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Economy India News

Indian economy’s recovery better than expected: Das

Reserve Bank of India Governor Shaktikanta Das (Photo: IANS)

Indian economy has exhibited stronger pick up in momentum of recovery than expected, said Reserve Bank of India Governor Shaktikanta Das on Thursday.

Addressing the 4th Annual Day of Foreign Exchange Dealers’ Association of India (FEDAI), he cited that a multi-speed normalisation of activity in Q2FY21, after the country witnessed a sharp contraction in GDP by 23.9 per cent in Q1FY21.

“Even as the growth outlook has improved, downside risks to growth continue due to recent surge in infections in advanced economies and parts of India.

“We need to be watchful about the sustainability of demand after festivals and a possible reassessment of market expectations surrounding the vaccine.”

Besides, he said that monetary policy guidance in October emphasised the need to see through temporary inflation pressures and also maintain the accommodative stance at least during the current financial year and into the next financial year.

“A key source of resilience in recent months has been the comfortable external balance position of India supported by surplus current account balances over two consecutive quarters, resumption of portfolio capital inflows on the back of robust FDI inflows, and sustained build-up of foreign exchange reserves,” he said.

“The Government’s recent policy focus to enhance India’s participation in global value chains, including through production linked incentives for targeted sectors, can leverage on the strong external balance position of India.”

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Business Economy India News

FIIs turn net buyers in India in 2020

With over Rs 55,000 crore net purchase of equities, foreign institutional investors (FIIs) have turned net buyers for the year 2020.

So far in November, FIIs have made net purchase worth Rs 55,576.84 crore including Rs 24.20 crore on Wednesday, the highest ever in a month.

Buoyed by the fund flow, both Sensex and Nifty have off late been on a record run and hit fresh highs. On Wednesday, the BSE Sensex touched an all-time high of 44,825.37, and the Nifty50 on the National Stock Exchange hit a fresh high of 13,145.85 points.

During January-April, FIIs pulled out a net amount of Rs 89,069.01 crore, with nearly Rs 66,000 crore being pulled out in March due to the initial fears and uncertainties over the pandemic.

However, post the announcement of measures to boost liquidity and provide stimulus globally, including in India, FIIs started coming back in May. Except a blip in September, FIIs have been net buyers since May.

This trend is the likely to continue at least in the near term, according to analysts.

A report by Kotak Institutional Equities showed that the September 2020 quarter witnessed Rs 46,900 crore of buying by foreign portfolio investors (FPI) and FPI holding, including ADR and GDR in the BSE-200 Index increased to $415 billion in the September 2020 quarter from $360 billion at the end of the June 2020 quarter.

“FPI ownership in the BSE-200 Index stood at 23.3 per cent in September 2020. FPIs were net buyers in banks, diversified financials, IT services and oil, gas and consumable fuels’ sectors. DIIs holding in the BSE-200 Index declined to 13.6 per cent in the September quarter from 14 per cent at the end of the June 2020 quarter,” it said.

DIIs, however, sold IT services, oil, gas and consumable fuels and pharmaceuticals sectors.

Currently too, DIIs have been on a selling spree and have been net seller off late, contrary to the investments by foreign investors.

So far in November, DIIs have made a net selling of Rs 39,950.17 crore of equities.

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Business Economy India News

Festive spike in E-Com demand lesser than expected: Report

e commerce

This festive season has seen 30-40 per cent growth in e-commerce volumes with overall growth similar to that witnessed last year.

A report by financial services major, Bernstein, said: “While not a negative surprise, we had anticipated a much higher growth for online sales this season given the Covid impact.”

This festive season has seen 30-40 per cent growth in e-commerce volumes with overall growth similar to that witnessed last year, the report said.

“This, in our view, either reflects unlocking ensuring a better than expected offline momentum or the impact of weak economy on overall festive demand. Our offline checks suggest a mixed read on festive trends with some categories seeing strength and some others still down year on year,” the report said.

Another interesting read was that there were no major supply constraints this season suggesting adequate channel re-stocking.

The just-concluded festive season in India was expected to have an increased dependence on e-commerce channels given the impact of Covid.

“Our analysis of consumer income and demand patterns over the past few months had suggested a better situation for Tier 3/4 geographies and e-commerce trends suggest a similar pattern,” the report said. While growth for e-commerce channel emerged from all geographies, Tier 3/4 outpaced Metro and Tier 1/2 with booking from these markets increasing to 60 per cent of mix vs 55 per cent last year.

