This week, we talk about the RBI’s decision to keep interest rates unchanged. We also talk about the continuing fallout of last week’s RBI order on Paytm, the latest numbers on mutual fund flows and the mega India IPO reportedly being planned by South Korean auto giant Hyundai.
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A few days ago, the US Federal Reserve held its benchmark lending rates steady. This week, India’s central bank followed suit.
That the Reserve Bank of India will keep its interest rates unchanged was a given. What some economists and market participants had hoped for was a change in stance to neutral or at least any signal of a change in stance soon.
The hope was not uncalled for. Inflation has been coming down and liquidity in the banking system has been tight.
While the Monetary Policy Committee disappointed on the policy stance, the RBI’s inflation projections did give some hope. The RBI maintained its retail inflation projection for the second quarter of FY25 at 4%, for the second consecutive time.
But inflation is projected to climb again for the following two quarter, to 4.6% and 4.7%, respectively.
And then there was some hard talk by Governor Shaktikanta Das. The RBI chief reminded of the need for inflation to reach the 4% target and to stay at the target. He also warned of upside risks to food inflation and its ripple effects while reiterating the stance – withdrawal of accommodation. Monetary policy must continue to be actively disinflationary, Das said.
The central bank also said that the momentum in the economic activity is expected to continue in fiscal year 2024-25 with GDP growth estimated at 7%.
While it kept the lending rate and inflation projection numbers steady, the RBI raised the economic growth rate estimates for Q1FY25 to 7.2% from 6.7%. Likewise, estimates for Q2FY25 have been raised to 6.8% from 6.5%; Q3FY25 GDP growth forecast raised to 7.0% from 6.4%, and Q4FY25 GDP growth has been pegged at 6.9%.
But what does all of this mean for a person who may have availed of home loans, car loans, personal loans and such like? The RBI’s decision means that your EMIs are not coming down anytime soon, at least not for the next couple of months when the MPC meets again to take a call on interest rates.
Paytm saga
After announcing the policy, the RBI, like every time, held its press conference. This time, however, the questions posed to the central bank were less about the policy and more about its last week’s decision regarding Paytm Payments Bank, a decision that has been having ramifications since then.
Last week, the central bank had barred Paytm Payments Bank from accepting new deposits from February 29. On Thursday, the RBI clarified that the action against Paytm was taken due to the fintech firm’s ‘persisted non-compliance’.
“We give sufficient time to every entity to comply and sometimes more than sufficient time to the entities for compliance. If they would comply, why would a regulator like us would have to take action?” RBI governor Das said.
Paytm shares have fallen almost 45% since the RBI decision and touched their all-time low of Rs 410 apiece on the NSE on Friday.
Paytm’s founder and chief executive officer Vijay Shekhar Sharma had met both the RBI and finance minister Nirmala Sitharaman after the RBI order. But going by the answers given at the post policy press conference and according to reports, the RBI seems unwilling to move.
According to a report, the Paytm founder was told by Sitharaman that action against his company was a regulatory process and the government cannot help the company with.
Interestingly, even as it faces heat, the fintech firm is reportedly putting the finishing touches to a deal to acquire Bitsila, an interoperable e-commerce startup. Bengaluru-based Bitsila is currently the third largest seller side platform by transactions on the Open Network for Digital Commerce (ONDC).
Following the RBI order, the Employees’ Provident Fund Organisation (EPFO) has asked all its field offices to abstain from accepting claims linked to bank accounts in Paytm Payment Bank. This order will come into effect from February 23, 2024. For EPFO subscribers with accounts in Paytm Payment Bank, this restriction may affect the timely processing of withdrawals and credit transactions.
Hyundai India IPO
Nearly three decades after Hyundai made its India debut, the South Korean auto company is reportedly mulling to list in the country. The IPO could be India’s largest if it goes through, according to a report by The Economic Times newspaper. LIC holds the record for the largest IPO with an issue size of ₹21,000 crore.
The report says several investment banks were in Seoul last week to firm up the listing plan for India’s second-largest passenger vehicle seller, after Maruti Suzuki.
