Flows into NRI deposits doubled to $7.3 billion in the April to November period of FY24. As of the close of November 2023, the NRE (non-resident external) deposits stood at $96.79 billion. Out of the total growth of deposits in the Apr-Nov period of $7.3 billion, the foreign currency non-resident (FCNR) deposits that are foreign currency denominated term deposits, accounted for $2.5 billion. Overall NRI deposits at the end of November 2023 stood at $144.48 billion. Over a 1 year period, accretion in deposits is over 10%.
In a research paper published in the RBI Bulletin, deputy governor Michael Patra pointed out that spikes in food inflation can drastically change the face of headline inflation and hence monetary policy may have to rethink on inflation projections. It may be recollected that in the December policy, the MPC had actually kept the inflation estimate for FY24 at 5.4%, while raising the GDP growth estimate by 50 bps to 7%. Patra warned that food, which accounts for close to 50% of inflation basket, needs to be watched out carefully.
FPIs turned surprisingly bearish on HDFC Bank, leading to the sharp fall in the stock in the Indian market. However, one additional signal was that the ADR (American Depository Receipt) premium came down to zero, giving the clearest indication of FPI selling in the counter. In the Indian market, the stock of HDFC Bank had fallen by over 11% in just 2 days, leading the market lower. At the same time the ADR slumped by 15% in the last 2 days, indicating that there has been simultaneous selling in the HDFC Bank ADS also.
Tata Communications reported its best quarterly revenue growth in Q3FY24 in the last 9 years. This was possible on the back of robust demand for its core connectivity and digital segments. Data services makes up 80% of its revenues and that grew at 28.3% in the quarter. However, the growth in revenues in the Q3 has come at the cost of the bottom line. For instance, its net profits fell 88.6% to Rs44.81 crore due to a one-time charge. However, even the operating EBTIDA margins fell sharply by 370 basis points to 20.1%.
More on the Tata group; and Tata Steel is finally planning to shut down its blast furnaces at Port Talbot Steelworks in Wales, UK; which could lead to nearly 3,000 job redundancies. The decision was made after the Tata group top brass met with the trade unions in London, but were forced to reject their proposal as being unreasonable. The unions wanted the blast furnaces to be kept running as the company shifted to electric arc furnaces. The UK vertical of Tata Steel has been a losing proposition and Tatas want to cut it.
In an interesting move, Coal India Ltd plans to foray into critical minerals and is likely to starting off with mining of lithium deposits. Lithium is a critical raw material for India in the manufacture of EVs and it needs to rapidly secure its supplies to be a successful EV manufacturer. Its current dependence on China and other countries is not workable in the long term. Apart from scouring for domestic deposits, CIL also plans to explore for lithium deposits in other countries like Australia, Chile, and Argentina, among others.
One big trend in 2023 has been that start-ups are increasingly opting for profit over just top line growth or eyeballs, which is the right way to go. One such ration is the EBITDA ratio. In 2023, nearly 30% of the 100 start-ups surveyed by InnoVen Capital reported they were in EBITDA profits, compared to just 19% in the previous year. Also, 62% of the start-up promoters admitted that profitability was their biggest focus area, as compared to just 55% last year. The downturn in start-ups since late 2021 has forced this change.
After several weeks of persistent buying, the FPIs have been net sellers to the tune of $2.4 billion in just the last 2 days. That also probably explains why the markets fell so sharply, with HDFC Bank being the big casualty of the sell-off. The trend reversal was driven by the intensifying of the blockade of the Red Sea as well as the hawkish tone of the Fed. Contrary to the expectations of the CME Fedwatch about a slew of rate cuts, the Fed has been talking hawkish after the spike in inflation, raising fears of a rate hike now.