Tier 1 and 2 mainly comprised existing shoppers who are buying more, while Tier 3 and 4 reflect new online shoppers.

Apparel (including footwear and sportswear) continues to be the largest category in e-commerce with consumer electronics (mobiles, laptops etc) being the No 2 category.

Categories which are gaining scale are grocery, home personal care and household goods. The widening of category choices from consumers also reflects the willingness of consumers to experiment, reflecting their trust on online platforms. Consumer durables have seen 165 per cent growth in volumes this festive season with almost all products (TV, AC, washing machine), witnessing a spike in growth.

Comfort on online shopping is increasing. Sharp reduction in return orders which declined by over 25 per cent, and is a good indicator of increased consumer engagement with the online platform and also reflects the quality of growth. Increasing trust on online payments as indicated by lower share of COD (cash on delivery) orders (55 per cent now vs 65 per cent pre-Covid). While COD as a mode of payment may remain relevant due to ease of use (Quicker checkout, consumer comfort on delivery timelines etc.) online payments should continue to gain ground, the report said.

The analysts interacted with the top management of Delhivery, India’s largest independent private e-commerce logistics company, to understand the consumption trends this season.

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Economy India News

RBI Should let Rupee appreciate: SBI Ecowrap

The Reserve Bank should let rupee appreciate to reduce imported inflation, a SBI Ecowrap report said on Wednesday.

According to the report, the US dollar is expected to remain weak due to fragile US economic conditions.

“It would do no harm for the RBI to lean with the wind and let the rupee appreciate which would reduce imported inflation when metal prices are rising, and clear the liquidity overhang to some extent,” it said.

“In fact, the large supply of dollars will ensure that rupee will not appreciate significantly from the current levels and this could potentially play to the advantage of the RBI even if it takes a hands off approach to rupee appreciation for the time being.”

As per the report, data from 1968 shows that dollar index has performed well under the Republican regime vis-a-vis Democratic regime and thus US election results have led to significantly improved capital inflows in emerging markets, including India.

In fact, India has already witnessed record inflows of $18 billion so far this fiscal.

Reserve Bank Of India

“Interestingly, in the merchant market (in both spot and forward segment) there was an excess supply of $40 billion during Apr’20- Sep’20 (till 18th),” the report said.

“However in the interbank market, the trend is quite opposite and there has been excess demand of $27 billion in the same period and this must have increased significantly by now.”

Besides, the report pointed out that overall, merchant dollar supply is far higher than demand as they anticipate a stronger rupee and hence may be holding to long position in dollars, without even adequate hedging.

“This is being balanced by excess dollar demand in interbank market, but the net effect is a large supply of dollars,” the report said.

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Economy India News

Restocking for festive season exaggerated Oct activity: ICRA

Restocking activity ahead of the festive season to satisfy pent-up demand had exaggerated the pace of improvement recorded by many lead economic indicators in October 2020, said ratings agency ICRA.

According to the agency, prominent base effects also muddied the trends in certain sectors, related to a later onset of the festive season in October 2020, relative to 2019, which has affected the number of working days and the concentration of festive sales.

Besides, the ratings agency said that available trends for early November 2020, suggested some moderation in spike during the ongoing month.

“We now expect a stronger rebound in economic activity in H2 FY2021, compared to our earlier assessment (-3.5 per cent),” said Aditi Nayar, Principal Economist, ICRA.

“However, we caution that the spikes in production seen in the various sectors in October 2020, are an exaggeration of the true recovery on the ground, as they have been driven by a large component of pent-up demand that may not sustain after the festive period is over.”

Furthermore, ICRA pointed out the potential re-imposition of restrictions in one or more states, on account of a fresh surge in Covid-19 infections, may temper the momentum of recovery in the coming months.

In ICRA’s set of 17 high frequency indicators, the YoY performance of 10 sectors recorded a pick-up in October 2020.

“This sub-set includes the sharp spikes in the output of automobiles and generation of GST e-way bills, as well as the relatively moderate improvements in electricity generation, ports cargo traffic, domestic airlines’ passenger traffic, as well as fuel consumption,” the ratings agecy said in a report.

“However, the YoY performance of six indicators deteriorated in October 2020, relative to the previous month, including the output of Coal India Limited (CIL), vehicle registrations and non-oil merchandise exports.”

In addition, the growth in non-food bank credit remained unchanged at a modest 5.1 per cent in YoY terms on October 23, in line with the growth recorded as on September 25.

