In a surprising move, government sought special parliamentary approval for net additional spending of Rs326,000 crore ($40 billion) in FY23. This was necessitated by higher war spending, higher fertilizer and food subsidies. India imports 40% of its fertilizer requirement of 50 MTPA and has been hit hard by the spike in global fertilizer prices. India had budgeted an extra spend of Rs1.09 trillion on fertilizer subsidies in FY23, but it looks to spill to Rs2.14 trillion in FY23. Even food subsidy bill is 30% above budget estimates.
As per the latest data released by the Federation of Automobile Dealers Associations (FADA), retail auto sales surged 26% in November 2022 on the back of festive and wedding season demand. Unlike the SIAM data, that is based on wholesale dispatches to dealers, the FADA data is based on RTO registrations. Three wheeler sales surged 80% while tractor sales were up56.8% in November 2022. Additionally, CV sales rose 32.8% yoy while two-wheelers and passenger vehicles saw yoy growth of 23.6% and 21.3% respectively.
According to data put out by AMFI, AUM of Indian mutual funds crossed Rs40 trillion for first time; helped by steady flows and robust market conditions. Inflation into active equity funds were tepid at Rs2,258 crore. NFO contributed Rs7,191 crore in November 2022 while SIP flows were to the tune of Rs13,306 crore. In terms of categories, passive funds and ETFs saw the maximum net flows. While active debt funds saw net inflows in the month, selling continued in hybrid funds, especially in arbitrage funds and in BAFs.
Snapdeal, the fast growing ecommerce start-up backed by Softbank of Japan, has decided to shelve its proposed Rs1,250 crore IPO. Amidst a slew of withdrawals, Snapdeal is the latest casualty of investor caution in digital stocks. Snapdeal had filed its IPO papers amidst the digital boom in late 2021. However, post the tepid performance of Paytm, Nykaa, Policybazaar and Zomato; the Indian digital story has ground to a halt. The rout has raised hard questions over tech valuations. It has seen its value fall 80% since 2016.
India’s forex reserves expanded for the 4th week in succession; rising $11 billion to $561.16 billion as per the RBI weekly statistical supplement. However, forex reserves are still $80 billion below its peak levels of $645 billion. There were 2 reasons for the increase in reserves; viz. favourable revaluation gains and reduced intervention by RBI in dollar markets. The concern is that, even at current levels, forex reserves are just about sufficient to cover 8 months of merchandise imports, which is too low by BRICS benchmarks.
Despite the weak exports in the second quarter, the EXIM Bank has forecast India’s total merchandise exports at above $100 billion in the December 2022 quarter. EXIM Bank has identified the energy crisis, tight monetary conditions and a likely slowdown in trade partners as key risk areas. EXIM Bank pointed out that the recent weakness in exports was due to tweaks in export duties and export restrictions to hold domestic supplies. That may not be necessary due to falling commodity prices, so exports should surge.
On Friday, HCL Tech fell 6% after the management admitted that FY23 revenues could end up at the lower end of guidance band. HCL Tech blamed larger than expected attrition in the BFSI practice for the lower sales guidance. They also anticipated growth challenges from weak global demand. The expect budget cuts and price reductions from clients. More so, since Indian IT caters to rate sensitive client businesses like mortgages, capital markets and discretionary retail. Dollar revenues could slow significantly in FY23.
In a move that was not surprising, the stock of One 97 Communications (Paytm) surged 7% on Friday after its proposed buyback announcement. The company had announced that its board would announce a buyback at its board meeting on 13th December. The news led to improved sentiments around the stock, although analysts are sceptical if this can sustain. The stock is down 75% from the issue price. Several top brokers are finding the risk-reward ratio of Paytm attractive but the stock has consistently disappointed.