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Foreign Institutional Investors Are Selling India And China

India saw its biggest outflow of foreign investor funds in 19 months last week, Bloomberg is reporting. Global funds sold $2.4 billion of Indian shares on a net basis last week, the most since June 2022. 

By Govindraj Ethiraj
New Update
FII India China
On today’s episode, financial journalist Govindraj Ethiraj talks to Ashvin Parikh (of Ashvin Parikh Consultants), a veteran banking consultant and analyst as well as Sanket Kulkarni, Business Development (Theatrical) Head at Ormax Media.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (01:00) Foreign Institutional Investors are selling India and China.
  • (04:28) HDFC Bank’s stock is punished. The banking story behind the story?
  • (15:33) Zee goes to court saying it wants Sony to honour $10 billion merger terms.
  • (18:11) Bollywood has a record 2023 at over Rs 12,000 crore. Stargazing 2024.
  • (27:57) Netflix take another step into television territory even as crackdown on password sharing pays off


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.

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Until yesterday, we were watching foreign investors sell China. Turns out they are selling India too. 

The only difference is that India has very strong domestic flows including from mutual funds balancing the outflows. 

However, India saw its biggest outflow of foreign investor funds in 19 months last week, Bloomberg is reporting.

Global funds sold $2.4 billion of Indian shares on a net basis last week, the most since June 2022. 

They sold another $374 million on Tuesday, according to provisional data, as trading resumed after Monday’s surprise trading holiday announcement.

Remember, we spoke of India’s stock market overtaking Hong Kong’s value of $4.3 trillion.

Well, since then India has slipped and Hong Kong has rebounded so we are back to where we were, a week ago.

So in 2023, foreign investors brought in $21 billion in 2023. Actually this number is not very high compared to previous years and analysts like Mahesh Nandurkar, MD of Jeffries said to me just the day before that they expected this year to go much higher.

Of course the first few days of the month and year have not been very propitious but there is a long way to go.

Also, the one thing that is spooking markets is the Securities and Exchange Board of India asking for more disclosures on who the beneficial owners of stocks are. Various folks, interested or otherwise, have asked for deferment on this but that has not happened.

Presumably because transparency is a good thing for the markets in the longer haul, even if some folks would prefer to sell their stocks rather than see their names revealed.

Which also unfortunately adds to the suspicion that some of these investors were linked to companies here and so on. But that’s a story for another day.

And of course, there is the story of banks like HDFC Bank who are in the throes of slowing loan growth and we will spend some time on this matter later in the show.

Oil Continues To Stay Low

Oil fell in as traders were swayed by the prospect of more supplies against the increasing military activity in the Middle East.

The US and UK launched more airstrikes against the Houthis on Monday to prevent them from attacking commercial vessels in the Red Sea. 

Despite the increased geopolitical tensions, Brent crude is still holding below $80 a barrel while West Texas Intermediate is now at near $74 a barrel.

As we have been discussing here, crude prices have not risen because of the likelihood of increasing supply from non-OPEC countries. 

HDFC Bank Punishment. What Is The Story Behind The Story?

HDFC Bank continues to be punished even as rival ICICI Bank, yes no one really thinks of them like that now but they seem to be on a stronger wicket, at least if life was a T20 match.

Of course, the real matches are marathons and all the rest of it.

But at this point of time, HDFC Bank stocks have hit a 52-week low, even as ICICI Bank seems to have overtaken HDFC Bank on market capitalization, for now.

HDFC Bank is a bellwether in more ways than one. Almost all institutional investors hold it, as much for its performance as for its pedigree, which does matter in the slightly longer or medium term.

Even now, there appears to be a clear split between institutional investors who are either holding HDFC Bank stock or scaling down their price targets. Brokerages like CLSA are still holding buys at over Rs 2,000 per share in contrast to its current price of around Rs 1,450.

So let's take a step or several steps back and ask what is happening more fundamentally in India’s banking  sector right now which could be affecting the perceptions of banking stocks like HDFC and what is the outlook.

I reached out to Ashvin Parikh of Ashvin Parikh Consultants, a veteran banking consultant and analyst who has worked with several big 4 firms as well. I began by asking him what was happening ?

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Elsewhere, staying with banking, Reuters is reporting that India's banking system liquidity deficit hit a record high, amid outflows towards tax payments and limited government spending.

Traders are now anticipating that the central bank will infuse more cash to address the shortfall, the news agency said with the deficit widening to Rs 334,000 crore or $40 billion as on yesterday, triple of what it was in the beginning of the month and year, as per RBI data.

So far, the central bank has conducted shorter-term repo auctions to infuse cash into the banking system but refrained from infusing longer term money.

Sony Puts On A Brave Front

Sony Group Corp India head has sent a letter to its employees assuring them the company will thrive despite its aborted merger with Zee Entertainment Enterprises without any further details.

Sony finally pulled the plug on a proposed merger which had been in the offing for almost 2 years.