“Five indicators continued to display a YoY contraction in October 2020, reinforcing the unevenness in the recovery that is playing out in the different sectors of the economy,” the report added.

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Business Economy

Finance, Banking sectors garner most FPI investment in Nov

Foreign Portfolio Investments (FPI) have been bullish on the Indian equities off late and a significant portion of those investments are going into finance and banking stocks.

Financial services stocks attracted a net investment of Rs 16,389 crore during the first two weeks of November, with banks receiving Rs 11,519 crore out of it while other financial stocks received net investment of Rs 4,870 crore, as per NSDL data.

Capital goods, consumer durables, and oil and gas stocks followed the financial stocks in terms of FPI inflow with Rs 1,709 crore, Rs 1,532 crore and Rs 1,289 crore during the first half of November.

During November 1-15, 2020, FPIs made a net investment of Rs 29,436 crore into equities in India. So far, during the month, net FPI inflow has surged to Rs 53,167 crore.

FPIs made a return in October, after foreign investors made a pullout in September.

This trend is the likely to continue at least in the near term according to analysts, with high liquidity in the market post the measures announced by governments and central banks globally.

Experts noted that investors are looking for yield across the world and India provides them an opportunity where the cost of capital is low and can provide relatively higher growth over the long term.

A report by Kotak Institutional Equities showed that the September 2020 quarter witnessed Rs 46,900 crore of buying by FPIs. FPI holding (including ADR and GDR) in the BSE-200 Index increased to $415 billion in the September 2020 quarter from $360 billion at the end of the June 2020 quarter.

“FPI ownership in the BSE-200 Index stood at 23.3 per cent in September 2020. FPIs were net buyers in banks, diversified financials, IT services and oil, gas and consumable fuels’ sectors. DIIs [Domestic Institutional Investors] holding in the BSE-200 Index declined to 13.6 per cent in the September quarter from 14 per cent at the end of the June 2020 quarter,” it said.

DIIs, however, sold IT services, oil, gas and consumable fuels and pharmaceuticals sectors.

Currently too, DIIs have been on a selling spree and have been net seller off late, contrary to the investments by foreign investors.

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Economy World News

Bullion rates on downward journey as vaccines arrive

Futures of gold, which were soaring well above the Rs 50,000 mark till sometime back amid the weak economic scenario, have now started to ease and have fallen below the Rs 49,000-mark amid optimism regarding vaccines for the novel Coronavirus.

The December contract of gold on the Multi Commodity Exchange (MCX) is currently trading at Rs 48,975 per 10 gram, lower by Rs 505 or 1.02 per cent from its previous close.

Similarly, domestic futures of silver also continued its downward trend on Tuesday and its December contract on the MCX is currently at Rs 59,825 per kg, lower by Rs 700 or 1.16 per cent from its previous close.

Anuj Gupta, DVP for Commodities and Currencies Research at Angel Broking Ltd said that noted that the decline has been on the back of recovery in global equity market and development on the front of corona virus vaccine. Gold ETF holding is also falling more than a million ounce in this month, he said.

“The trend of gold and silver now become down and expectation of safe haven demand of this asset may fade out. As for today traders can go for sell in gold at Rs 49,800 levels with the stop loss of Rs 50,100 levels for the target of 49,000 levels,” Gupta said.

In the international market, gold may test $1780 to $1800 per ounce levels soon, according to him.

He was of the view that traders can also go for sell in Silver at Rs 61,000 levels, with the stop loss of 61,800 levels and for the target of 59,800 levels.

Optimism has been fueled in the global markets after the recent series of positive announcements on the vaccine front.

AstraZeneca on Monday announced Monday that positive high-level results from an interim analysis of clinical trials of the Covid-19 vaccine candidate in the UK and Brazil showed it was highly effective in preventing the disease, the primary endpoint, and no hospitalisations or severe cases of the disease were reported in participants receiving the vaccine.

One dosing regimen showed vaccine efficacy of 90 per cent when ‘AZD1222’ was given as a half dose, followed by a full dose at least one month apart, and another dosing regimen showed 62 per cent efficacy when given as two full doses at least one month apart. The combined analysis from both dosing regimens resulted in an average efficacy of 70 per cent.

All results were statistically significant. More data will continue to accumulate and additional analysis will be conducted, refining the efficacy reading and establishing the duration of protection.

Earlier Pfizer and Moderna had reported their vaccines of being highly effecting.

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India heading to a current account surplus: K Subramanian

Chief Economic Adviser Krishnamurthy Subramanian

India may witness a current account surplus due to the recent economic reforms announced by the government, said the Chief Economic Adviser, Krishnamurthy Subramanian.

