{"id":37329,"date":"2025-05-16T19:19:14","date_gmt":"2025-05-16T13:49:14","guid":{"rendered":"https:\/\/kuvera.in\/blog\/?p=37329"},"modified":"2025-05-16T19:19:14","modified_gmt":"2025-05-16T13:49:14","slug":"the-weekly-wrap-watch-the-changing-hues","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/the-weekly-wrap-watch-the-changing-hues\/","title":{"rendered":"The Weekly Wrap | Watch the Changing Hues"},"content":{"rendered":"

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Earlier this month, India\u2019s biggest paintmaker stunned the markets when it reported a 45% drop in quarterly profits and a 33% slump in consolidated earnings for the full year through March 2025.<\/p>\n

Asian Paints, which was set up five years before India gained independence in 1947, blamed a weak demand environment for the poor performance that also showed in its revenue\u2014sales fell 4.3% during the January-March quarter and slipped 4.5% for the full year. Worse, it said demand conditions were unlikely to improve anytime soon.<\/p>\n

The company hadn\u2019t seen such demand conditions in the industry over the \u201clast two decades\u201d, its CEO Amit Syngle said. \u201cCurrently, given the overall environment… (we) do not see acceleration in demand,\u201d he added.<\/p>\n

To be sure, Asian Paints has been disappointing the markets and investors for the past few quarters. Its shares have lost nearly a third of their value since September last year when the stock markets reached all-time highs. And the shares haven\u2019t managed to recoup the losses even though the benchmark indexes are now just a shade away from the peak.<\/p>\n

Still, the latest numbers and the CEO\u2019s comments reflect a matter of serious concern\u2014not just for the company itself but also for the entire paints industry as well as the broader economy.<\/p>\n

Why is that, you may ask? Well, the paints industry\u2019s performance directly correlates to the performance of a number of other sectors such as real estate and automotive. It also is linked directly to household consumption. So, if sales of houses or offices are slow or if people aren\u2019t buying as many as cars and bikes than before or if households worried about stagnant wages are tightening their budgets, the paints industry is directly affected.<\/p>\n

Asian Paints isn\u2019t the only one facing the pinch. Smaller peer Kansai Nerolac Paints this week reported a 7% drop in fourth-quarter profit while revenue inched up 3%. Akzo Nobel India, the maker of Dulux paint, reported a 0.3% fall in quarterly profit while revenue rose only 5% and expenses increased by 6%. Berger Paints, the No.2 by market share, managed to beat expectations as quarterly profit jumped 18% and revenue climbed 7%.<\/p>\n

Slowing demand isn\u2019t the only problem that Asian Paints is facing. Its bigger headache is the rapid expansion of Grasim Industries, the textiles-to-chemicals arm of the Aditya Birla Group.<\/p>\n

Grasim entered the paints sector in February 2024 under the Birla Opus brand. It aims to ramp up its revenue to Rs 10,000 crore by 2027 and take the No.2 spot from Berger. And it seems to be well on course to doing that.<\/p>\n

Birla Opus has already gained a 6.8% share thanks to aggressive expansion that includes setting up factories, hiring executives and offering discounts to dealers. Meanwhile, Asian Paints\u2019 market share dropped to 52% from 59% a year ago, Reuters reported this week, citing Elara Securities data.<\/p>\n

And competition is set to intensify with another diversified conglomerate\u2014JSW Group\u2014seeking to expand quickly. The Sajjan Jindal-led group entered the sector in 2019 but is now pressing the pedal and is in the race to acquire Akzo Nobel India. A deal for the Dulux owner will help JSW Paints boost its market share and meet its target of Rs 5,000 crore for the current fiscal year from about Rs 2,000 crore in 2023-24. That would mean another headache for Asian Paints.<\/p>\n

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\"SIP_Kuvera\"<\/b><\/p>\n

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Taking Account<\/h3>\n

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Asian Paints isn\u2019t the only company under intense pressure. IndusInd Bank, India\u2019s fifth-largest private-sector bank, has been grappling with one challenge after another for the past several weeks.<\/p>\n

Last month, the lender disclosed derivatives loss of Rs 1,960 crore and admitted to accounting irregularities. This prompted the Reserve Bank of India to step in and forced CEO Sumant Kathpalia and deputy CEO Arun Khurana to step down. Last week, the bank all but admitted to violations of insider trading norms by Kathpalia and Khurana. It said that an independent review found issues that may need to be assessed from an \u201cinsider trading perspective\u201d.<\/p>\n

This week, more accounting irregularities came to light. The bank said an internal audit found that its microfinance arm incorrectly recorded Rs 674 crore as interest over three quarters of 2024-25. The amount was reversed on Jan. 10, 2025. The bank also found \u201cunsubstantiated balances\u201d of Rs 595 crore in its \u201cother assets\u201d accounts. This amount was set off against corresponding balances appearing in \u201cother liabilities\u201d accounts in January 2025.<\/p>\n

IndusInd said it was taking steps to strengthen internal controls and fix accountability of the people responsible for the lapses in the microfinance business.<\/p>\n

While IndusInd\u2019s colour seems to be fading fast, another bank is getting back its lost colour.<\/p>\n

