Midnight News Update – Jul 31st 2017
Infosys has admitted that it is investing heavily in Europe and also planning to recruit heavily in the European region. The IT major has been looking to reduce its exposure to the US and diversify its product mix more in favour of other geographies. As per IMF estimates, Western Europe is likely to lead growth in the next two years while US GDP growth is likely to lag behind the global average. Europe is already Infy’s second largest market after the US and accounts for 22% of the total market. Infosys expects that the BREXIT is likely to open up massive opportunities in the EU region in IT services.
RBI will begin its 2 day meet to discuss the monetary policy on August 01st and the monetary policy will be announced on August 02nd. The Monetary Policy Committee (MPC) is expected to cut rates by 25 basis points as per consensus estimates. Inflation has touched a multi-year low with food inflation slipping into negative territory. The only stumbling block could be that the MPC is yet to shift its monetary stance back from neutral to accommodative. Also, yields have fallen post demonetization and the MPC may not see a very pressing need for them to cut rates and may prefer to wait till October.
Foreign portfolio investors (FPIs) have pumped in nearly $4 billion in the month of July into the Indian markets. There is a clear preference for Indian paper among global investors. While FPIs infused $1.2 billion into equities in July, they brought in nearly $2.8 billion into Indian debt. The attractiveness of Indian debt is quite obvious. With the RBI maintaining a neutral stance, Indian debt yields still enjoy a premium over US benchmark yields. Add to that, the strength of the INR vis-à-vis the dollar is proving to be an added advantage for the FPI. Equities demand will predicate on earnings growth.
The head of Tata Sons, Mr. Chandrasekharan, has affirmed that turning around the domestic business of Tata Motors remains the top priority for the Tata Group. While JLR appears to be doing quite well, it is the domestic auto business that is losing out to competition. Tata Motors has not been quick enough in responding to the changes in the market, even as other auto players like Maruti and Hyundai have become a lot more aggressive. Over the last 5 years, Tata Motors’ share in CVs has fallen from 59.4% to 44.4% while share in passenger cars has fallen from 13.1% to 5.2%.
Morgan Stanley has cut the CPI forecast for India on the back of good monsoon and a very uneventful launch of GST. It was feared that GST could lead to a spike in inflation. However, with the government taking care to keep food products at the lower end of the GST spectrum, the problem of inflation has been largely addressed. The year 2017 is expected to be another year of good monsoons and a record Kharif output. According to Morgan Stanley, both these factors will contribute to keeping the inflation under check. In fact, for the full year Morgan Stanley has revised its inflation estimates downward from 3.6% to 3.1%. Whether this translates into a rate cut in the August Policy remains to be seen? However, it looks like lower inflation is here to stay and it will undershoot the RBI target for retail inflation.
After supermarkets and retail outlets saw pressure on sales due to GST, the month of July 2017 has seen a genuine pick-up in sales of most consumer goods. At most retail outlets, the customers appear to be streaming back to buy goods. In fact, this situation is expected to further improve as wholesalers and stockists also log into the GST network that allows the seamless flow of input tax credits. Many vendors had faced hassles since they were not on the GST network but the recent efforts of the GST Council to quicken GST registrations appears to have done the trick with over 1.2 million new registrations.
