaj Finance, one of India’s largest non-banking finance companies, said its AUM jumped 35% year-on-year during the October-December quarter while new loans booked grew 26% to 9.84 million. State-run lenders as well as private-sector banks such as Bandhan Bank, Federal Bank and RBL Bank have also shown credit growth in excess of 18%.
Foreign portfolio investors (FPI) made record monthly purchases of Indian shares totalling almost $8 billion in December, National Securities Depository data showed. Similarly, foreign investors net bought Indian government bonds worth about $4.2 billion in October-December, pushing the full-year number to a six-year high of $7.2 billion.
The United Nations, too, is optimistic about India. The UN said India is projected to grow at 6.2% in 2024, supported by robust domestic demand and strong growth in the manufacturing and services sectors.
So, what does all of this economic jargon actually add up to? Well, in a nutshell, these numbers add up to say that for now, the government can breathe easy, as Prime Minister Narendra Modi vies for a third term in office in the next general elections that are less than five months away.
But none of this is to say that a rude shock may not be just around the corner, so it may just be better for the powers that be to keep watching their backs.
Brookfield’s New Deal
Indo-Canadian relations may have hit an impasse in recent months but that doesn’t seem to be deterring the North American country’s investors from going long on its long-time South Asian trading partner.
On Friday, Data Investment Trust, an Indian Infrastructure Investment Trust (InvIT) sponsored by Canada’s Brookfield Asset Management Inc inked an agreement to acquire American Tower Corp’s (ATC) India operations in a Rs 21,000 crore ($2.5 billion) deal. The total cash proceeds include an enterprise value on the ATC India operations of around $2 billion (Rs 16,000 crore), plus a ticking fee that accrues from 1 October 2023 to the date of closing of the deal, ATC said.
This is Brookfield’s third acquisition in the Indian telecom tower space and one of the biggest deals in the Indian infrastructure sector till date. In 2022, Brookfield bought a portfolio of 5,000 indoor business solutions sites and small cell sites. It also has a portfolio of nearly 175,000 towers that were acquired in 2020 from a unit of Reliance Industries Ltd. The ATC deal will add another 78,000 towers to this across India and make Brookfield the largest operator of telecom towers in India, leaving behind Indus Towers in the wake.
RBI’s New Norms
While big investors strike multi-billion-dollar deals, the Indian central bank is watching out for the small investor.
To ensure that individual investors’ losses are minimised in case issuers default on short-term financial instruments, the Reserve Bank of India has limited their investment in primary issuances to a quarter of the total offering.
Further, issuers of commercial papers (CPs) and non-convertible debentures (NCDs) will have to disclose information on any default in payments through various channels, including publicly disseminating such information through their website, as per the RBI’s revised master direction on CPs and NCDs of original or initial maturity up to one year.
Capping the total subscription by all individuals in any primary issuance of CPs or NCDs to 25% of the total amount issued could curb their tendency to go overboard and invest, lured by high rate of interest. Earlier, there was no limit for individual investors’ investment.
The central bank has also expanded the category of CP and NCD issuers to include Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). In addition, co-operative societies and limited liability partnerships with a minimum net worth of Rs 100 crore can also issue CPs. This is subject to the condition that all fund-based facilities availed, if any, by the issuer from lenders are classified as standard at the time of issue.
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On Cloud Nine
Meanwhile, the Adani Group can rest easy, at least for now, with the Supreme Court saying this week that it had limited jurisdiction when it came to the Security and Exchange Board of India’s regulatory domain, and so SEBI should be allowed to conclude its probe into the allegations made by Hindenburg Research last year.
Hindenburg Research had accused the Adani Group of “brazen stock manipulation” and “accounting fraud” in January last year, and said the group was “pulling the largest con in corporate history”. The group rejected all these allegations.
The apex court said that there was no ground to either transfer the probe from SEBI to a Special Investigation Team. It noted that SEBI had completed investigation in 20 out of 22 matters and asked the regulator to complete the probe in the other two cases within three months.
The court also rejected the claim made by petitioners that there was a conflict of interest in members of the court-appointed expert committee, calling it “unsubstantiated”. “The Government of India and SEBI shall take into consideration the recommendations of the committee to strengthen interest of the Indian investors,” the court said.
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-stock Nifty ended the last five trading sessions flat while the 30-share Sensex slipped 0.3%.
Nifty stocks that gained the most in the first week of the new year included Adani Ports and Adani Enterprises, Bajaj Finance and Bajaj Auto, Tata Consumer and Tata Motors, and public-sector firms ONGC, NTPC and Coal India. Other counters that rose were drugmakers Sun Pharma and Cipla and private-sector lenders Axis Bank and IndusInd Bank.
Nifty losers during the week were IT majors Wipro, Infosys, TCS, HCL Technologies and Tech Mahindra, and auto majors like Eicher Motors, Mahindra & Mahindra, Hero MotoCorp and Maruti Suzuki.
Old economy stocks including Tata Steel, JSW Steel, Ultratech Cement, Grasim, Hindalco and Shree Cement also fell. Four top banks—HDFC Bank, ICICI Bank, State Bank of India and Kotak Mahindra Bank—also ended in the red.
Other headlines
- India to use Elon Musk-led SpaceX’s rocket to launch communications satellite
- India manufacturing PMI falls to 18-month low in December
- Reliance, Disney begin antitrust due diligence on merger of India media business
- Govt rejects GMR’s proposal for Delhi Airport to pre-fund Rs 3,500 crore train corridor via passenger fees
- Govt may get Rs 55,000-60,000 crore in dividends from PSUs, topping FY24 aim of Rs 43,000 crore
- Swan Energy takes full control of Reliance Naval
- Wipro, former CFO Dalal go into arbitration over alleged breach of non-compete clause
- Vedanta Resources’ bondholders support debt restructuring plan
- Bajaj Auto to consider share buyback on January 8
- Gujarat govt holds talks with Japan, US, Korean firms for chipmaking investments
- ArcelorMittal JV, NTPC, 56 other companies commit to $86 billion investment in Gujarat
- Vietnam’s VinFast plans to set up EV battery plant in Tamil Nadu
That’s all for this week. Until next week, happy investing!
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