Week ending 28th Sept 2024
# 1 Markets
Indian markets saw their third consecutive week of gains, with both the Sensex and Nifty reaching all-time highs on Thursday. However, profit booking on Friday led to a slight dip, closing at 85,571 and 26,178 respectively. New-age tech IPOs surged, raising ₹15,000 crore, making 2024 the best year for IPOs after a 3-year lull. India led the global IPO race, surpassing the US and China.
Foreign investors have injected ₹1.5 lakh crore into Indian bond markets, with inflows likely to accelerate post the US Fed’s rate cuts. The RBI’s caution on inflation reversed the softening trend in bond yields, which closed higher at 6.87% on Friday.
The US bond market continued its softening trend, with yields falling further following the Federal Reserve’s 50 basis points rate cut. US 10-year bond yields closed at 3.75% on Friday. Mortgage rates also saw a decline, with the average rate on a 30-year fixed home loan reaching a two-year low of 6.08%. China announced a fresh stimulus package this week, including a 20 basis points cut in its 7-day reverse repo rate to 1.5%, along with a reduction in the reserve ratio for banks. Mortgage rates were also eased, resulting in a positive ripple effect across Asian markets.
The US equity markets ended the week on a high note, with the blue-chip Dow Jones rising to hit an intraday record on Friday fuelled by favourable inflation and increase in consumer spending for August. All three major US indices ended the week higher, with gains ranging from 0.5% to 1%.
# 2 Banking
2.1 As per TransUnion CIBIL report released last week,
- the share of borrowers rated prime and above is on the rise
- those with credit score above 731–up from 51% in June 2022 to 55% in June 2024
- that of subprime borrowers with credit score between 300 and 681 down from 0.22% to 21% in the same period
- self-monitoring by individual borrowers rose more than 50% in FY24.
- Retail credit growth and the number of new borrowers climbed at a moderate pace
The data points to improvement in the credit culture in India which augurs well for design of new and innovative products by fintech’s in India.
2.2 As per study published in RBI bulletin released last fortnight, the performance of NBFCs has improved since 2022 after the regulators adopted scale-based regulations- a framework linked to the size, activity and risk levels. Some findings:
- Total borrowings rose 11% from ₹27. 67 lakh cr. in Dec. 2022 to ₹30.72 lakh cr. in Dec 2023,
- Loans and advances grew 14% from ₹31.42 lakh cr. in Dec. 2022 to ₹35.88 lakh cr. in Dec 2023,
- Gross NPAs ratio down from 4.4% to 10.6% range in Dec. 2021 to 2.4% to 6.3% by Dec. 2023
- Consistent improvement seen on return on assets (RoA) and return on equity (RoE).
- Despite increase in risk weights, the overall capital adequacy of both upper-layer (NBFCs-UL) and middle-layer (NBFCs-ML) remains strong, indicating financial readiness to meet higher regulatory requirements
2.3 S&P Global ratings in its report “Indian Fincos Balancing Act”
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- loan growth of rated finance companies in India will moderate to 18% during FY25 from 20% in FY24, caused by RBI’s prescription of increased risk weights.
- Finance companies will however sustain loan growth stronger than the banking sector, which is expected to grow at 14 per cent.
- Retail loans by banks and finance companies in India could triple by 2030.
- Indian lenders’ strong underwriting will support asset quality as reflected in their focus on lending primarily to low-risk customers and generally low loan approval rates.
- Emerging co-lending models are easing funding pressure
# 3 SEBI
3.1 SEBI on Friday, in a consultation paper has proposed a series of regulations.
- To make MF schemes more transparent, including disclosure of expenses, expense ratio, returns and yields on both regular and direct plans separately.
- Disclosure more orderly and standardised including half yearly financial results that shall contain separate disclosures for total recurring expenses of the Scheme for direct and regular plans.
- Risk-o-meter to be colour coded in a standardised format and change in the risk-o-meter of the scheme to be communicated to the unit holders.
This will facilitate enhanced transparency, ease of comprehension and standardised approach towards disclosures by the MF industry.
3.2 SEBI through its circular on Thursday
- reduced timeline for listing of public issue of debt securities to 3 working days from 6 days.
- the listing timeline of T+3 will be applicable on a voluntary basis opening on or after November 1, 2024, and on a mandatory basis from November 1, 2025.
- the move would align the listing timeline in case of the public issue of debt securities and non-convertible redeemable preference shares (NCRPS) with that of non-convertible securities issued on a private placement basis and specified securities.
- Additionally, for delay in refund/unblocking of funds beyond the timelines, the issuer will be liable to pay interest at the rate of 15 percent per annum to the investors from the scheduled listing date till the date of payment
Already the minimum subscription period has been cut from 3 to 2 working days and in case of revision in price band, the bidding period could be extended by one working day. This move therefore is in continuation of its series of efforts to and would help in enabling faster access to funds for issuers and early credit and liquidity of their investment for investors.
3.3 SEBI last Wednesday has notified the modified delisting rules
- Companies can delist shares through a fixed price mechanism as an alternative to the reverse book building process (RBB) whose shares are frequently traded.
- The fixed price offered by an acquirer would be at least 15% premium over the floor price.
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- It has also provided modification of the counter-offer mechanism in case of delisting through the RBB process. Threshold for making a counteroffer is reduced from the existing 90% to 75% provided that at least 50% of public shareholding has been tendered.
- Adjusted book value introduced as an additional parameter for determining floor price for frequently and infrequently traded shares of the companies under the delisting framework, except for PSUs.
