India retail inflation for the month of February 2024 came in almost flat at 5.09%, compared to 5.10% in January 2024. While core inflation was 30 bps lower at 3.3%, the pressure came from food inflation, which spiked by 36 bps to 8.66% for the month. Food inflation was sticky in rural and urban areas. In the food basket, most of the inflation pressure came from vegetables, pulses and the high protein items like eggs and meat products. This marked the 53rd month in succession when the headline inflation was above 4%.
The Index of Industrial Production (IIP) for January 2024 was also announced by the MOSPI in Tuesday, at the level of 3.8% on a yoy basis. However, the MOM IIP (high frequency) was just up by 0.59%. For the month of January, the growth in manufacturing IIP slowed while mining and electricity were robust. The impact of the higher base was also felt in the current month. The previous month IIP reading was revised up from 3.84% to 4.25% in the first revision, giving the hope that Jan-24 IIP could be revised upwards too.
US consumer inflation was up by 10 bps in February 2024 to 3.2%, compared to 3.1% in January. Pressure came from higher core inflation at 3.8% and that could be partially attributed to the trade disruptions caused by the Red Sea crisis. Some of the supply chain links between the US and Asia have been impacted by the crisis. However, experts are of the view that this may not impact the Fed intent to cut rates in the June policy statement. The Fed uses the PCE inflation as the benchmark, announced at end of the month.
In recent weeks, the SEBI has been worried about the rally in small stocks, especially the SME stocks. For now, SEBI is planning a series of measures to curb any froth in the small stocks. Last week, SEBI issued warnings to AMCs to be vigilant with small-cap and mid-cap scheme flows. It has also imposed additional special margins (ASM) on specific stocks and raised margins to 100% in many cases to curb speculation. In addition, it has also pulled up brokers for suspicious transactions. Even T+3 listing of IPOs can curb froth.
The government of India has nixed plans by Vedanta to demerge Hindustan Zinc Ltd (HZL) into 3 separate entities. The demerger needed approval of three-fourth of the shareholders, so the government vote was essential. However, the government has refused to approve the same. Vedanta wanted to separate HZL into its lead, silver, and recycling business to create value for shareholders. Earlier, Vedanta had tried to monetize its mining business in Africa, which too was nixed by GOI. Government owns 29.5% stake in HZL.
Adani Cements, the combination of ACC and Ambuja Cements, expects the sales to more than double by the year 2027 to Rs85,000 crore. It also expects the EBITDA per tonne to rise to Rs1,500 crore. The plan is to expand the production capacity to 140 million tonnes per annum (MTPA) by FY28, to bridge the gap in capacity between Adani Cements and Ultratech. Cement demand has been robust in the last 2 years on the back of government infrastructure spending; and the demand is likely to be strong in next 4 years too.
According to a note by India Ratings, the current account deficit (CAD) could touch 1.2% in the Q3FY24, but the full year CAD should still be under control. The December quarter CAD is expected to be put out by the RBI towards the last week of March. The CAD is a combination of the merchandise trade deficit and the services trade surplus, adjusted for remittances and other specific flows. In the current fiscal, the big story has been the sharp surge in the services surplus, that has brought down the overall CAD for India.
According to OPEC, Indian oil demand is slated to rise 4.2% in the year 2024. Rising diesel consumption is likely to be the key driver of oil demand from India. For 2024, India’s oil demand is likely to touch 5.57 million barrels per day (bpd) according to OPEC estimates. This is likely to be triggered by better economic activity and higher investments. Even air travel is expected to further recover in the year. The signals are there in January with oil demand rising 3,86,000 bpd as compared to just 1,33,000 bpd in December 2023.