Stocks rally for fifth day in a row on Russia-Ukraine talks
Indian equities gained for the fifth consecutive trading session ahead of fresh talks between Russia and Ukraine. Falling crude oil prices and an easing in selling pressure by foreign portfolio investors also helped the advance. The Sensex rose 1.7 percent to end at 56,486 points, while the Nifty gained 1.5 percent to 16,871 points.
Why it’s important: The Indian stock markets are recovering after hitting their lowest since July 2021 last week, but experts are wary whether the rally will sustain. Much will depend upon the quantum of increase in benchmark interest rates by the US Federal Reserve.
Retail and wholesale inflation rise in February
Higher prices of food and manufactured goods led to an eight-month high spike in retail inflation in February. Wholesale inflation also rose in February, reversing a cooling trend and staying in double digits for the 11th straight month as prices of energy, metals and chemicals increased as the Ukraine war disrupted global supply chains. At 6.07 percent, retail inflation has stayed above the tolerance bank of the Reserve Bank for two months in a row.
Why it’s important: Higher prices pose the gravest risk to India’s economic recovery after the coronavirus pandemic. The gap between wholesale and retail inflation indicate producers are reluctant to pass on higher costs to consumers as overall demand remains muted in the country.
India may revamp capital gains tax next year to boost revenues
The central government is considering proposals to reform the capital gains tax structure in the next national budget to bolster revenue collections and increase spending on welfare schemes. Finance ministry officials are working on the premise that passive income from the capital market should not be taxed lower than earnings from doing business.
Why it’s important: Higher capital gains tax could reduce India’s attractiveness as an investment destination. It might also encourage Indians to invest more on real estate, moving money away from productive assets, which could have an impact on economic growth.
Violation in KYC-AML norms led to RBI action on Paytm Payments Bank
The Reserve Bank of India prohibited Paytm Payments Bank from acquiring new customers because it violated norms on know your customer and anti-money laundering. The payments bank has been ordered to conduct a tax audit. The banking regulator will review its ban after the audit report. Paytm shares crashed 12.8 percent after the ban was announced.
Why it’s important: Banks are supposed to conduct appropriate due diligence of customers, which Paytm is said to have neglected. The Reserve Bank has been asking for strict compliance on KYC and AML rules. Paytm’s business is likely to be affected due to the ban.
N Chandrasekaran to be accountable manager at Air India till new chief is found
After a failed attempt to appoint a chief executive for newly acquired Air India, the Tata Group is likely to announce that Tata Sons chairman N Chandrasekaran will be the accountable manager at the flag carrier till a replacement is found. Its earlier appointee, former Turkish airline chief Ilker Ayci, declined to head Air India after an unfavorable response from a right wing think tank close to the government.
Why it’s important: This is a rare development as the government and the aviation regulator are said to have asked the new owners of Air India to appoint a position holder as accountable manager. The airline is currently being operated by a five-member committee.
Government will launch LIC IPO only when it’s sure of success
The central government will proceed with the initial public offering of the Life Insurance Corporation of India only when it is confident of successfully listing the insurer, according to Tuhin Kanta Pandey, secretary at the Department of Investment and Public Asset Management. The IPO is a large offering, and the government wants it to go off well, he said.
Why it’s important: Although there is strong investor interest in the share sale at India’s largest insurer, market conditions are adverse due to the Ukraine war and the government naturally wants to time the IPO launch right to maximize returns. It has a window open till the middle of May, after which fresh regulatory approval will be required.
Two-wheeler makers aim for ninefold increase in electric vehicle sales
Top Indian two-wheeler companies, including start-ups and traditional manufacturers, are ramping up capacity to touch six million vehicles every year by 2023 to meet anticipated demand for electric vehicles. Estimates by Goldman Sachs indicate the current capacity is around 0.67 million, which means that the target will be a ninefold increase in capacity.
Why it’s important: The interest and demand for electric vehicles are increasing in India as environment awareness spread and auto fuel prices rise. Since two-wheelers form the bulk of private vehicles sales in the country, manufacturers are seeing an opportunity.
SoftBank in investment talks with Tata and Mahindra
Japan’s SoftBank is in discussions with the Tata and Mahindra groups for potential investment, according to Rajeev Misra, chief executive at SB Investment Advisers, which manages SoftBank Vision Fund. The discussions have been ongoing for six months.
Why it’s important: The Tata group have been in talks with global investors, including sovereign and pension funds, to fund its digital foray. The Mahindra group, too, has been looking to ramp up capacity in many of its businesses.
Reliance New Energy to acquire all assets of Dutch Lithium Werks
Reliance New Energy has signed a pact to buy all assets of Netherlands-based Lithium Werks BV for a total transaction value of $ 61 million (Rs 4.68 billion), including funding for future growth. Lithium Werks is a leading provider of cobalt-free and high-performance lithium iron phosphate batteries.
Why it’s important: As energy transition picks up pace in India, the demand for battery storage is expected to rise exponentially. India’s largest conglomerate is betting heavily on renewable and climate-friendly energy and the latest purchase fits into that paradigm.
India’s trade deficit broadens on higher import costs
The country’s trade deficit widened in February as the costs of imports soared on the back of rising crude oil and commodity prices, which was a fallout of the Ukraine war, and a modest revival in domestic demand after the Omicron wave of the Covid-19 pandemic. Merchandise exports expanded at a three-month low of 27.63 percent in February to touch $ 34.57 billion, while imports increased at a three-month high of 40.75 percent to $ 55.45 billion, resulting in a trade deficit of $ 20.88 billion, up from $ 17.42 billion in January.
Why it’s important: Rising economic uncertainty due to the war in eastern Europe could worsen the trade deficit even further, economists have warned, as global crude oil prices are expected to remain elevated.