Bankers reportedly valued the company at $22-28 billion. Hyundai Motor Co, which is listed in South Korea with a market cap of $39 billion, is eyeing a Diwali listing. The India listing would be reportedly part of South Korea’s ‘value-up’ programme.
MF juggernaut
Meanwhile, in good news for the mutual fund industry, inflows into the equity segment rose 28% to Rs 21,780 crore from Rs 16,997 crore in December, according to the latest data released by the Association of Mutual Funds in India (AMFI).
AMFI said that the spike can be partly attributed to some categories of mutual funds such as sectoral funds, largecaps, multicaps and smallcaps. Sectoral mutual funds saw an inflow of Rs 4,805 crore, smallcaps witnessed an inflow of Rs 3,257 crore and multicaps saw an inflow of Rs 3,038 crore.
This was followed by flexi-cap funds and mid-cap funds that drew a total of Rs 2,447 crore and Rs 2,061 crore, respectively. Large-cap funds and value funds saw an inflow of Rs 1,287 crore and Rs 1,842 crore, respectively.
Among hybrid mutual funds, maximum inflow was seen in arbitrage and multi asset allocation funds which saw an inflow of Rs 10,608 crore and Rs 7,079 crore, respectively. Index funds also saw inflow to the tune of Rs 2,988 crore.
A total of 20 mutual fund schemes were launched in January, in the category of both open ended and close ended scheme, raising a total of Rs 6,817 crore.
The month of January witnessed several new highs. Mutual fund industry’s net AUM reached Rs 52,74,000 crore during the month, from Rs 50,77,900 crore in December.
Market Wrap
This was a sluggish week for India’s stock markets with both the benchmark indices ending most of the sessions in the red. The Sensex ended the week down by 0.7% while the Nifty fared a little better, and was in the red by just under 0.3%.
Government-owned companies led the pack of Nifty stocks that ended the week in the green. These included Bharat Petroleum. Coal India, ONGC, Power Grid Corp of India and State Bank of India. Other counters that also ended the week in the green were Sun Pharmaceuticals, Hero Motocorp and three Tata group companies- Tata Consultancy Services, Tata Steel and Tata Motors. Wipro, HCL Technologies, Cipla, Dr. Reddy’s Labs and Adani Ports.
Nifty stocks that lost ground in the week included the likes of UPL, Grasim, ITC, Kotak Mahindra Bank, ICICI Bank, IndusInd Bank, Shree Cement, L&T and Bharti Airtel. Other losers were HDFC Bank, Titan, Nestle India, Ultratech Cement and the two Bajaj twins- Bajaj Finserv and Bajaj Finance.
Results Wrap
- Nestle India profit before exceptional items and tax climbs 16% to Rs 994 crore
- Biocon revenue surges 34% to Rs 3,954 crore, net profit at Rs 660 crore versus year-ago loss
- Grasim net profit falls 8% to Rs 236 crore, but beats analysts’ expectations
- LIC profit jumps nearly 50% to Rs 9,444 crore from Rs 6,334 crore a year ago
- Apollo Hospitals beats street view as consolidated net profit soars 59% YoY to Rs 245 crore
- Zomato tops estimates, consolidated net profit at Rs 138 crore versus year-ago loss
- Nykaa profit nearly doubles on festive demand to Rs 16.2 crore
- Lupin beats estimates as consolidated net profit rises four-fold to Rs 613 crore
- Tata Consumer consolidated profit before exceptional items and tax rises 27% YoY to Rs 513 crore
- Britannia profit falls 2% year-on-year to Rs 761 crore
- Tata Group-owned Trent’s consolidated net profit more than doubles to Rs 371 crore vs Rs 155 crore
Other headlines
- HDFC Bank gets RBI approval to buy 9.5% stake each in six banks including ICICI Bank, Axis Bank
- UAE wealth fund Abu Dhabi Investment Authority plans to invest $4-5 billion in India via GIFT City
- Govt approves auction of telecom spectrum at reserve price of $11.6 billion
- HDFC Bank raises $300 million through first issue of sustainable finance bonds
- Vedanta looks to sell minority stake in Zambian copper assets
- India plans to protest EU’s carbon tax at WTO meeting
- Ola Electric weighs bid for lithium mining rights
That’s all for this week. Until next week, happy investing!
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