#1. India’s stock market declines after US Federal Reserve continued to raise rates
Indian equities fell on Thursday, mirroring the overnight drop on Wall Street after the US central bank continued to raise interest rates while acknowledging the crisis in the US banking system could weigh on the economy.
The US Fed’s rate hike of 0.25 percentage points was in line with expectations but its chairman Jerome Powell’s remark in the media briefing that the fight against inflation was far from over soured sentiment. The Sensex declined 0.5 percent to end at 57,925.28 points. The Nifty fell 0.44 per cent to close at 17,076.90.
Why it’s important: The cost of funds is rising amid a tightening liquidity situation and the market seems to have reacted to that. India’s volatility index remains high, indicating muted sentiment.
#2. Cash market turnover in India falls 20 per cent in 2022-23 financial year
Despite investor inflows through systematic investment plans crossing Rs 13,000 crore for a fifth consecutive month in February, cash market turnover fell 20 per cent during 2022-23. The notional value of derivatives more than doubled due to persistent volatility that reduced delivery volumes.
The average daily turnover in the cash market until March 22 stood at Rs 53,564 crore, down almost a fifth from Rs 66,799 crore in the preceding financial year. Over the same period, average daily derivatives turnover more than doubled to Rs 152 lakh crore a day from a notional Rs 68.3 lakh crore.
Why it’s important: Regulatory restrictions have driven traders to derivatives instead of cash trading. New rules on upfront margins have likely shrunk volumes.
#3. Vedanta Resources likely in discussions to sell 10 per cent stake in India arm
Vedanta Resources has reached out to investors for a strategic stake sale of up to 10 per cent in India-listed Vedanta Ltd as the conglomerate will have to repay debt amounting to $2 billion maturing in June. It may also leverage the cash flows of the domestic subsidiary and upstreaming the borrowed funds by moving them to the parent via dividend payouts. Vedanta has denied the stake-sale plans.
Why it’s important: Vedanta Resources has large repayments starting next month, including dollar bonds of $400 million in April and $500 million in May. Its plans to raise funds by selling overseas zinc assets to Hindustan Zinc has been nixed by the government, which is a minority stakeholder.
#4. Finance ministry asks state-run banks to share bond portfolio data
The finance ministry has asked public sector banks to furnish details of their bond portfolios ahead of their meeting with finance minister Nirmala Sitharaman. The ministry has requested details on holdings under the held-to-maturity and available-for-sale portfolios.
Sitharaman will hold a meeting with all bank chiefs to review their work, including lending to infrastructure and flow of cash transfers to beneficiaries under various government flagship schemes.
Why it’s important: This is part of an exercise to check the resilience of banks against interest-rate risks. The government also wants to find out how banks will respond in the case of large bond sales.
#5. Chinese firms may need majority Indian partners to build plants in country
Chinese companies will need to concede a majority 51 per cent stake to their Indian joint venture partners to establish a component manufacturing plant in the entire mobile device and electronics supply chain ecosystem in the country. A consensus in this regard is emerging in government circles.
Why it’s important: the move would affect the man global and local firms seeking joint ventures with Chinese companies in the mobile device component space. Some say the foreign direct investment cap could be linked to the amount of technology the Chinese companies are willing to transfer.
#6. Market regulator set to approve proposal to end permanent board positions
The Securities and Exchange Board of India is set to clear a number of proposals, including putting an end to permanent board memberships, reining in special rights, introducing a system for stock market trades, and allowing private equity funds to become sponsors of mutual funds.
Its board is scheduled to meet on March 29. The regulator will consider a proposal to end the practice of directors occupying permanent board seats at listed companies. This will have to be subject to periodic approval by shareholders, at least once in five years.
Why it’s important: The regulator feels that permanency provides directors an undue advantage prejudicial to the interest of public shareholders. This would be the latest in a series of step SEBI has taken in recent times to boost accountability and transparency.
#7. Accenture to layoff 7,000 staff in India as part of global belt tightening
Accenture Plc plans to fire at least 7,000 of its about 350,000 employees in India as the world’s largest technology services company prepares to let go of 19,000 people, or 2.5 per cent of its global workforce in the next 18 months.
During December to February, Accenture added a net of 424 employees to take its total workforce to 7,38,143. This is the slowest pace of net employee addition in 10 quarters after the company saw its workforce decline by 7,496 people during the June-August quarter of 2020.
Why it’s important: The move marks the first major layoff announcement by a large IT services company this year., Accenture joins Big Tech firms like Google, Alphabet, Amazon, Facebook, and Microsoft, all of which have announced job cuts amid fears a global recession.
#8. Auto prices to rise as manufacturers pass on higher input costs amid uncertain sales outlook
Vehicle prices across commercial, passenger, and two-wheeler segments in India are set to rise in April as stricter emission rules kick in and automakers pass on the impact of input cost inflation. Top companies like Hero MotoCorp, Maruti Suzuki and Tata Motors have announced price increases across product portfolios. Others are expected to follow suit soon. The price hikes range from 2 to 5 per cent.
Why it’s important: The price hikes could impact demand at a time when the auto sector is facing other headwinds like reduced customer loyalty due to long waiting periods and higher financing costs.
#9. SpiceJet chief says company open to selling more stake in airline business
Budget airline SpiceJet is open to selling more shares to reduce liabilities, chairman and managing director Ajay Singh has said. At the end of the December quarter, when it posted a four-fold jump in net profit to Rs 106.8 crore, the airline had liabilities of around Rs 14,000 crore.
The carrier has been in talks with lessors, investors, and lenders in India and abroad for renegotiating contracts, raising funds, and restructuring. Carlyle Aviation, its largest lessor, has already converted $100 million of outstanding dues into a 7.5 per cent equity.
Why it’s important: Mobility restrictions during the pandemic and the grounding of some of its aircraft have badly impacted SpiceJet, which is struggling to meet its commitments to vendors and creditors. It remains to be seen if it can come of this crisis.
#10. Return to normalcy from pandemic has increased costs for Indian households
The return to normalcy from the pandemic has proved to be costly for households with office and school requirements triggering a spike in prices of items such as shirts, trousers, shoes, coats, and school uniforms, among others.
The inflation in some of these items are about three times higher than the pre-Covid levels, spurred by a combination of demand, high input prices and rupee depreciation. The inflation in shirts, trousers and coats has doubled in the current financial year compared to the pre-pandemic period. The cost of school uniforms rose 7.8 per cent over last year. Higher prices of consumer electronics and automobiles are weighing on household budgets.
Why it’s important: The sharp rise in costs after the pandemic has pinched household budgets amid persistently high inflation. This is bound to have an impact on the demand outlook and have a bearing on slowing economic growth since earnings have not risen as much.
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