In this edition, we talk about India becoming the most populous country and what it means. We also talk about the difference of opinion at the RBI and how the India economy has been resilient in the face of a global slowdown.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
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Big families, they say, have many benefits but also bring big problems. And we Indians should know this only too well!
The United Nations said this week that India is on track to become the most populous country in the world. India will have 1.428 billion people by the middle of 2023, as against 1.426 billion in China, the UN said.
While the milestone means that, with more mouths to feed, the country’s economic and development indicators will remain stressed, some economists and population experts say that the country is set to reap a “population dividend”.
They say that the country will remain much younger than China and the developed world, which is seeing a population decline, and that this will land India in good stead in the decades to come.
The long-term view apart, even in the short term the economy seems to be showing signs of impeccable resilience.
The latest figures on eight high-frequency indicators compiled by Bloomberg show that India’s economic activity stayed resilient in March though the weakening pace of exports and an increase in unemployment dimmed the outlook.
Purchasing managers’ surveys showed manufacturing activity improved as pressure on supply chains eased on increased raw materials availability, the report said. Activity in the services sector moderated in March from a 12-year high in the previous month. Exports dropped 13.9% in March while imports fell 7.9% from a year ago. Liquidity in the banking system swung to a surplus in March and credit growth remained high at 15%.
GST collections rose 13% from a year earlier to Rs 1.60 trillion ($19.5 billion) in March — the second-highest level since the tax was introduced six years ago. This is not all. Passenger vehicle sales growth in March improved to 14.42% year-on-year, from 10.9% a month ago.
On the flip side, the unemployment rate climbed to 7.80% in March from 7.45% a month ago, according to data from the Centre for Monitoring Indian Economy, as companies tightened purse strings after the festive season.
The new figures come even as the Reserve Bank of India (RBI) paused raising interest rates for the first time since May 2022 to evaluate the impact of the 250 basis points in rate increases so far and to support growth.
The cautious pause
Talking of the RBI’s decision to take a pause, the latest minutes of the central bank’s six-member Monetary Policy Committee showed that its members were split on India’s growth prospects. This, even as all six members voted for pausing the repo rate at 6.5% in the meeting held during April 3-6.
The minutes showed that the members remained concerned about inflation as they emphasized that the monetary tightening cycle had not ended. MPC members said there was a need for constant monitoring and efforts to bring inflation to the target of 4% over the medium term.
RBI Governor Shaktikanta Das wrote in the minutes that inflation for 2023-24 was projected to soften, but the disinflation towards the target is likely to be slow and protracted. His deputy, Michael Patra, said the future path of inflation was vulnerable to several supply shocks and the MPC must accordingly remain on high alert and ready to act pre-emptively if risks intensified to price stability or growth.
So, does that mean the RBI could again go in for a rate hike? We can’t predict what the central bank will do but don’t count the possibility out, just yet.
IT slide
While interest rates may inch up further, the country’s top IT stocks are now down more than 50% from their peaks owing to weak earnings and a dim outlook.
In fact, at least four out of the 10 Nifty IT stocks are now trading below their average price-to-earnings levels.
These include Infosys, which is down over 35% from its all-time high and is available at 21.71x PE versus its five-year average of 25.59x. Likewise, Tata Consultancy Services is down over 22% from its peak and is not finding enough takers at 27x PE, below the five-year average of 29x. Others that make up the four are Mphasis and Wipro, both of which have lost more than half their value from their peaks.
Tech Mahindra, which has eroded 44% of investor wealth from its peak touched on 30 December 2021, is still trading above its average PE of 17x, while Persistent System has lost 15%, becoming the most resistant Nifty IT stock.
So, where do these IT stocks, once the blue-eyed boys of the Indian stock market, go from here? Brokerages have taken a cautious stance on these companies, especially those with greater exposure to the North American market, which has seen a banking crisis, and the communications sector.
So, if the brokerages are cautious, we say you too exercise caution and take smart investing bets.
Crude reality
Meanwhile, Russia reportedly overtook all other major oil exporting countries and became the biggest crude oil exporter to India.
In fact, India and China have bought the vast majority of Russian oil so far in April at prices above the Western price cap of $60 per barrel, a Reuters report said. Data showed that Russian Urals oil cargoes that loaded in the first half of April are mostly heading to Indian and Chinese ports. India accounts for more than 70% of the seaborne supplies of the grade so far this month and China for about 20%, the report said.
Why is this important? This is significant not only because more oil exports mean more money in Russian coffers, but also because it helps India reduce its US dollar outgo, as Indian refiners have reportedly begun paying for most of their Russian oil purchased via Dubai-based traders in the United Arab Emirates dirhams instead of US dollars. This after the State Bank of India cleared such an arrangement.
And this, in turn, also helps India reduce its dependence on the US dollar, which has been the most dominant currency ever since the end of the second world war.
Market Wrap
Both the benchmark indices didn’t do much this week and ended lower, after gaining the previous week.
While the 30-script Sensex ended down 1.1$, the 50-share Nifty was down almost 1.3%. The broader indices were checked by the fall of tech majors after they posted tepid results over the past couple of weeks.
The Nifty stocks that gained the most this week included the lenders Yes Bank, IndusInd Bank, State Bank of India, Kotak Mahindra Bank and Axis Bank. Other shares that gained ground during the week were Eicher Motors, Bharat Petroleum, Asian Paints, ITC and Power Grid Corp of India.
The Nifty stocks that fell the most included Infosys, Tech Mahindra, HCL Tech, Tata Consultancy Services and Wipro. Others that lost ground were NTPC, Larsen & Toubro. Grasim Industries, Sun Pharma and JSW Steel.
Other headlines
- HCL Tech slows down employee addition, hiring drops to 17,067 from nearly 40,000
- Vedanta pledges more Hindustan Zinc shares to raise Rs 1,500 crore
- Kumar Mangalam Birla returns to Vodafone Idea board after two years
- Shapoorji Pallonji nears major revamp with Mistry family as benefactors
- Twitter removes legacy blue ticks for thousands, including Indian and international celebrities
- Mankind Pharma sets price band for IPO at Rs 1,026-1,080 per share; IPO opens April 25
- Avalon Technologies shares close with 9% loss on stock market debut
- Apple opens Delhi, Mumbai stories as India sales touch $6 billion
- Nike, Adidas shoes maker Pou Chen to invest nearly $281 million in India
- Cyient Q4 net profit up 5.5% at Rs 163 crore, revenue jumps 30%
- Tata Communications Q4 net profit declines 10.7%, revenue rises 7.2%
- Volkswagen to bring its first electric vehicle in India next year
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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