Late last week, Sumitomo Mitsui Banking Corp agreed to buy a 20% stake in YES Bank for almost $1.5 billion. Japan\u2019s second-biggest bank will buy the stake from State Bank of India and other lenders that had rescued YES Bank as part of an RBI-led restructuring in March 2020. The deal is a win-win. SBI and other lenders will get some of their money back, SMBC gets a big foothold in India\u2019s banking sector, and YES Bank gets the backing of a strong shareholder.<\/p>\n

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Trump\u2019s Cards<\/h3>\n

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Talking about the changing colours, metaphorically speaking, US President Donald Trump said this week that India had offered a trade deal that proposed zero tariffs on American imports.<\/p>\n

\u201cIt is very hard to sell in India, and they are offering us a deal where basically they are willing to literally charge us no tariffs,\u201d Trump said in the Qatari capital Doha during his visit to the Middle East.<\/p>\n

Trump has been putting pressure on India to reduce import duties even before he was reelected as president in November last year and even called the country a \u201ctariff abuser\u201d. Last month, Trump imposed a 26% reciprocal tariff on imports from India in addition to the 10% baseline tariffs imposed earlier. These were part of his broader strategy where he levied baseline and reciprocal tariffs on all of America\u2019s trading partners on April 2, before hitting a pause on April 9.<\/p>\n

India, like other countries, now has 90 days to stitch a trade deal with the US. India-US trade totalled about $129 billion in 2024, with India running a large surplus. While the Indian government hasn\u2019t yet commented on an agreement, Trump\u2019s statement\u2014if true\u2014would mark a dramatic change in bilateral trade ties.<\/p>\n

Trump didn\u2019t just stop at trade. He also chided Apple Inc for increasing iPhone manufacturing in India and said the Tim Cook-led American company should make more smartphones in its home country.<\/p>\n

Apple has shifted some of its manufacturing from China to India and recently said it will make most of its iPhones sold in the US at Indian factories as part of a strategy to shield itself from potentially higher tariffs in China.<\/p>\n

In fact, Apple\u2019s growing manufacturing presence in India has been one of the rare success stories for the country. And it would be big loss for India if the company were to now change its plans under Trump\u2019s pressure.<\/p>\n

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More Rate Cuts in Offing<\/h3>\n

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Moving on to economic news, retail inflation in India cooled to a six-year low of 3.16% in April, largely due to a sharp drop in food prices. Core inflation, which excludes volatile components like food and fuel, also remained steady at 4.1%.<\/p>\n

Vegetables and pulses were the key drivers pulling inflation down. Their decline brought food inflation down to 1.78% in April from 2.69% in March\u2014the lowest level since October 2021.<\/p>\n

Most experts believe inflation will remain benign through the rest of the calendar year, primarily supported by subdued food prices. The only upward pressure could come from gold, which has hit record highs amid geopolitical uncertainty. However, this turmoil\u2014triggered by Trump\u2019s reciprocal tariff regime\u2014is also expected to have a deflationary effect on other commodities, especially crude oil.<\/p>\n

This should help keep inflation below 4%, the RBI\u2019s medium-term target, providing the central bank ample room for deeper rate cuts. The RBI had reduced the repo rate by 25 basis points each in February and April. Since then, inflation has eased further, and growth pressures have become more visible\u2014just as the RBI had projected.<\/p>\n

The central bank has shifted its policy stance to \u201caccommodative\u201d and has been injecting liquidity aggressively, maintaining surplus conditions in the system. With banks flush with funds, there is little excuse left to delay passing on rate cuts. In fact, there is growing chatter about banks frontloading rate transmission, as high-frequency indicators increasingly signal the need to support growth.<\/p>\n

This was the last inflation print before the next meeting of the Monetary Policy Committee (MPC) in June, in which a rate cut is widely expected. Whether it will be a 25-bps cut or a 50-bps one is now the only question left.<\/p>\n

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\"FD_Kuvera\"<\/p>\n

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Market Wrap<\/b><\/h3>\n

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Benchmark Indian indices rose this week as investors welcomed a ceasefire with Pakistan and Trump\u2019s comments on a possible trade deal with India. Expectations of a rate cut after inflation cooled also helped improve sentiment.<\/p>\n

The Nifty 50 surged 4.2% for the week while the BSE Sensex gained 3.6%. The small-cap index soared 9.2% while mid-cap stocks surged 7.2% this week. The IT index jumped 5.8%, as concerns over a recession in the US abated.<\/p>\n

Only three of the 30 Sensex and the 50 Nifty stocks ended in the red. These were IndusInd Bank, Bharti Airtel and Sun Pharma. IndusInd dropped as it disclosed more accounting issues while Airtel slipped after Singapore Telecom sold a 1.2% stake in the company for about $1.54 billion. Sun Pharma fell on worries about US tariffs.<\/p>\n

State-run Bharat Electronics was the top gainer this week, surging 15% as investors lapped up stocks with exposure to the defence industry. Adani Enterprises was the next best performer. As many as eight companies, including Hero MotoCorp, Bajaj Auto, Jio Financial, Tata Steel and Trent, jumped between 8% and 12%.<\/p>\n

Almost 15 Nifty companies, including index heavyweight Reliance Industries, recorded a gain of between 5% and 8%. This set also included Grasim, Adani Ports and IT companies Infosys, Wipro and HCL Technologies.<\/p>\n

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Earnings snapshot<\/b><\/h3>\n