Our Top Reports For Today
- (00:00) Stories Of The Day
- (00:50) Falling food prices bring down inflation to 3-month low.
- (03:31) How an India-facing ETF on Wall Street is beating the S&P 500.
- (04:51) SEBI wants to increase scrutiny of IPOs, is it too late?
- (08:19) Will cutting of import duties on electronic components help the electronics industry?
- (16:33) Why are prices of chicken falling while everything else is going up?
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
Inflation Numbers Are Falling, Although Slightly
Inflation is falling just like we said yesterday, based of course what many others who we believe said or have been saying in recent weeks.
The consumer price index (CPI)-based inflation for January came in at a 3-month low of 5.1 percent, according to the Ministry of Statistics and Programme Implementation (MoSPI)'s data.
In December, retail inflation had touched a four month high of 5.69 per cent, following 5.55 per cent recorded in November.
Food inflation, which accounts for nearly half of the overall consumer price basket, rose 8.30% in January which was lower than the 9.53% rise in December.
The RBI had retained its inflation forecast for 2023-24 at 5.4 per cent. For the current quarter (Q4), the projection was lowered to 5 per cent from 5.2 percent earlier.
Meanwhile, the Index of Industrial Production (IIP) growth for December 2023, released by the MoSPI, was 3.8 per cent, f cereals which includes rice and wheat rose 7.83% year-on-year in January compared to 9.93% in the previous month, while vegetable prices rose 27.03% compared to 27.64% in December, the data showed.
Vegetable inflation is obviously still high and an interesting contrast to meats which we will come to later in The Core Report today.
Inflation in rural India has fallen too, to The rural inflation was 5.34 per cent in January, compared to 5.93 per cent in December. The urban inflation for January eased to 4.92 per cent, vs 5.46 per compared to 2.4 per cent recorded in November. November witnessed the lowest IIP growth since March 2023, when it was 1.7 per cent.
So broadly lower inflation and higher industrial production in the last month.
The markets were down however, in anticipation of all this data which clearly turned out okay or for other reasons.
The S&P BSE Sensex shed 523 points to end at 71,072 levels while the Nifty50 was down 166 points at 21,616 levels.
The broader markets suffered deeper losses with the BSE MidCap index falling 2.6 percent and the BSE SmallCap 3.16 per cent.
A quick recap from Wall Street. The S&P 500 has climbed 5.4% to start 2024 and closed above 5000 for the first time on Friday, its 10th record of the year. The Dow Jones Industrial Average has risen 2.6%, setting 11 records along the way.
India Facing ETF Scores On WS
Meanwhile, CNBC is reporting that India is becoming a favourite emerging market of investors looking for long-term upside, and one ETF has done a better job at capturing those returns than its peers.
The WisdomTree India Earnings ETF (EPI) has a total return of 6.6% through Feb. 8, according to FactSet, and is up 18.7% over the past three months.
EPI 3M mountain WisdomTree’s EPI has been outperforming other major India ETFs.
The WisdomTree fund is also beating The S & P 500, which up less than 5% over the same period.
The WisdomTree fund has had an average annualised return of roughly 12% over the past decade, CNBC said.
WisdomTree global chief investment officer Jeremy Schwartz told CNBC. “The story on India has been that it’s got one of the better population profiles. ... It’s got a long-term growth story, but people know that so they pay so much for it,” Schwartz said.
“Most of the large cap indexes for India today, they’re 50, 75, 100 stocks. ... But we have over 400 companies,” Schwartz said. The fund’s success is winning over investors, having brought in nearly $400 million of net inflows this year, according to FactSet. It now has about $2.5 billion in assets.
Meanwhile, back home, India's market regulator is increasing scrutiny of issue documents filed by companies going public, Reuters is reporting basic sources, amid a general rise in initial public offerings in the Indian market.
This sounds a little like closing the proverbial stable door after the horses have bolted and have been bolting for a while and also implicitly admits that the previous IPOs were cleared without sufficient scrutiny.
