With the US trying hard to slow the technological advances in China, the latter is working out a $143 billion package for the semiconductor industry. It is a major step towards self-sufficiency in chips for China. The package would include subsidies and tax credits to bolster semiconductor production and research. Most of the global companies have been trying to reduce their supply chain dependence on China. The big challenge for the US in domestic manufacturing of chips is the relatively higher costs that it would entail.
US consumer inflation fell sharply to 7.1% for November 2022. Now, consumer inflation has fallen a full 200 basis points from the peak of June 2022. The Fed has already hinted at reducing the rate hike to just 50 bps in December and further in the next year, although it is still ambiguous about the terminal rates of interest. On a MOM basis, CPI inflation was up 0.1%. All the 3 components of US consumer inflation viz. food inflation, energy inflation and core inflation were down yoy. US GDP turned positive in third quarter.
Mutual fund investors redeemed over Rs10,000 crore from systematic investment plan (SIP) accounts in November 2022 as they tried to monetize the rally. This is the highest level of redemption seen since April 2021. It is only since 2021 that AMFI is disclosing net SIP flows. Gross SIP flows for November 2022 were at a record level of Rs13,306 crore. SIP closure ratio has been relatively much higher in FY23 as compared to FY22, but it is still lower than FY20 and FY21, when the COVID panic had resulted in frantic MF selling.
The good news is that, with inflation falling to 5.88% in November 2022, India’s real interest rates may have finally turned positive. Real interest rates are the nominal interest rates, net of inflation. To curb the rising inflation, RBI has already hiked rates by 225 basis points, taking it 110 basis points above the pre-COVID levels. This has brought down inflation by 200 bps from the peak and help turn real interests into positive territory. Going ahead the probability of a rate hike in February looks quite low, at least for now.
The RBI lifted informal restrictions on rupee non-deliverable forward (NDF) trades placed on local banks in October 2022, to reduce the volatility in the rupee. The NDF is the informal market based out of Dubai and Singapore, where the rupee is traded on OTC markets. When the rupee had dipped to a record low of Rs83.29/$, the RBI had informally communicated to the banks to stop building fresh positions in the NDF market to manage the rupee’s volatility. NDFs are offshore products which offers speculation scope.
Four PSU power companies viz. PFC, REC, SJVN and Damodar Valley Corporation, may be close to buying the 1,980 megawatt stressed power plant of Lanco Infratech for Rs3,020 crore. The 4 PSUs managed to outbid the Adani Group and Reliance Industries. The power project ran into problems after Lanco had to file for bankruptcy. This marks the first instance when power financiers have entered the fray to buy the stressed assets of power companies. Post the deal, SJVN will be the majority shareholder with 40% stake.
Vedanta Group has signed agreement with over 30 Japanese technology companies to develop an Indian semiconductor and glass display manufacturing ecosystem. The agreements were signed in Tokyo last week. Vedanta and Foxconn are working hard to set up a full-fledged semiconductor plant and have already zeroed in on Gujarat for the project. Most companies are starting off with Fab assembly and Fab testing and Fab creation will come in at a later date only. India is in a sweet spot in the global chip story.
Aditya Birla Capital plans to sell its insurance brokerage unit as the group seeks to restructure its financial services business. The insurance broking business did not pick up to the extent anticipated and this is part of the CEO, Visakha Mulye’s attempts to restructure business model. The stock has rallied 50% since Mulye took over as CEO. Aditya Birla Insurance Broking offers broking and advisory services to companies and individuals combined with reinsurance solutions to insurers. IT employs 350 people across 11 cities.
