1. Indian equities decline on hawkish tone by US Fed, Nifty slides below 18,000
India’s benchmark indices retreated by 1 percent, wiping out most of the gains made on December 9, as investors became cautious after a hawkish stance by the United States Federal Reserve, which said interest rates could exceed 5 percent. The Nifty fell by 1.03 percent to below the psychological mark of 18,000 points, closing at 17,914.15. The Sensex lost 1.04 percent. All sectoral indices except for auto declined, with investors booking profits in banks, financial services, IT, infrastructure, realty, and metal stocks.
Why it’s important: The stock market has seen wild swings in the past few days. The volatility is expected to continue but expectations of healthy quarterly earnings could cap the downside.
2. Government may correct inverted duty structure to boost domestic manufacturing
The central government may consider correcting the inverted duty structure across sectors impacting domestic manufacturing in the upcoming budget on February 1, as subdued overseas demand affects India’s exports and current account balance. The government is also considering measures to expand export credit and insurance cover, encourage services exports and provide marketing and branding support for products such as khadi and coir with geographical indication labels.
Why it’s important: The inverted duty structure, where inputs are taxed at higher rates than finished products, hurts competitiveness of Indian manufacturers. It makes a made in India product more expensive than an imported finished product.
3. Stock exchanges get regulatory approval to launch derivatives on bond indices
The Securities and Exchange Board of India (SEBI) has allowed stock exchanges to introduce index derivatives contracts based on corporate debt securities rated AA+ and above. The stock exchanges will be initially permitted to launch futures contracts on corporate bond indices, the market regulator said in a circular. They will have to submit a detailed proposal, providing details related to underlying index, methodology, contract specifications, risk management, and trading, clearing and settlement mechanism.
Why it’s important: The decision of the capital market regulator is aimed at boosting liquidity in the bond market, which has been typically subdued in India. It will also provide investors an opportunity to hedge their positions.
4. World Banks predicts global economic recession, slashes growth forecasts
The World Bank has pared its growth forecasts for most countries and regions, warning that new adverse shocks could tip the global economy into a recession. Global GDP will likely increase 1.7 percent in 2023, about half the pace forecast in June, the multilateral lender said. It would be the third-worst performance in the last three decades or so, after the contractions of 2009 and 2020. The Indian economy would grow at a robust 6.6 percent in 2023-24, slowing down from an estimated 6.9 percent in 2022-23.
Why it’s important: The looming recession will deepen the crisis facing development, as emerging economies may face the brunt. India continues to be the bright spot despite the headwinds.
5. Carlyle acquires wellness firm VLCC in a possible $300 million transaction
Private equity group Carlyle has acquired wellness, beauty products and services company VLCC Healthcare. Details of the transaction were not disclosed. Carlyle may have bought 65-70 percent in the homegrown company for Rs 2,255-2,460 crore ($275-300 million) through a primary infusion as well as secondary purchase of shares from the Luthra family.
Why it’s important: Buy acquiring majority stake in VLCC, the private equity firm has marked it entry into a rapidly growing sector where direct-to-consumer brands have mushroomed. VLCC already has a significant presence in this market.
6. Lenders to Reliance Capital to restart auction with base price of Rs 9,500 crore
Lenders to Reliance Capital have voted to restart the bidding process to auction the insolvent company. The auction will be conducted with a base price of Rs 9,500 crore, including upfront cash of Rs 8,000 crore. It is likely to be conducted on January 16. Bids from the first round will remain valid. In the first round, which concluded on December 21, Torrent submitted the highest bid of Rs 8,640 crore, followed by Hinduja Group with Rs 8,110 crore. A day after the auction, the Hindujas revised their bid to Rs 9,000 crore.
Why it’s important: It will not be easy for lenders to get bids at Rs 9,500 crore as the top bidders in the first auction round would think twice before upwardly revising their offers.
7. Luxury carmakers in India likely to see faster transition to electric vehicles
Adopting electric vehicles (EVs) is likely to be faster in the luxury segment because buyers are less price-sensitive and market leaders like Mercedes-Benz India and BMW India expect double-digit growth in this category. Mercedes-Benz India expects 25 percent of its India sales to come from EVs in the next four years, and BMW estimates around 10 percent of sales to come from these in the near future.
Why it’s important: The expected local growth in the luxury EVs segment follows the global trend as high-end consumers are unlikely to be deterred by the higher expense. Growth in the volume driven market is expected to grow more slowly.
8. US emerges as top buyer for Indian refinery products
The US emerged as a top destination for refined petroleum products from India in November, much of it processed from Russian crude oil imported at a discount. Russia exported crude oil worth $3.08 billion in November to India, making it the second-largest exporter to India after Saudi Arabia, according to commerce ministry data. The US imported oil products worth $588 million in November, raising imports to the highest levels in the current financial year.
Why it’s important: The imports to the US increased amid the high demand for crude ahead of the holiday season. The higher export of petroleum products from India is expected to continue.
9. Government to explore all angles before framing digital competition law
The corporate affairs ministry will hold wide ranging consultation on the stringency of emerging regulations on the digital economy before it gives a final shape to a proposed Digital Competition Bill. The government wants to assess whether another layer of legislation would put an undue burden on businesses when a host of legislative and regulatory changes are in the works under the Digital India Bill, Digital Personal Data Protection Bill, Indian Telecommunication Bill and various rules on e-commerce and online gaming, in addition to the Competition Amendment Bill that is pending before Parliament.
Why it’s important: Indian authorities need to make sure that overregulation does not stall a fast-growing segment of the economy. A stable legal framework would be welcomed by the digital giants to ensure growth.
10. Top foreign universities unlikely to establish India campuses
The University Grants Commission’s (UGC) draft rules to allow foreign universities to set up campuses in India may attract some international schools, although top institutes like Harvard Business School and Massachusetts Institute of Technology (MIT) are unlikely to open branches in the country.
Why it’s important: Foreign universities interested in setting up an India campus may have to work out a reasonable cost structure to make it attractive to students. That would not be an easy task.
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