Sony will focus on content that can boost subscriber growth and revenue in India while actively exploring “inorganic possibilities to strengthen our market presence”according to a letter seen by several news agencies.

“Let’s turn our attention back to the heart of our work – our current projects, our fantastic team, and the audiences who count on us,” Sony’s India chief said. 

Meanwhile, Zee said it was going to court to enforce the merger with Sony who had earlier slapped it with a $90 million termination charge.

Zee said it has approached the National Company Law Tribunal, which handles corporate disputes

News of the merger's termination sent Zee's stock tumbling nearly 34% on Tuesday but it recovered somewhat on Wednesday. 

One reason the proposed $10 billion merger broke down was Zee’s likely insistence on retaining promoter Punit Goenka as CEO of the merged entity who was the subject of a fund diversion investigation by regulatory body Sebi.

Results & GIFTS

Bajaj Auto Ltd reported a 37 percent year-on-year (YoY) increase in net profit for the third quarter of FY24 at Rs 2,041.88 crore thanks to strong sales of its two-wheelers, price hikes and higher realisations amid consistent demand, Moneycontrol reported.

What helped Bajaj, as it is many others, was a product mix in favour of premium vehicles leading to a  higher average selling price (ASP).

Bajaj Auto’s revenue also increased by 30 percent to Rs 12,113.51 crore during October-December 2023. 

Very broadly, Bajaj’s domestic business did much better than exports which were reported as challenging.

Sticking to family owned business Elsewhere, Wipro Ltd founder chair Azim Premji has given a little over 10 million shares, worth about ₹500 crore, as gift to his two sons, Rishad and Tariq, according to data from the stock exchanges, reported Mint newspaper.

On 20 January, Premji gave shares, each, to elder son Rishad, who is the chairman of Wipro, and to Tariq, who works at Azim Premji Foundation.

Wipro shares ended at ₹484.9 on Friday, implying that the 1,0230,180 shares were valued at ₹496 crore

Box Office

Last year was a good year for India’s movie box office, crossing the Rs 12,000 crore collection mark for the first time and closing the year at Rs 12,226 crore.

The previous pre-pandemic peak was close to Rs 11,000 crore

Hindi cinema also saw its best-ever year, with a gross box office of 5,380 Cr, crossing the `5,000 Cr mark for the first time. 

Hindi cinema’s box office share (44%) reached the pre-pandemic level of 44%, up from 33% in 2022, according to figures from research house Ormax Media.

While more than 1,000 films released in the year 2023, just the top 10 films contributed 40% of the year’s total box office. 

Jawan was the highest-grossing film of 2023, with a gross box office of Rs 734 Cr.

Some (943 Million) footfalls were registered, a growth of only 6% over 2022. Footfalls however remain below the pre-pandemic level of 103.0 Cr in 2019• 

Average Ticket Price (ATP) grew by 9% vis-à-vis 2022, from `119 to `130. 

The growth is primarily an outcome of the increase in box office contribution of Hindi cinema, which operates at higher ATP compared to the South language industries

I reached out to Sanket Kulkarni, Head Business Development (Theatrical) at Ormax Media and began by asking him what stood out last year and what the coming year holds at least from what we can project at this point.

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Netflix Ramps Up

Netflix is ramping up its investments in live programming with a new deal for 

WWE wrestling rights as it continues to add new customers at a rapid clip.

The streaming giant added 13.1 million subscribers in the fourth quarter—its strongest final quarter ever for net additions—after attracting 7.7 million new customers during the same period a year earlier, the WSJ reported, adding that the subscriber growth is a sign that its global crackdown on password sharing was a success.

Netflix has ended the year with 260.28 million subscribers, up almost 13% from a year earlier. Netflix plans to spend as much as $17 billion on content this year and its revenue rose 12.5% from a year earlier, to $8.8 billion in the final quarter of 2023, beating its expectations. 

Net profit for the period rose to $938 million.

Earlier Tuesday, Netflix said it struck a 10-year deal valued at more than $5 billion to become the new home of hit wrestling show “WWE Raw” and other WWE shows in the U.S. and abroad. 

More Spirited News

Remember, folks said there was no way the dry state of Gujarat would ever allow sales or consumption of alcohol. Well it did last month after it said it would allow the consumption in GIFT City, the international finance centre.

Not that everyone goes to a financial centre to get sloshed but the fact that it was not there was considered a hurdle for any place positioning itself as an international anything, leave alone a finance centre.

News now according to Reuters is that Saudi Arabia is preparing to open its first alcohol store in the capital Riyadh to serve exclusively non-Muslim diplomats.

Customers will have to register via a mobile app, get a clearance code from the foreign ministry, and respect monthly quotas with their purchases, the document said. Of course the process sounds exactly like something we here would be used to.

Anyway, Saudi’s move is also apparently part of wider plans known as Vision 2030 to build a post-oil economy.

The move is part of efforts to open the ultra-conservative Muslim country for tourism and business as drinking alcohol is forbidden in Islam, Reuters said.