Know About Latest Stock Market, 28th November 2023

LIC Plans to Retain Stake in IDBI Bank for Bancassurance Benefits, Casting Doubt on Joint Divestment with GOI

Oil prices declined for the fourth day in a row ahead of the OPEC meeting on November 30, 2023. OPEC members will deliberate on supply curbs at the meeting. The Sunday meeting was once again postponed due to differences with the African members of OPEC. Brent closed lower by 1.1% at $79.67/bbl. WTI crude also closed lower at $74.65. Brent has dropped nearly 20% from the peak in late September on rising US supplies and fading supply risk from the Israel-Hamas war. IEA has tipped the oil surplus to come back.

BSE stock may have surged nearly fourfold in the last year, but brokers like Jefferies continue to be bullish on the stock. In its latest report, Jefferies expects another 25% upside in the stock. BSE and CDSL have been big beneficiaries of the financialization of savings in India in the last couple of years. BSE has also seen a rapid ramp-up in its derivatives business. Its market share has gone up from 1% to 14% in recent months. BSE derives 35% of its revenues from the corporate services sector and 25% from clearing and treasury.

S&P Global Ratings hiked India’s GDP growth forecast for FY24 to 6.4%, a 40-bps upgrade to its previous estimate of 6%. However, S&P Global slashed its FY25 growth estimate by 50 bps. S&P noted that robust domestic momentum had offset headwinds like food inflation and weak exports. Fixed investment in India recovered more than private consumer spending. S&P Global expects FY24 inflation to be 5.5%, below the RBI upper tolerance limit of 6%. However, retail inflation is likely to fall further to a level of 4.5% in FY25.

Hon Hai Precision, the iPhone manufacturing unit of Foxconn, plans to expand its footprint in India with another $1.6 billion investment. It only stated that the investment was for operational needs. Most of the Taiwanese electronic companies are expanding their business base outside of China to hedge bets. This is amidst rising tensions between China and the US and China indulging in sabre rattling with respect to Taiwan. The Karnataka facility will make mechanical enclosures for iPhones, apart from semiconductors.

FMCG biggies are facing some real pressure from small and regional brands with niche markets. These smaller FMCG companies have effectively used product, packaging, promotion, and pricing to give the FMCG big boys a run for their money. According to experts, these smaller players have a much deeper grasp of local needs compared to the MNCs. Also, decisions are much quicker as structures are a lot leaner. These include names like Priya Gold Biscuits, Annapurna Swadisht etc, who also offer smaller buying units.

In the first 10 months of 2023, a total of 920 venture capital (VC) funding deals were announced in India. This is 39% lower on an annual basis. VC funding in 2023, at $6.3 billion, was nearly 67% lower than last year. The funding taps dried up after rising concerns over Byju’s saga. However, India continues to rank among the top 5 markets globally in terms of the number of VC deals. VC funding deals announced in India in 2023 include $250 million by PhysicsWallah, $229 million by Perfios Software, $200 million by PhonePe, and Zepto.

India reported 47% lower solar installations in the 9 months of 2023 at 5.6 GW due to delays in project execution. For the September quarter, solar installations were down 34% at 1.9 GW. Utility-scale installations dropped more than 54% year over year to 4.2 GW. Falling prices (per product) are the cause of weak growth. There was an oversupply of modules in China, which lowered average selling prices of solar modules. India’s total installed solar capacity, including rooftop solar installations, surpassed 69 GW as of September 2023.

It now looks like LIC, the promoter of IDBI Bank, plans to retain part of its stake in the IDBI Bank to harness the full benefits of bancassurance (the cross-selling of banking and assurance products). LIC and the GOI were to jointly divest their stake in IDBI Bank. It is not clear if the GOI and LIC would now jointly sell a 60.7% stake, as originally planned, or something lower. For LIC, IDBI Bank has been the strongest contributor to its bancassurance channel. DIPAM has already put off the divestment of stakes in IDBI Bank from FY24 to FY25.

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