Namaste! Aaj ka news roundup, Newswala style!

MARKETS

Markets: Top Nifty gainers were HDFC Bank, Axis Bank, ICICI Bank, IndusInd Bank, and Kotak Mahindra Bank. The biggest losers included Titan Company, Maruti Suzuki, L&T, Hindalco, and Bharti Airtel. Among the sectors, only banking (up 2%) and IT (up 0.4%) ended positively. Meanwhile, auto, capital goods, metal, oil & gas, power, and realty sectors fell by 1-3%

BUSINESS

Heatwaves Likely to Drive Up Food Prices

What happened

Economists predict that the ongoing heatwave will pressure food prices, with pulse inflation remaining high. Paras Jasrai from India Ratings and Research expects food inflation to exceed 8% in June 2024, with pulses inflation staying in double digits. In May, pulse inflation rose to 17.1%, up from 16.8% in April. 

Arhar, a staple pulse, saw a 33.7% price hike in the wholesale market compared to last year, trading at ₹13,737.9 per quintal in early June. Vegetable inflation also soared to 27.3% in May.

Why it matters

The heatwave and delayed monsoon are expected to negatively impact farm income, food inflation, and health. Reservoir levels, currently at 22% of full capacity, are below last year's levels and the decadal average, potentially exacerbating the situation. Northern India, including Delhi, has faced increased heatwave days, affecting productivity.

The Purchasing Managers’ Index from HSBC showed a decline in manufacturing and service sector activities in May due to severe heatwaves, with manufacturing activity hitting a three-month low.

Zoom out

Heatwaves have not only impacted health and productivity but also driven up inflation, particularly in food prices. With retail inflation at 4.8% in May and food inflation at 8.7%, the economic repercussions of the heatwave are significant.

As northern states bear the brunt of these extreme temperatures, the ongoing heatwave spell is expected to continue, potentially affecting more regions and exacerbating the current challenges.

BIG MONEY MOVES

The Pant Project raises $4.25 million in Series A funding

The Pant Project, a D2C fashion brand, secured $4.25 million in Series A funding, led by Sorin Investments and supported by MGA Ventures, Huddle, Dexter Ventures, and Indian Silicon Valley. Founded by Dhruv and Udit Toshniwal in 2020, the brand specializes in custom-made and ready-to-wear pants, targeting diverse Indian body sizes. 

With plans to expand to 25-30 stores nationwide, the startup aims for ₹100 crore in revenue within 18-24 months. Sorin Investments sees The Pant Project as a leading bottom-wear brand, leveraging its expertise in apparel supply chain and product innovation.

SBI Plans to raise ₹20,000 Crore via long-term bonds

The State Bank of India (SBI), India's largest lender, announced plans to raise up to ₹20,000 crore in FY25 through long-term bonds, either via public issue or private placement. The bank's central board approved this proposal in a recent meeting. Earlier this year, SBI raised ₹5,000 crore through perpetual bonds with an 8.34% coupon.

In FY’23, the bank raised ₹20,000 crore from 15-year infrastructure bonds. SBI’s London branch also secured $100 million through three-year senior unsecured floating-rate bonds. For FY24, SBI reported a record net profit of ₹61,077 crore, a 21.6% increase year-on-year.

BUSINESS

Seafood Exports Dip Despite Record Volume

What happened

India’s seafood exports fell by 5.38% to ₹60,523.89 crore in FY 2023-24, down from ₹63,969.14 crore the previous year. In dollar terms, exports dropped 8.77% to $7.38 billion. Despite shipping a record 17,81,602 MT of seafood, the sector faced challenges in key markets like the USA, EU, and UK. Frozen shrimp remained the top export item, with the USA and China being the largest importers.

Why it matters

Frozen shrimp accounted for 40.19% of the export quantity and 66.12% of dollar earnings. Exports of black tiger shrimp and scampi showed significant growth. However, Vannamei shrimp exports fell by 11.56% in value. Other major items like frozen fish and squid also saw mixed results. The USA continued to be the biggest market, followed by China and Japan.

Zoom out

Despite an all-time high in export volume, India's seafood sector faced economic hurdles, leading to a decline in overall export value. The industry’s resilience in volume amid market challenges underscores its significance, but the financial drop highlights the need for strategic adjustments to enhance value recovery.

BIG PICTURE

China's potential tariff hike on European brands could shake market dynamics

China's potential tariff hike on European car imports could profoundly impact European brands in the world's largest vehicle market. The escalating competition between Chinese and European electric vehicles (EVs) has moved beyond product features to global trade. Following the European Commission's tariffs on China-made EVs entering Europe, Chinese brands seek retaliation from Beijing.

This comes amid concerns about Chinese EVs benefiting from subsidies, leading to lower prices in Europe. If China raises tariffs on European combustion engine cars, it could significantly challenge European players in China's competitive automotive landscape, affecting prices and market dynamics.

Japan's export surge fueled by a weak yen, raises economic concerns

Japan's exports surged by 13.5% in May, the fastest growth since late 2022, driven by a weak yen. However, the trade deficit widened to ¥1.22 trillion. The yen's 14.9% depreciation against the dollar bolstered exports but raised concerns about inflation.

While exports to the US and China soared, those to the EU declined. Car exports rose amid production restarts post-scandal. The yen's continued weakness poses challenges, with concerns over rising import costs and inflation. BOJ Governor Kazuo Ueda emphasised the need to monitor economic impacts closely.

BUSINESS

India to Receive $2B in Foreign Bond Inflows

What happened

Foreign inflows into Indian bonds are set to reach a decade-high of $2 billion around June 28, as these bonds will be included in the widely-tracked JPMorgan Emerging Market Index. This follows a significant precedent on August 20, 2014, when a record $2.7 billion was poured into Indian bonds amid expectations of a credit rating upgrade.

More than $200 billion in assets follow this index, and India is projected to have a 10% weight by March 2025, potentially bringing in a total of $20 billion in passive inflows over ten months.

Why it matters

This massive inflow of foreign capital is noteworthy for several reasons. Firstly, it could positively impact the rupee and India's foreign exchange reserves. However, the Reserve Bank of India (RBI) is cautious. With the rupee's real effective exchange rate indicating it is moderately overvalued, the RBI aims to prevent a sudden rise in the currency's value.

The central bank plans to absorb most of the inflows to avoid any abrupt appreciation of the rupee. Despite this, bankers believe there won't be a large rally in the rupee due to the RBI's tight control.

Zoom out

India's inclusion in the JPMorgan Emerging Market Index marks a significant milestone, promising substantial foreign investment in Indian bonds. While this influx can strengthen the rupee and forex reserves, the RBI's vigilant approach ensures a balanced impact on the currency. 

With the potential for $20 billion in inflows by March 2025, the RBI's strategic management will be crucial in navigating these economic waters. This event highlights the dynamic interplay between global finance and national economic policies, promising an intriguing period for India's financial landscape.

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