This most awaited move approved earlier by SEBI Board and notified now is aimed at facilitating ease of doing business for listed firms. RBB process was always riddled with challenges and manipulation by the promoters.
3.4 SEBI on Wednesday launched a dedicated Foreign Portfolio Investor (FPI) outreach cell to improve and simplify the experience of such investors accessing the Indian securities market.
- This cell will focus on direct engagement with Foreign Portfolio Investors (FPIs) and supporting them in accessing the Indian securities market seamlessly.
- Its key responsibilities include assisting prospective FPIs during the pre-application stage by offering help with documentation and compliance processes.
- The cell will also provide support during the onboarding phase and address any operational challenges that arise during or after the registration process.
- SEBI through consultation paper has proposed an abridged version of the Common Application Form (CAF) to simplify onboarding for Foreign Portfolio Investors (FPIs) and minimize redundant information. This new form will require only information unique to the applicant, while the remaining data will be auto filled from depository records.
Collectively, these measures reflect SEBI’s commitment to attracting more foreign capital, strengthening market integrity, and positioning India as a more attractive destination for global investors.
3.5 SEBI has updated its 2022 F&O study. Things look worse!
- 93% of individual F&O traders incurred average losses of around ₹2 lakh per trader (inclusive of transaction costs) during the three years from FY22 to FY24.
- Loss matches profits of prop traders & FPIs
- Individual traders are generally young, rural & income < 5 lakhs.
# 4 Economy
4.1 Global credit ratings agency S&P Global in its latest economic outlook, on Tuesday
- Retained India’s growth forecast at 6.8 per cent for the current FY
- Retained its growth forecast for FY26 at 6.9 per cent
- Stated that solid growth in India would allow the RBI to focus on bringing inflation in line with its target and expects inflation to average 4.5 per cent in the current FY.
4.2 Moody’s also revised its CY 2024 growth forecast for India to 7.1%, from its earlier estimates of 6.8% in June, as it expects growth in the Asia-Pacific region to outpace the global economy. It, however, kept its India growth forecast for CY 2025 unchanged at 6.5%.
4.3 Asian Development Bank (ADB) in its outlook released on Wednesday expects India’s economy to grow at 7% in FY25 and 7.2% FY26,
- Agricultural improvements will enhance rural spending, which will complement the effects of robust performance of the industry and services sectors.
- It maintained a positive outlook for the industry, as well as the services sector, private investment and urban consumption for FY25 and FY26.
- Additionally, a new government policy offering employment-linked incentives to workers and companies could increase labour demand and support job creation starting FY26
4.4 As per Index released by World Intellectual Property Organisation [WIPO] last week,
- India’s position rose one notch to 39th among 133 global economies in the Global Innovation Index 2024.
- India holds the top rank in both lower middle-income economies as well as the Central and Southern Asia region for Knowledge and technology outputs, Creative outputs, Institutions and Business sophistication.
- Last year, the country ranked 40th on the Index.
- Switzerland continued to top the ranking followed by Sweden, US and Singapore.
Improvement in the index do not mean anything to common man unless meaningful cost-effective solutions for myriad problems faced come out of such innovations.
4.5 As per statement released last week by Ministry of Information and Broadcasting, India has overtaken Japan to secure the position of the third-largest power in the Asia Power Index. Reasons attributed include:
- Its dynamic growth, a youthful population, and its expanding economy, solidifying the country’s standing as a regional force.
- The index uses eight core measures such as Economic Capability, Military Capability, and Diplomatic Influence to assess the power of each country.
- India experienced a 4.2-point boost in Economic Capability, primarily driven by its strong GDP growth and status as the world’s third-largest economy in Purchasing Power Parity (PPP) terms.
- India’s Future Resources score also saw a notable increase of 8.2 points, highlighting its potential demographic advantage. India’s youthful demographic is expected to fuel continued economic expansion and workforce growth in the coming years.
- India’s active participation in groups like the Quad and its leadership in regional dialogues have bolstered its position in regional security without the need for formal military alliances.
Launched by the Lowy Institute in 2018, the Asia Power Index evaluates 27 countries across the Asia-Pacific region, focusing on their ability to shape and respond to external geopolitical challenges.
While this achievement marks a significant shift in the geopolitical landscape of the Asia-Pacific region, critics argue that in place of demographic dividend, it is demography divided now piloted by political heads, yielding negative results in the long run.
# 5 PE VC
5.1 As per research report released by Global Data last week,
- The Indian startup funding surged by 5.1% in volume and 53.1 per cent in value terms, in the first eight months of 2024 as compared to the previous year.
- The Indian startups have raised USD 7.5 billion (780 deals) through venture capital funding, (Jan- August) which was USD 4.9 billion (742 deals) last year during the same period.
- Country accounted for 7.3 per cent of the total number of VC deals globally from January to August 2024, while its share of the total funding value stood at 4.6 per cent.
The report also mentioned India’s position as the top destination for venture capital investment in the Asia-Pacific (APAC) region, second only to China.
5.2 As per Tracxn 9M report released last week
- Funding among Indian startups declined by a marginal 7 per cent in the first nine months of 2024 to $7.6 billion from $8.2 billion during the same period last year.
- Funding rounds declined to 1,036 from 1,579 during the same period.
- Startups in India received around one-tenth of the funding secured by US-based startups ($86.2 billion) but comparable to China’s $8.2 billion during the same period.
- The fintech space was the second most funded sector on a year-to-date (YTD) basis in 2024. It received $1.49 billion in funding in 2024, a 39 per cent decline from $2.46 billion during the same time in 2023.