For calendar year 2022, India’s merchandise trade crossed $1-trillion. While merchandise exports stood at $450 billion, imports were $723 billion. This is despite global headwinds impacting the exports. The sustained growth in exports can be attributed to pent-up demand, especially due to the opening up after the COVID restrictions. Indian export to developed markets like the US, Singapore, Hong Kong and EU was sharply higher. Five items comprised 70% of imports viz. Crude oil, coal, gold, electronics and machinery.
Nirmala Sitharaman is likely to cut the fiscal deficit target for FY24 to 5.8% and possibly settle the fiscal deficit in the range of 5.8-6.0%. Most economists are of the view that the government will refrain from adopting an expansionist fiscal policy, despite this being the last full budget of the current government. The fiscal consolidation is essential to keep global investors and rating agencies happy. Also, low fiscal deficit is the key to India’s macro stability. However, gross borrowings is expected to rise to Rs16 trillion.
The RBI has warned the state governments not to shift to the old pension scheme as it would impose a huge pressure on their finances. Indian states already have a full year borrowing target of around Rs23 trillion and it could shoot up if the old pension policy is adopted. According to the RBI, states risk the accumulation of unfunded pension liabilities in coming years. Fiscal health rebounded sharply post COVID. However, most foreign investors and global rating agencies are worried about burgeoning fiscal deficit.
By 2027, it is estimated that India will produce 45-50% of Apple iPhones and would be at par with China. This is contrast to China’s share at 85% in 2022. India and Vietnam are to become the biggest beneficiaries of smartphone supply chain migration out of China. As of end of 2022, India only accounts for 10-15% of the total iPhone production capacity, although actual output is below 5%. While iPhone production will move to India, iPad and MacBook will move to Vietnam. Indian PLI scheme is likely to be a big booster.
L&T stock spiked 4% to scale a life-time high of Rs2,214. This was on expectations of strong order inflows and improved execution. L&T has done much better than the Nifty in the year gone by. In the first half of FY23, L&T announced order inflows of Rs93,719 crore. L&T has also retained its 12-15% growth guidance for FY23. L&T board is scheduled to meet on January 30th, 2023 to approve the unaudited financial results of the company for Q3FY23. Revenue growth in Q3FY23 is expected at 13.9% and EBITDA growth at 18.8%.
FSN E-Commerce Ventures, the corporate name of Nykaa, hit an all-time low of Rs132.55; losing nearly 11% in the last 2 days of trading. The stock is now down nearly 37% from its IPO price and over 75% from its peak price post listing. Trading volumes on the counter jumped 3-fold. The stock has fallen over 62% in the last one year and its idea of issuing a bonus to prevent a run on the stock backfired. Nykaa is India’s largest online beauty and cosmetics retailer. Its core business is the premium BPC and fashion market.
RBI is likely to pause the rate hike cycle at its next monetary policy committee (MPC) meeting in February 2023 with retail inflation staying under 6% for 2 months in a row. With lower than expected inflation and higher than expected IIP rebound, the RBI has reasons to go slow on rate hikes. RBI has already hiked the repo rates by 225 basis points since May 2022 from 4.00% to 6.25%. Economists also expect that the Union Budget, which will precede the monetary policy will focus largely on fiscal consolidation and capex.
SEBI is serious about ASBA in secondary markets and plans to discontinue the practice of advance transfer of funds to stockbrokers before trades are executed. In ASBA, the money will directly move from the investor to the clearing corporation without any broker intervention. SEBI believes that it will prevent the
misuse of client funds and broker defaults. Like the IPO, even the secondary markets will use the block mechanism. In such cases, the interest on the funds will accrue to the investor and not to the stockbroker.
