Week ending February 04, 2024

# 1. Markets

India’s DPI on global flag, when UPI payment to Indian tourists got enabled in Eiffel Tower though the principal driver of market last week was presentation of the Interim Budget. Bereft of major announcements, equity markets cheered with highest 1% weekly gain in the last 3 months. But it was bond markets which celebrated with more than 10 bps move intraday, fell to 7.05% from 7.22% a month ago. India’s bond market has witnessed another first, last week, with the outstanding amount on a single sovereign security maturing in 2063 rising to Rs. 2.04 lakh Cr mark, crossing earlier threshold, exhibiting renewed confidence of the Govt.

The Federal Reserve left interest rates unchanged on Wednesday and gave no hint that a rate cut was imminent unless they see inflation is moving sustainably toward 2%. Following day, US Bond yields cooled off to 3.887%. This buoyancy was short lived as Treasurys sold off aggressively on Friday, sending the benchmark 10-year rate up by the most in a single day in more than a year and ended at 4.03% on Friday on a disturbing news of near collapse of regional banks due to commercial real estate defaults. In the east, China’s benchmark government bond yield fell to its lowest in nearly 22 years on mounting expectations for further monetary easing amid a fragile economic recovery. The yield on the 10-year sovereign note slipped to 2.47%, a level unseen since 2002.

The S&P 500 was heading for a fresh record high on Friday, led by tech stocks and on some news of long ceasefire between Israel and Hamas and hotter-than-anticipated jobs report ignoring the spike in yield in Treasury witnessed on Friday.

# 2. Interim Budget FY2025

As the Govt. focussed on GDP – Governance, Development and Performance, prudence triumphs populism, ahead of Elections. Though limited in new announcements, we list the following +ves from TVS Capital Funds’ investments point of view, including financial services, B2B logistics space and sustainable development space.


  1. High Govt Capex will support growth and spur investments. Fiscal consolidation to further improve macro indicators.
  2. The Capex had grown by 37% in current year, with growth rates of 24% in FY23 and 40% in FY 22. Proposed capex at Rs 11.11 lakh cr for FY25 –rise to 3.4% of GDP in FY 25 (highest in two decades) vs. 3.2% in FY24.
  3. Eligible startups incorporated till March 31, 2025, (turnover < Rs, 100 cr.,) will get the tax holiday on profits and capital gains for 3 years out of 7 years.
  4. Tax exemption on dividend interest and capital gains on infra investments by sovereign wealth funds and pension funds extended till March 31, 2025.
  5. Rs, 1 lakh cr for 50-year interest free loan for innovation and research which is crucial for the next leg of growth. As Kris Gopalakrishnan often voices, this may help India’s spending on R&D to go up to 3% of its GDP from 0.7% now.
    1. However, one can be sceptical about this as no details are available and the earlier promise of Rs 50,000 crore for the National Research Foundation as part of the new education policy is yet to see daylight. Government should concentrate on funding the announcement they made in earlier years fully, as the lack of any increase in research for universities is a big dampening factor.
  6. Supportive framework for the growth of MSMEs and increase in presumptive taxation to Rs 3 cr. will help small and nano enterprises.

Banks and NBFCs are likely to benefit:

  1. Lower Govt. borrowing projected at Rs. 14.13 lakh cr for FY25 and Fiscal Deficit coming down to 5.1% make available more capital for private sector investment. Bank credit may go up.
  2. Complimenting this with inclusion of India in Global bond indexes and likely cut in rates by RBI interest rates are likely to come down and floor rate is projected at 7% for next FY.
  3. A cut of 50 bps could help investors earn a 3-4% appreciation long duration funds with an average maturity of 10 years and thus Banks likely to get higher treasury profits.
  4. 20 million rural homes and middle-class housing scheme to promote larger play of HFCs and NBFCs.

Logistics to become more attractive:

  1. plans 3 major economic railway corridors – energy, mineral and cement – to reduce congestion and logistics costs.
  2. emphasis on modernising the farm sector through greater investments in upgraded storage, streamlined supply chains and branding will enhance overall efficiency and competitiveness.

Sustainable Development:

  1. Viability gap funding has been introduced for offshore wind projects.
  2. Boost for green energy industry with a provision of Rs. 10000 cr for roof top scheme- to enable 1 cr households to obtain up to 300 units of free electricity p.m.


# 3. SEBI

3.1 SEBI last week has issued a new consultation paper to revise and revamp the existing nomination facilities in the Indian securities markets including mutual funds.

