FPIs turned net buyers in May 2024 ahead of the inclusion of Indian bonds in the JP Morgan Bond Index. They have infused Rs7,427 crore into debt in May so far, even as they remain net sellers in equities. It must be remembered that in April 2024, FPIs had been net sellers in debt to the tune of Rs11,218 crore, so this is surely a turnaround in flows. The JP Morgan inclusion would mean a 1% increase in weight each month, so the passive funds will also gradually raise stakes. The total FPI inflow is expected at $35 billion.
Hindalco, the parent of Novelis, is looking to garner close to $945 million from the Novelis IPO in the US markets. The IPO has been priced in the band of $18 to $21 and values Novelis at nearly $12.6 billion. This will also result in Novelis being listed on the NYSE. That would be good value accretion, since Hindalco had acquired Novelis in the year 2007 at a valuation of $6 billion, and the aluminium positive cycle may have just about begun. Since Novelis has net debt of $4.35 billion, enterprise value us closer to $17 billion.
Reliance has entered into a deal with Rosneft of Russia to buy crude and pay in roubles. With OPEC looking to extent supply cuts beyond June, this deal provides assured supplies to Reliance at discounted prices. The one year deal will entail a commitment by Reliance to buy at least 3 million barrels of oil from Rosneft per month. Putin has been trying hard to find an alternative to the West-driven payment system, which has become a major bottleneck for Russia. India is already the largest buyer of seaborne Russian crude.
It could be a sort of setback for the Shapoorji Pallonji group. Care Ratings has cut the rating of NCDs issued by Goswami Infratech Private Ltd, a part of the SP group. The rating on these NCDs were downgraded from Care BBB- to Care BB with negative outlook. According to Care Ratings, the NCD repayments are not backed by internal cash flows and hence the company will have to depend on refinancing to repay the NCDs. This adds to uncertainty on funding costs. These NCDs mature in April 2026 at premium of 18.75%.
NASSCOM expects that more global competency centres (GCCs) are likely to dot the Indian business landscape in the coming quarters. GCCs have been a big driver of IT growth and also of services export for India in the last few years. India is currently home to around 30 GCCs with over 2,700 centres. These GCCs are spread across sectors like financial services, healthcare, engineering, automotive, aerospace etc. The big global players are finding solid engineering talent in India plus the innovative DNA is a major positive.
According to a recent note by Fitch, the high RBI dividend could help to lower the FY25 fiscal deficit, more than expected. The interim budget had already pegged fiscal deficit at 5.1% of GDP, when the estimate of RBI dividend plus PSU bank dividend was pegged at Rs1.02 trillion. Now, the RBI dividend alone has come in at Rs2.11 trillion. That gives the government an opportunity to reduce the fiscal deficit below 5% and also boost the capex growth higher. FY25 capex growth was cut to 11% from 30% in the previous 2 years.
The share of gold in India’s forex reserves has been steadily rising. In 2012, share of gold in India’s forex reserves had scaled 9.2%, but later fell to 5.1% by 2018. However, the share has been steadily moving up once again since the pandemic period. In FY24, the share of gold in the total forex reserves of the RBI have moved up to 8.15%. This is on the back of higher gold prices and also persistent purchases of gold by the RBI. India now holds the fourth largest forex reserves in the world after China, Switzerland, and Japan. After the benchmark 10-year bond yields dipped below 7% last week to close at 6.98%, the bond yields have remained subdued in the current week also. The yields this week have been hovering between 6.97% and 6.99%, largely on the back of the record Rs2.11 trillion dividend announcement by the RBI. This higher than expected dividend is likely to reduce the fiscal deficit more decisively leading to less pressure on the government borrowing program. It was instrumental in pulling down the 10-year bond yields to sub-7%.