Morning Scan: All the big stories to get you started for the day

The domestic manufacturing sector grew at its fastest pace in three months in March as raw material availability improved and supply chain concerns receded. The S&P Global India Manufacturing Purchasing Managers’ Index rose from 55.3 in February to 56.4 in March. The gauge has remained above 50, indicating expansion, for 21 consecutive months. However, job creation remained a concern as pending workloads expanded only marginally, the survey said.

Why it’s important: The continued rise in factory orders indicate strong underlying demand for Indian goods. Companies have also tried to make the best of a slight easing in inflation to buy raw materials and semi-finished products.

3. Electronics grew 25 per cent in 2022-23, FMCG sales increased 8 per cent

Sales of household essentials, groceries and personal care items grew 8 per cent in the year ended March 31, while electronic product sales surged by 25 per cent. Last financial year, sales had grown at a higher 18 per cent for FMCG items and 30 per cent for electronics and durables, mainly due to a lower base of the previous year on account of the pandemic restrictions and lockdown, according to industry executives and Bizom, a data provider.

Why it’s important: The increase in sales was helped by a gradual recovery in the last quarter after a decline or flat growth in the initial few months of the financial year. Worryingly, the pace of growth Is declining.

4. Income tax department scrutinizes 89 high-value outward remittance cases

The income tax department has identified 89 high-risk foreign remittance cases with suspected tax evasion of over Rs 100 crore each. These cases pertain to high-value remittances in 2019-20 and 2020-21. The Central Board of Direct Taxes has asked assessing officers to initiate verification and send notices to these red-flagged transactions in an internal instruction.

Why it’s important: Advanced data analytics is increasingly detecting a high number of discrepancies in documents required to be filed in case of outward remittances. The instances could rise further.

5. Creditors to Reliance Capital delay auction to get more bidders on board

The second auction of bankrupt Reliance Capital’s assets has been delayed by a week as lenders seek to enlist the participation of more bidders. The auction has been postponed from April 4 to 11. Indusind Holdings of Hinduja Group, Torrent Investments and Oaktree Capital will participate in the auction. The Piramal-Cosmea Financial consortium has not responded yet. The bidders have sought more time to complete the compliance process.

Why it’s important: After a botched first auction that landed in court, the lenders are seeking to maximize their recoveries from the insolvent firm by raising the floor price in the second auction. The outcome remains uncertain.

6. MUFG Bank leads the $400 million fundraise by DMI Finance

DMI Finance has announced the closure of a $400 million equity investment round led by Japan’s Mitsubishi UFJ Financial Group through its consolidated subsidiary MUFG Bank. Existing investor Sumitomo Mitsui Trust Bank also participated in the fundraising that involved primary and secondary transactions. The two founders and the largest shareholder, New Investment Solutions, have partially sold their stakes in the secondary round. MUFG deployed $230 million for a 20 per cent stake and has the option of buying an additional 10 per cent equity.

Why it’s important: A strong growth in digital infrastructure has provided a lot of room for financial services to grow in India. Mitsubishi wants a share of the expanding pie.

7. Chip shortage may drive local automobile production into a rut in 2023-24

Although India’s passenger vehicle sales touched a record high of 3.9 million units in 2022-23, growing 27 per cent on year, Maruti Suzuki India has warned uncertainties in the electronic component supplies might affect production in the current financial year. Other leading automakers like Mahindra and Tata have also flagged their concerned on this count.

Why it’s important: Semiconductor chips have become indispensable in today’s cars. An earlier shortage during the pandemic had hamstrung production. It threatens to derail production once again.

8. Non-life insurers may soon be allowed to expand product offering beyond covers

General insurers may soon be allowed to sell services such as gym memberships, vehicle repairs and other diagnostic services in addition to their core insurance offerings. The proposed changes would be implemented through amendments to the insurance law. The changes are also expected to boost the value of insurance distribution operations.

Why it’s important: The proposed expansion of other financial services would mark a significant reform for the domestic insurance industry that could lead to significant business growth.

8. Crude prices could hit $100 after oil cartel unexpectedly announced production cuts

Prices of crude oil has surged after the OPEC plus cartel unexpectedly announced output cuts that threaten to tighten the market. An immediate reaction to the surprise 1.16 million barrels per day output cut by the oil producing nations saw Brent crude oil prices climb 6.4 per cent to over $85 a barrel. Prices could stay firm and inch towards $100 a barrel as the year progresses if the cartel continues to cut production amid strong demand.

Why it’s important: The decision by OPEC plus has delivered an unpleasant inflationary jolt to the world economy at a time central banks are raising rates aggressively to stem the increasing rate of price rises. It may add pressure to recessionary fears.

9. IT revenues at risk due to macroeconomic and financial sector headwinds

Global macroeconomic and financial sector slowdown is likely to depress the Indian IT sector, with revenue growth expected to nearly halve from a year ago, according to analysts. The fourth quarter of 2022-23 is expected to have been muted due to longer deal cycles, impact on the banking, financial services and insurance sector and seasonal headwinds. The financial sector contributes around 40 per cent to the country’s IT services industry revenue.

Why it’s important: Software exports make up for a major chuck of India’s foreign exchange earnings. A moderation in business growth could widen the current account deficit at a time when crude oil prices are rising.

10. Corporate credit quality rises significantly despite inflationary pressures

Indian companies have reported strong credit quality in 2022-23 with continued debt reduction and robust profitability and despite some downgrades due to inflationary pressures, credit raters have. ICRA reported 22 defaults in its portfolio in 2022-23, compared to 42 in the previous year and 44 in 2020-21. It also reported almost three upgrades for each downgrade. The trend was consistent with the improvement in the asset quality of banks and non-banking financial companies.

Why it’s important: Upgrades are expected to exceed downgrades in the current financial year. However, the slowdown in exports, the impact of higher interest rates and volatility in commodity prices could impact the positive outlook.