Week ending February 11, 2024

# 1 Markets

Indian equity markets were moving in direction less narrow range and was waiting for a trigger till Thursday. RBI’s policy announcements though were on expected lines, spooked both equity and bond markets for not only continuing with withdrawal of accommodation stance and giving no clue for likely reduction in rates. Sensex fell by nearly 800 points as shortage of liquidity was not addressed by RBI but managed to gain some ground and closed at 700 points lower than when the week began. It may be interesting to note that, equity MFs added Rs 21,781 cr in January making this the 35th month of consecutive net inflows, which balances the FPI outflows considerably.

In the quarter ended December 2023, India Inc reported an uptick in revenue growth even as margin expansion continued to aid its bottom line. For the 1,357 companies (ex-BFSI) that had reported results till February 8, revenue growth at 4.8 per cent year-on-year is seen as a normalisation compared to 1.7 per cent YoY reported last quarter. Adjusted PAT growth at 38 per cent YoY (69 per cent YoY in Q2FY24) was aided by the 235 bps YoY EBITDA margin expansion to 16.4 per cent. Lower margin and PAT is therefore expected lower in Q4.

10Y G Secs hardened from 7.05% from last week closing, to 7.11% on Friday driven by projection of inflation nos. beyond RBI’s comfort zone and unlikeliness of rate cuts in the near term.

US S&P 500 continued its bull run and tops 5000 for the first time on Friday, buoyed by Friday’s inflation revisions while Dow Jones industrial average was tad lower. Economic data, including latest readings on labour and GDP have boosted hopes that the Fed Reserve monetary policy actions won’t hamper growth.

# 2 RBI

2.1 RBI Policy – 8th Feb 2024

Key actions:

  1. Repo rate unchanged at 6.5% as expected.
    1. Sixth consecutive stance to retain the rate.
    2. Withdrawal of accommodative stance continues with no indication of “neutral” stance.

Markets reacted negatively – Sensex moved down 800 points and bond markets hardened by 3 bps – expecting some kind of indication of timing of rate cuts, which was absent.

  1. Reiterates inflation at 5.4% and GDP growth at 7.3% for FY 24 and 7% for FY 25 as estimated by RBI earlier.
  2. FX reserves more than adequate to meet all obligations and the domestic financial system remains resilient with healthy balance sheets of banks and financial institutions.


  1. Revised regulatory framework for Electronic Trading platforms [ETPs] being issued (earlier version was in 2018):
    • Ahead of Indian sovereign debt’s inclusion in global bond indices, some banks have on behalf of their overseas clients requested RBI to permit international electronic trading platforms to execute trades in domestic government securities in order to ease market access.
    • Currently “voice or chat” method is in use and banks pass it on to trading desks for entering in NDS-OM. NDS-OM web version is on offer but FPIs feel comfortable with global trading platforms.
  2. Lenders to provide key fact statements [KFS] for retail and MSME borrowers – including effective interest rate in the form of Annual Percentage Rate [APR].
    • Short charging of borrowers by banks/NBFCs through different forms to be arrested.
    • Processing charges may come down but may not have much impact on banks’ revenue.
  3. Additional fraud risk management process in AePS (Aadhar Enabled payment system) being brought in along with Principles based framework for digital transactions.
    • RBI wish to progress from current additional factor authentication (OTP)
    • This move will promote innovation in the area of digital payments.
    • SMS-based OTP, while necessary and useful, has added a layer of friction for those transactions that require an additional factor of authentication when compared with transactions that do not, the most key among the latter being payments via Wallet instruments.
    • RBI permits hedging of gold price risk in OTC markets in IFSC.
  4. Earlier in Dec 2022, the RBI had permitted hedging in recognised exchanges in the IFSC.
  5. Now, the RBI is also allowing residents to hedge in the OTC segment.
  6. This will provide more flexibility to resident entities in hedging their exposure to gold prices.

2.2 Banks to share info with the Police.

The Delhi High Court last week, has directed the banking industry to ensure that all members follow standard operating procedures (SOPs) for disclosing information to law enforcement authorities.

  • This follows after RBI informed the court that detailed SOPs for information exchange have been prepared and must be followed by all banks.
  • The court has ordered that domain name registrars and banks must provide required information to the Delhi Police promptly or face potential legal action in response to petitions from Dabur India, Snapdeal, Bajaj Finance on infringement of their trade rights.


# 3 SEBI

3.1 SEBI has proposed through a consultation paper floated last week, a set of changes to provide flexibility to Foreign Portfolio Investors (FPIs) in reporting material changes and in dealing with their securities after their registration expires.

