CPI inflation for June 2022 eased to 7.01%, but still way above the RBI outer tolerance limit of 6%. Food inflation tapered slightly but core inflation remained almost static at 6.11%. The cumulative inflation for the first quarter averaged 7.3%, which is 20 bps lower than the RBI inflation forecast. To an extent, the moderation in prices of edible oils kept CPI inflation under control. With the pick-up in the monsoons, food inflation should be reined in further, although Kharif output has fallen short by over 20% this year.
The MOSPI also announced the index of industrial production (IIP) numbers for the month of May 2022. Overall industrial output grew by 19.64% and was largely driven by electricity generation at 23.5% and manufacturing output growing at 20.6%. Mining growth was more subdued at 10.9%. The overall growth was also positive on a month-on-month basis at 2.30%, which is a hint of the short term momentum in the IIP numbers. In terms of use-based classification, consumer durables and capital goods grew over 50%.
During the day, the Brent Crude prices tumbled below the $100/bbl mark on the back of a strong dollar. The demand destructive COVID curbs imposed by China also hurt oil demand as did fears that a global recession could overtake economies in the last quarter of 2022. Brent fell by almost 7.1% on Tuesday. The dollar index has climbed to a 20-year high of 108.56 and that is also making dollar denominated assets look overly cheap. However, spare capacity with OPEC countries is running low, so bounces are very likely.
HCL Technologies reported 8.6% lower profits on a sequential basis at Rs3,283 crore. On a yoy basis, the net profits were up by 2.4%. However, revenues were robust at Rs23,464 crore; growing 4% sequentially and 17% on an annual business. Revenue growth guidance for the full year has been pegged in the range of 12-14%. While new bookings were up 23.4% on a yoy basis, HCL Tech also saw operating margins taper to 17% amidst cost pressures. Attrition in the quarter touched an all-time high at HCL Tech at above 23%.
Titagarh Wagons stock touched a 4-year high of Rs127.60 on Tuesday 12th July. The stock is already up 26% in the last two weeks. The stock has rallied close to 75% in the last 1 year, although it is still way short of its 2017 highs. Titagarh Wagons is the largest private sector wagon manufacturers in India. Titagarh has a robust order book position of Rs15,123 crore of which nearly one-third is the Italian business. Currently, the Indian Railways remains the largest consumer of the wagons manufactured by Titagarh Wagons.
For the month of June 2022, India reported record coal imports, despite healthy production by Coal India. India imported close to 25 million tonnes of thermal coal and coking coal in June; which represents a growth of 33% on a yoy basis. Out of the total of 25 million tonnes imported, coal imports were to the tune of 19.6 million tonnes, while the balance was accounted for by coking coal. In India, thermal power is still about 70% of all such efforts. Once again, it was Russia that took the top spot as exporter to India.
India’s current account deficit (CAD) is projected to reach $105 billion this fiscal year. That would be roughly 3% of the GDP, and is a tad too high for comfort. For now the key driver of this rising current account deficit is the surge in trade deficit. It is not just oil but even minerals, gold and fertilizers are among the major imports into India. This has resulted in a lot of imported inflation and a worsening of the current account defence. It remains to be seen; how much the liberalized forex flows come to the rescue.
The edtech major, Byju’s, finds itself in tight spot. Byju’s needs to pay nearly $200 million to the US private equity investors, Blackstone. This is towards part acquisition of Aakash Educational Services for close to $1 billion. Byju’s was to buy the Blackstone stake but had agreed to a 2-month postponement. In the last few weeks, Byju’s has been struggling to justify its lofty valuations of $22 billion and as a result, the flow of funds into Byju’s coffers have slowed down. The cash payments are due for disbursal in August 2022.