  • The move is aimed to reduce unclaimed assets as well as simplify the process for the surviving family member of the deceased investors to claim the assets.
  • However, the new guidelines will not impact existing guidelines on rule of survivorship (for joint holding), when a person dies leaving a will or when a person dies intestate i.e. without leaving a will.
  • Interestingly, SEBI data reveals 8% of MF accounts under single holding are without nomination opt in or opt out. This number was 27% in joint MF holding.

3.2 Why SEBI banned Growpital last week?

  1. Business model of raising Rs. 180 cr:
  2. Owning a fraction of farmland with low investment.
  3. Managing the land and crops
  4. Offer high return of nearly 15% besides profit sharing from crops.
  5. Tax free agri income.
  6. Each investor is co-owner through LLP structure, escaping the SEBI regulations for Collective Investment Scheme.

II Why ban?

  1. Growpital masquerading as LLP though a CIS as pooled investments that distribute profits.
  2. Used Cashfree Payments to receive and transfer back to Growpital.
  3. Assured returns contrary to rules.
  4. So called co-owners had no decision making and don’t know the details.

SEBI feels model of mobilising money is illegal and similar to Agri platform from Tamil nadu in 1990s where investors were duped. In the name of fintechs, Startups are not supposed to be circumventing the guidelines.

# 4 RBI

4.1 In an order issued on January 31, RBI asked Paytm Payments Bank to stop all basic payment services through various platforms and technology railroads, including the Unified Payments Interface (UPI), Immediate Payment Service (IMPS), Aadhaar-Enabled Payment System (AEPS) as well as bill payment transactions, with effect from February 29. Market reports indicate that RBI may consider cancelling the operating license of Paytm Payments Bank due to violations, including misuse of customer documentation rules and non-disclosure of material transactions.

The recent regulatory action was prompted by the company’s failure to address previous regulatory concerns, despite earlier actions.

  • Violations include money laundering, conflict of interest, lax processes, and breaches of licensing agreements. Issues with KYC norms, lack of proper checks, and accounts owned by individuals with enforcement issues were doubted.
  • Some accounts were linked to a single PAN and operated more than 1,000 wallets, contrary to their intended use for small transactions.
  • Violations of the Financial Action Task Force policies and the Prevention of Money Laundering Act were also identified.
  • Other reasons may include data security concerns and overlaps between Paytm and Paytm Payments Bank, although Paytm denied any data sharing between the two entities.


4.2 RBI’s Digital Payments Index for September 2023 stood at 418.77, as opposed to 395.57 in March 2023. This index captures the extent of digitisation of payments across the country. The central bank has been publishing this index since January 2021, with March 2018 as the base of 100.

4.3 Output in the eight core infrastructure sectors that account for two-fifths of India’s industrial output expanded at a sluggish clip of 3.8% in December, official data released on Wednesday showed. According to the HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, manufacturing PMI fell to 54.9 in December from 56 in November and 55.5 in October.


5.1 Under the new guidelines, effective from April 1, 2024, IRDAI has directed all general and health insurers (except ECGC and AIC) to put in place a board-approved policy for AYUSH coverage, which should include their approach towards placing AYUSH treatments on par with other treatments for health insurance coverage, thereby allowing policyholders to adopt a treatment of their choice.

  • The policy shall also contain the quality parameters as well as procedure for enrolling AYUSH hospitals/daycare centres as network providers for cashless facility.
  • Insurers shall modify their existing products that contain limitations for AYUSH treatments and ensure compliance.


5.2 IRDAI on Friday proposed removing the need for Indian insurance companies to seek prior approval from the regulator before listing on stock exchanges, subject to compliance with specified conditions. The suggestion is made based on recommendations from the Regulation Review Committee (RRC) that consolidated existing regulations.

  • The recommendations are expected to help enhance ease of doing business while ensuring protection of customer interests.
  • Had this proposal brought in last year by IRDAI, Digit Insurance would have got listed already.

# 6 IMF

While ahead of the Interim Budget, a Finance Ministry report on Monday placed FY25 GDP growth close to 7 per cent and expected to become a $7-trillion economy by 2030, the IMF in its last Tuesday release,

  • has increased its growth projections for India in FY24 and FY25 to 6.7% and 6.5%, respectively, citing strong domestic demand and increased government spending.
  • has raised growth projections for Russia, the US, and China while lowering Europe’s growth outlook. Global economy is expected to grow at 3.1% in 2024 and 3.2% in 2025, with falling inflation rates, while for China the growth is expected from 4.2% to 4.6%.
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