The upcoming RBI monetary policy meeting on April 04th and 05th is likely to maintain status quo on repo rates; at least that is what the market consensus is at this point of time. With hardening global crude prices and the potential for food prices to go up again, there is a strong possibility that CPI inflation may again cross the 5% mark. While there has been pressure on the RBI to cut rates that looks unlikely with inflation at elevated levels. There is also the added risk of US Fed hawkishness with the Fed already hiking rates by 25 basis points in March and looking good for 3 more rate hikes in 2018.
FPI inflow into equities for the fiscal year 2017-18 almost halved to Rs.26,000 crore ($4 billion). Most FPIs have been cautious on the valuations as well as they have been evaluating a more risk-off approach if the US hiked rates by 100 basis points during the year. The PNB fiasco and the tax on LTCG effective April 01st is also putting pressure on FPIs to go slow on their India investments. However, the big sentiment shift came from the debt markets with FPIs pouring in nearly $18 billion into Indian debt. Normally, debt inflows are most vulnerable to bond spread differentials.
The much talked about E-Way bill, an important component of the GST Bill, will be officially launched for all intrastate sales effective from April 01st. The platform is tested and is working smoothly and is likely to be applicable to any interstate movement of goods having a value of over Rs.50,000. In fact, Karnataka will be the only state to launch E-Way Bills for inter-state and intra-state trade in goods. The E-Way Bill was conceived as an anti-evasion measure as the spills were quite high in GST. Currently, there are 1.05 crore GST registrations of which nearly 10 lakhs have registered for E-Way bills.
The March auto numbers continue to flatter with Tata Motors reporting a 35% growth in its domestic sales. CV sales provided the major boost for Tata Motors and that is also considered a major lead indicator for a recovery in industrial output. Its passenger vehicle sales were largely driven by Tigor and Tiago. Industry leader, Maruti Suzuki Ltd, also posted healthy 15% growth with a predominant leadership in the mid and mini segment. Sales in the compact segment also grew by 13.5% for Maruti. Among the 2 wheelers, Hero Moto crossed the 75 lakh unit sales mark.
Indian companies raised more than Rs.84,300 crores via IPOs during the fiscal year 2017-18 making it the best year in the history of IPOs in India. This is nearly 3 times the figure of Rs.29,000 crore achieved during the fiscal year 2016-17. Of course, the only worry may be that the LIC had to fund nearly 50% of the government IPOs especially the large ones like New India Assurance, GIC Re, Bharat Dynamics etc. The PSU IPOs were also part of the divestment program of the government and the government plans a similar push this year also. The coming year may not repeat such a stellar performance for IPOs as the market conditions are likely to be tighter and the global and domestic appetite for these IPOs could also be limited. The big story in this year could be the strategic divestment of Air India.
Finally, Vedanta has successfully bid to buy out the assets of Electrosteel Steels, one of the companies that were referred to bankruptcy under the NCLT. While Tata Steel too had made a bid for the company, it was Vedanta’s bid that was finally accepted by the NCLT. Electrosteel owes nearly Rs.13,000 crore to Indian banks of which nearly Rs.5000 crore is to SBI alone. The added advantage for Vedanta will be the proximity of the plant to some of Vedanta’s iron ore mines in Jharkhand. Vedanta had bid Rs.4500 crore for the assets which was substantially higher than Tata Steel’s bid for Rs.3500 crore.
