In its December, the RBI hiked repo rates by 35 bps, largely along expected lines. This takes the repo rates to 6.25%, a full 110 basis points above the pre-COVID levels of 5.15%. As a result, the two peg rates viz. the Standing Deposit facility (SDF) also moves up by 25 bps to 6.00% while the bank rate moves up to 6.50%. However, the RBI decided to hold its inflation estimate for FY23 at 6.7% while cutting its full year GDP estimate by 20 bps to 6.80%. The stance of the MPC remains withdrawal of liquidity accommodation.
The government is committing a huge investment outlay of Rs244,000 crore to support the 500 GW renewable energy (RE) capacity with adequate transmission system integration. This will entail linking the mega solar parks and wind power zones with the national grid. The plan also envisages the installation of battery energy storage capacity of 51.5 GW by 2030. India has targeted 500 GW non-fossil fuel capacity by 2030. Going ahead, companies can construct projects before PPA and sell on the power exchanges too.
The Department of Investment and Public Asset Management (DIPAM) confirmed it had received a total of 167 queries from at 10 potential bidders regarding the sale and transfer of IDBI Bank. Investors would recollect that LIC and the government were to jointly hive off 60.72% stake in IDBI Bank and transfer full management control to the potential buyer. The bidders apparently included 3 private equity firms, one foreign bank, and a few alternative investment funds (AIFs). Even consortium of foreign funds can apply.
Amidst the volatility and chaos in the markets, FMCG index has touched a life-time high. These gains came on the back of expectation of volume recovery, especially rural demand. Some of the FMCG companies like Emami, Dabur, Hindustan Unilever, Colgate, Marico, GCPL and ITC gained sharply in recent weeks. RBI governor’s positive comments on urban and rural consumption also boosted the fortunes of FMCG stocks, apart from indications of resilient Rabi sowing. Price cuts and grammage restoration will boost volumes.
L&T, joined the elite group of companies with market cap of over Rs1 trillion after a sharp rally on hopes of a capital cycle revival. It now ranks 20th in the market cap sweepstakes. In last one month, the stock of L&T gained 6%, against 2.5% for the Sensex. Apart from engineering segment gaining from capital cycle revival, the merger to create LTI Mindtree is also likely to be value accretive for L&T. It has become the best proxy for Indian capex revival. The bets on green hydrogen and data centres are also likely to pay off.
Digital lending platforms and BNPL platforms are trying hard to become RBI compliant and are not taking any changes on compliance. Most of the digital players are in sync with the recent RBI norms. Some are even keen to get an NBFC license to become an organized part of the lending ecosystem. However, NBFC license has been tough for newer Fintech platforms. Many of the digital lending platforms are now trying to acquire smaller outfits with an NBFC license. An NBFC license will allow the consolidation of operations.
Troubles are rising in the edtech space. Byju’s is now trying to restructure its $1.2 billion loan amidst steep losses and cost reduction targets. Byju’s still remains India’s most valuable digital start-up with a possible valuation of $22 billion. Byju’s is looking at more lenient terms, including lower coupon and more time to repay. In the last few months, the rapid rise of edtech firms has been cut short by a shrinkage in demand for online education combined with sustained cash burn. The loan is already trading at a 20% discount.
India may see a steep rise in its subsidized foodgrain program this fiscal (FY23) to Rs2.70 trillion or nearly $32.75 billion. The food support to the poor is likely to continue, at least, till December this year. That is nearly 30% higher than the budget estimates. That may prompt the government to cut other spends to keep the total fiscal deficit for FY23 under 6.4% of GDP. Food subsidies are normally released to the Food Corporation of India (FCI). The food subsidy bill jumped due to the free rice and wheat program of 2020.