Stock markets rise on Ukraine peace hopes and despite oil surge
Indian equities rose more than 1 percent, led by gains in Reliance Industries, Infosys and Tata Consultancy, amid favorable global cues. The gains came despite hawkish statements by the chairman of the US Federal Reserve and elevated crude oil prices. The benchmark Sensex added 697 points, or 1.22 percent, to end at 57,989. The Nifty 1.16 percent to close at 17,316 points.
Why it’s important: Overseas investors poured in money in domestic stock markets as hopes for an early end to the Ukraine war drove investor sentiment. The gains are, however, fragile and may reverse swiftly.
Fitch Ratings lowers India’s growth estimate to 8.5 percent in 2022-23
Fitch Ratings slashed India’s growth forecast for 2022-23 financial year 8.5 percent from 10.3 percent, citing extremely high crude oil prices on account of the Russia-Ukraine conflict. In another international assessment, the Organization for Economic Co-operation and Development estimated India’s economy to grow 8.1 percent in 2022-23 and then plummet to 5.5 percent in the next fiscal year.
Why it’s important: India is vulnerable to high energy prices since it imports most of its crude petroleum requirements. The benchmark Brent crude has soared more than 40 percent in the recent past and may rise even further if the war in eastern Europe persists. This might hurt the country’s economic recovery.
Inflation concerns rise after hike in fuel and LPG prices
State-run oil marketers increased auto fuel prices by 80 paise per liter, the first rise since daily revisions were frozen on 4 November before crucial assembly elections that are now over. Executives at the oil firms said more hikes are likely as Brent crude prices have surged more than 40 percent since November.
Why it’s important: Rising fuel prices are likely to squeeze household budgets and reduce demand for goods and services. The resulting inflation will also test the Reserve Bank of India’s commitment to keeping interest rates low to foster economic growth.
Shell emerges as frontrunner to buy Actis’ Sprng Energy
Royal Dutch Shell has emerged as the frontrunner to acquire Sprng Energy, the Indian renewable arm of Actis. Shell’s offer submitted last week valued the portfolio at $ 1.75-1.8 billion inclusive of debt. It is said to be higher than Singapore’s Sembcorp Industries, the only other contender who made a binding offer from a field of six who were earlier picked from the original list of 17 for due diligence.
Why it’s important: The potential purchase by the oil and gas major will be a step to assure shareholders of its green intentions. If completed successfully, it will be Shell’s biggest renewables foray in India.
Auto component makers impacted by supply chain uncertainty
Global supply chain disruptions and soaring commodity prices worsened by the Russian invasion of Ukraine has placed auto component makers on the horns of a dilemma. Most have seen the inventory of raw materials and finished goods increase because passenger vehicle makers are no longer able to stick to the production schedules on semiconductor shortages and two-wheeler, tractor and commercial vehicle manufacturers haven’t been able to give accurate projections on production volumes due to frequent swings in demand.
Why it’s important: The constant uncertainty has left suppliers of auto components guessing at the amount they need to produce. As a result, they are tied down with inventory of raw material and finished goods. This does not augur well for their bottom lines.
Zomato takes flak on launch of quick delivery service
Restaurants, gig workers, market experts, social media users have reacted adversely to Zomato’s announcement to pilot a 10-minute delivery service. Restaurants are worried about quality control, and there are concerns about delivery persons rushing to complete orders within the short time frame.
Why it’s important: Deepinder Goyal, founder and chief executive of the food aggregator, has clarified that delivery partners will not be penalized or incentivized for timely deliveries. He also said the service will involve restaurants preparing the order in 24 minutes, while delivery persons will travel up to 2km in six minutes at an average speed of 20km per hour. The experiment is fraught with risks.
Oyo trims IPO plans as investors back out from selling their stakes
Oravel Stays, which operates hospitality unicorn Oyo Hotels and Homes, plans to reduce the size of its initial public offering after its investors dropped their plans to sell their holdings through an offer for sale. In its draft share sale documents in October, Oyo had proposed a Rs 83.4 billion IPO, which included an offer for sale of Rs 13.4 billion from shareholders such as SoftBank Group, Grab Holdings, HuaZhu Hotels and the family office of Sunil Munjal.
Why it’s important: Since the existing investors will not sell their stakes, the company will be able to raise a smaller amount at a much lower valuation. Bloomberg News had earlier reported that Oyo would slash its $ 1 billion IPO by 50 percent and halve its valuation from its previous $ 12 billion expectation.
ArcelorMittal to partner with Greenko to use more ecofriendly energy
ArcelorMittal has tied up with Greenko, a large renewable energy firm, to use cleaner energy alternatives instead of fossil fuels to fire critical infrastructure like blast furnaces and smelters. The two companies will develop a renewable energy project, which will consist of a 975 MW solar and wind farm, in Andhra Pradesh that will be owned and funded by ArcelorMittal but designed, built, and operated by Greenko.
Why it’s important: Steel production accounts for up to a tenth of global carbon dioxide emissions. The partnership will go a long way in decarbonizing production at the world’s biggest steelmaker.
Government to start process of bank privatization by September, lift 20 percent cap
The privatization of state-run banks could be initiated by September this year, with the central government preparing to lift the 20 percent cap on foreign ownership in public sector lenders by amending the Banking Regulation Act.
Why it’s important: The finance minister has reiterated that the government will privatize two state-run banks along with IDBI Bank to make them more efficient and remove the need to recapitalize them periodically. The pandemic disruptions had delayed the privatization plans.
Capacity addition in renewable energy not meeting government targets
The ministry for new and renewable energy has not been able to achieve annual targets to install renewable power although the government has pulled out all stops to hit net zero emission by 2070, according to the parliamentary standing committee on energy.
Why it’s important: Till January, total renewable energy capacity in India stands at 105.85 GW, which is about 60% of the overall target of 175 GW. The installation has to pick up its pace if the country is to achieve its targets articulated at global forums.