Speaking at CII’s MNCs Conference 2020 on Monday, the CEA also said that the implementation of the labour law reforms has eased compliance burden by way of increased thresholds, change of MSME definition and easier retrenchment norms.

“Owing to the economic reforms measures by the government, the Indian economy may witness a Current Account Surplus despite battling the COVID19 crisis,” he said

The government has taken up several market liberalising measures including enhancing FDI limits in defence, commercialising coal mining, labour law reforms among others as part of the economic packages announced to support the economy amid the pandemic.

Subramanian on Monday said that the intent of the reforms including RERA, employment among others is for formalisation of the economy.

“Macroeconomic configuration is being changed to employment-intensive sectors for sustained growth,” the CEA said.

Soumitra Bhattacharya, Chairman, CII National Committee said that the government reform measures of liberalisation in FDI policies, simplification of agriculture and labour laws, PLI schemes have provided a boost to foreign investment sentiment.

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Business Economy India News

SEBI Chief calls for increased Investor awareness

Securities and Exchange Board of India (SEBI) Chairman Ajay Tyagi

Emphasising on the need for informed decision by investors, Securities and Exchange Board of India (SEBI) Chairman Ajay Tyagi has said that investor awareness and education play an important role in the investor’s decision making.

In his message, ahead of the World Investor Week scheduled for November 23-29, Tyagi said that complexities of the securities market have grown manifold during last three decades with so many developments relating to market structure, and newer products among others.

He said that apart from the supply side growth, on the demand side too, newer participants have entered the market. Also, the trends in participation of the retail investors are encouraging in terms of growth in number of portfolios of mutual funds, he said.

“There is a need for the new investors to make informed investment decisions. Thus, investor awareness and education play an important role in education the investor. One should not get lured by false promises and by unsolicited advice,” Tyagi said.

SEBI is member of the International Organisation of Securities Commissions (IOSCO). The World Investor Week is celebrated in October every year, under the aegis of IOSCO.

This year, due to the pandemic, celebration of the World Investor Week has been delayed and it will be celebrated during November 23-29. The SEBI is the National Coordinator for the event.

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Economy

Global transition to renewables affected coal auction: Ind-Ra

The transition to clean energy sources led to subdued participation in the recently concluded first round of commercial coal mine auction, said India Ratings and Research.

Accordingly, in a report, the agency said that domestic coal mining has opened up at a time when the world is transitioning away from coal as a fossil fuel to cleaner energy sources.

“Hence, participation from the players in the recently concluded first round of commercial coal mine auction has remained limited,” the report said.

In the first round of commercial coal mines auction a total of 19 mines have been allocated to the bidders.

These mines have an estimated annual output production of 51 million tonnes (mt) with total reserves of 3,045 mt.

“Globally, the funding sources to fossil fuel has declined as large financial institutions and equity investors have stayed away from the sector. Additionally, the awarding of mines is just the first step and multiple challenges will still remain before the commercial production commences at these mines.”

Historically, the report cited a gap of three-to-seven years between the awarding of mines and the commencement of production.

“Thus, Ind-Ra believes the benefit from the auctioned mines would only be visible after a considerable time gap,” Ind-Ra said.

According to the report, global players did not participate at all in the first round of auction, despite the government of India (GoI) allowing 100 per cent foreign direct investment in commercial coal mining.

Coal.

“Ind-Ra expects the participation of international players in coal auctions to remain weak in the future as well, owing to the overall transition towards cleaner fuels from fossil fuels,” the report projected.

During 2019, the share of renewables globally increased by 176 gigawatt (GW) yoy to 2,537GW and is likely to increase to 3,500GW-3,800GW by 2025, as per the International Energy Agency.

Additionally, large global lending institutions have pledged to reduce their exposure to fossil-fuel lending by 2030.

“This move has made it difficult for investors to secure funding for setting up new coal-based power plants and the development of coal mines,” the agency highlighted.

“The quality of domestic coal, as reflected through calorific value and ash content, is significantly inferior than international traded coal, hence, there exists limited export potential for the output produced.”

Besides, the report pointed out the low interest shown by the domestic private sector as only 19 mines could be auctioned out of the 38 on the block.

“Moreover, few very large mines like Chhendipada, Kurloi (A) North, Machhakata, Brahmanbil-Kardabahal, North Dhadu with average annual production of around 15mt received one or no bids and hence, were not eligible for being awarded,” it added.

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