Of course, I wouldn’t want to build too many conclusions on the basis of this one report but Sebi chairperson Madhabi Puri Buch did say last month that they were investigating three initial public offerings (IPOs) for allegedly inflating the number of subscriptions received. However, the agency or Buch did not disclose the names of the companies.
At the time, Sebi said it was working on measures to curtail such malpractices, in this specific case involving smaller company IPOs.
There are other regulations on how long the promoters or owners have to stay locked into their shares depending on what the utilisation of the fund raise is, for example retiring debt may have a shorter lock in than capital expansion.
All of this increases the paperwork obviously because companies have to declare in greater detail what they want to use the funds for.
In some ways, this is also going back to the not so good old days of controls but hopefully there will be some compromise and of course companies are more honest in their intent.
Oil Prices Fall On Tensions Likely Easing
Oil prices fell after rising steadily last week after Iran’s foreign minister flagged the Israel-Hamas conflict could be moving closer to a diplomatic solution, Bloomberg reported.
Brent fell 1.1% to below $82 a barrel, after gaining 6.3% last week.
Oil has traded within a band of about $10 for most of this year as nervousness over the conflict in the Middle East has been partially offset by ample global supply and a shaky demand outlook — especially in China, the second-biggest consumer, according to Bloomberg and as we have been mentioning in The Core Report.
Interestingly, Goldman Sachs Group Inc. analysts said in a note that there are other reasons oil demand could fall, being a surge in electric vehicle sales.
Among other big news in the oil industry, also suggesting that consolidation is continuing, the WSJ is reporting that Rivals Diamondback Energy and Endeavour Energy Resources are merging to create a $50 billion oil behemoth.
Endeavor has long been one of the most prized businesses in the consolidating Permian Basin, the largest U.S. oil patch that straddles West Texas and New Mexico, the WSJ said.
Here is a quick tally of the major energy deals in the last year via WSJ.
Exxon launched a nearly $60 billion all-stock deal to buy Pioneer last fall followed by Chevron’s $53 billion all-stock deal to purchase Hess the same month.
Occidental Petroleum late last year revealed a $10.8 billion agreement to buy West Texas producer CrownRock. Last month, energy company APA agreed to buy smaller peer Callon Petroleum in a deal valued at about $4.5 billion including debt.
Merged in January that created one of the largest natural-gas producers in the U.S.
India Cuts Import Duties On Mobile Phone Parts, How Effective Will It Be?
India can become a major and competitive producer of mobile phones if it is able to source the components cheaply.
As it turns out, many components of mobile phones are imported from other countries, including high value parts like semiconductor chips.
If import duties are high, then it obviously becomes uncompetitive to produce in India, whether it is for India or exports.
The government two weeks ago cut import duties on a number of mobile phone components like battery cover, front cover, SIM socket and screws to 10% from 15%.
The initial feedback on this move is that the impact on the final price of the mobile phone in India is very minimal, maybe 2-3%.
Incidentally, the Economic Times quoted an industry study on tariffs on smartphone input components which found India to have the highest tariffs (8.5% on average) among six other manufacturing nations including China (3.7% on average) and Vietnam (0.7% on average).
The larger question obviously has to do with the ecosystem since that is part of a larger mission to make India an electronics manufacturing hub including of course and led by companies like Apple.
I spoke with Neil Shah, Vice President at Counterpoint Research and began by asking him how he was viewing the duty cuts in the context of overall mobile phone and electronics production in the country?
Why Are Chicken Prices Going Down?
We were talking about inflation earlier in the show.
Vegetable prices rose 27% compared to 27.64% in December, according to the latest inflation data. The figures have shifted around but there has not been much change in the last year or so.
On the other hand, meat and fish inflation levels are just at 1.19%, latest figures. That is, once again there has not been much change in the last year.
Egg prices are rising a little more, with inflation around 5.6%.
The larger question is of course how and why chicken prices are staying low. While not everyone consumes chicken, a good source of protein, its low prices obviously suggest demand and supply are matched.
I reached out to Ricky Thaper, who is an industry person and Treasurer of the Poultry Federation of India and I began by asking him why chicken prices were staying low and even egg prices had not moved much.
That’s it from me for today, have a great day ahead.