  • suggested categorizing material changes notified by FPIs into two types, each with specific timelines for reporting and providing supporting documents.
  • Type I includes changes that require FPIs to seek fresh registration, or which affect any privileges or exemption available to such foreign investors and Type II includes all other material changes.
  • has proposed measures to facilitate the disposal of securities after the expiry of FPI registration, including a framework for dealing with securities that remain in FPI demat accounts after the registration expires and securities that have been written off.

This proposal comes in response to challenges faced by market participants in meeting the current prescribed timelines for disclosures, particularly concerning changes in beneficial owners and thus expected to be a welcome measure.

  • SEBI on Tuesday came out with guidelines for returning the draft offer document for public issues and its resubmission in a bid to provide greater clarity and consistency in the disclosures as well as for timely processing.  Under the guidelines, the draft offer document
  • is required to be prepared in simple language with visual representation of data to ensure ease of understanding of its contents and the information needs to be presented in a clear, concise and intelligible manner.
  • needs to avoid complex presentations; vague and ambiguous and imprecise explanations; repetition of disclosures in different sections of the document and inconsistency in the data or facts provided in different sections of the offer document.
  • Need to avoid legal and technical terminology and also directed to clarify technical and complex terms used to explain the business of the issuer company in the document.



4.1 IRDAI has released the exposure draft of the IRDAI (rural, social sector and motor third-party obligations) regulations, 2024, in order to achieve “insurance for all” by 2047. The regulator has sought feedback by February 27. These regulations will come into effect on April 1st, 2024, and will supersede previous regulations from 2015, and include amongst other things:

  • specify minimum rural and social sector business that insurers are required to underwrite and minimum third-party motor insurance business that insurers carrying on general insurance business are required to underwrite.
  • obligations for insurers to ensure a minimum number of lives in rural and social sectors and plans to introduce gram panchayats as the unit for measuring performance metrics.

Hopefully the premium to GDP ratio is likely to improve from 4% to international levels of 7-8%.

4.2 IRDAI, last week proposed changes in post listing, flexible lock in period for investors which presently varies in between 5-10 years.

  • Earlier, the IRDAI prescribed lock-ins based on the age of the insurer, with waivers granted only in extraneous situations, like in distress sale by DHFL General Insurance in 2020.
  • Investors in insurance companies will have the option of a reduced lock-in for investments if their financial position deteriorates and they need to save themselves by selling their investments in the company.
  • Shareholders planning to list their shares will see relaxation of the lock-in clause.


# 5 Its economy – stupid!

5.1 Key takeaways from CRISIL report released last week.

  • Steady growth of 6.7% per year predicted from 2024 to 2031, exceeding pre-pandemic average.
  • Key drivers being, Government’s investment-driven strategy, especially in infrastructure; Increased capital expenditure and interest-free loans to states play a crucial role.
  • Impact of Middle East conflict on energy and logistics costs needs monitoring.
  • Uncertainty around US Federal Reserve’s rate cuts due to strong job market and high inflation.

5.2 HSBC India Services PMI Business Activity Index rose to 61.8 in January as compared with 59 in the previous month.

  • Services sector activity expanded at the fastest pace in six months in January, as buoyant international and domestic demand contributed to rising new business orders, according to results of a private sector survey released Monday.
  • However, the growth during January was still slower than in July, when India’s PMI was at 62.3, the highest monthly reading for the service sector during the ongoing fiscal.
  • The improvement in service sector growth follows a recovery in manufacturing, which hit a four-month-high during January, driven by a sharp uptick in orders amid mild input cost inflation.
  • The growth in new export orders was the quickest in three months, with 400 service sector firms noting gains from clients in Afghanistan, Australia, Brazil, China, Europe, the UAE and the US.


# 6 Prequin Global Reports – 2024

Key Takeaways from APAC webinar – 1st Feb 2024

  • Sharp increase in interest in Private Debt – 50% respondents plan to increase commitment, as PE and VC see low asset valuations.
  • Main challenges for PE – asset valuation, exit environment and interest valuations.
  • Private Equity gave less volatile and better returns than VC and S&P500.
  • Overall global private capital raised falls for second consecutive year in 2023, at a 5-year low.
  • While VC fundraising fell by 56; PE grew by 2% (driven by EU funds).
  • APAC fundraising dropped to 10 years low in 2023 due to reduction in investment in China focused funds. Japan seen as top choice in developed markets and leads APAC, India and SEA seen as newer VC markets and to develop into larger PE markets.
  • APAC private debt market is very small, with higher risk and return profiles but growing.
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