CPI Inflation for Jan-20 came in still higher at 7.59%, representing a 5-year peak in inflation. The sharp spike in inflation was largely on account of 13.6% food inflation with vegetable inflation crossing the 50% mark. The spike in inflation almost rules out any further rate cuts by the RBI in its next few policies. At the same time, the IIP for Dec-19 dipped back into negative territory (-0.30%) on account of negative growth in manufacturing. The lag effect of some of the reform measures like tax cuts and infrastructure spending may still not be visible. Also, the PMI touching 7-year highs in Jan-20 will also have an impact.
In what could be a positive cue for the Indian IT industry, the NASSCOM has pegged the IT industry growth at 7.7% for fiscal year 2020. The total full year revenues from IT services are expected to be in the vicinity of $191 billion. The NASSCOM chairman added that the IT industry had created 2 lakh additional jobs during the year taking the total IT workforce to 4.36 million. The IT industry has been facing major challenges in the last few years as global IT spending was increasingly gravitating towards digital spend and Indian IT professionals did not have the requisite skills to adapt to the changing milieu.
The government has approved capital infusion of Rs.2500 crore into 3 general insurance companies’ viz. United India Assurance, Oriental Insurance Company and National Insurance Company. The 3 general insurance companies have been under strain and have seen their regulatory solvency requirements being breached. This capital infusion will help them tide over the solvency gap for now. A slew of general insurance companies had been listed in the last 3 years but in most of the cases, the pricing was too aggressive during the IPO, leading to overall underperformance of the stock post listing.
In a move that was being spoken about for some time now, Dr. Reddy Labs of Hyderabad has acquired the select generics business of Wockhardt for a consideration of Rs.1850 crore. The stock price of Wockhardt has been touching new highs over the last 1 month. The business comprises a portfolio of 62 brands in multiple therapy areas like respiratory, neurology, dermatology, VMS, pain and vaccines. Apart from the manufacturing plant of Wockhardt at Baddi in HP, all the employees, sales and marketing teams will also be transferred to Reddy Labs. This fits with Reddy Labs’ plan to scale up India business.
SBI Mutual Fund beat HDFC MF to become the largest Indian mutual fund in terms of assets under management. SBI MF had total assets of Rs.3.82 trillion as at the end of January 2020. It was closely followed by HDFC Mutual Fund at Rs.3.79 trillion and ICICI Prudential MF at Rs.3.68 trillion. This is the first time in the last 15 years that an AMC other than HDFC AMC, ICICI Prudential AMC or Reliance AMC has been the leader in MF AUM. SBI had been locked at 3rd position for quite some time but it managed to break ranks and become the largest MF in India with an accretion of Rs.21,000 crore in Jan-20. SBI MF has been the largest equity fund AUM manager for quite a few months now. Reliance MF (now Nippon) had been in top position for a long time before losing out over internal problems in the ADAG group.
The enhanced deposit insurance limit at Rs.5 lakh per individual depositor will also entail higher insurance premium payable by the bans. It is estimated that the cost of insurance as a result of this higher insurance cover will be 20% higher for banks and that is likely to be loaded to the customers, either directly or indirectly. Of course, banks have been asked by the RBI to foot the bill but the bankers will surely find a way of passing on the cost to the end customer indirectly. The new premiums will be applicable from April 2020 and banks have to also maintain adequate liquidity resources for the same.
