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Business News/ Mint-lounge / Mint-on-sunday/  Auto Expo, Alphabet’s milestone and corn crisis
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Auto Expo, Alphabet’s milestone and corn crisis

Car makers look to rev up sales; Google's parent overtakes Apple (for a while); and drought results in India importing corn

Photo: Ramesh Pathania/MintPremium
Photo: Ramesh Pathania/Mint

RBI hits pause on rate cuts

The Reserve Bank of India (RBI) on Tuesday said that it would hold any cuts in interest rates for now, and that future cuts would depend on the Narendra Modi government meeting its goals on fiscal consolidation. The central bank left unchanged the rate at which it lends to banks (called the repo rate) at 6.75%. It had cut interest rates by 125 basis points, or 1.25 percentage points, in 2015. Borrowing costs are lower now than they were then, though there has been a slight hardening of rates in recent times.

Sensex-sentiment gap widens

January’s Nikkei India Composite PMI Output Index came in at 53.3, according to data released last week. The index is a survey-based measure of private sector activity. The PMI index has been above 50 for seven months in a row now. The figure marks the divide between pick-up and decline in activity. But the equity markets have been moving in the opposite direction, drifting below the 25,000 mark in recent times. This is despite the January PMI figure being the highest since February 2015.

Auto Expo takes centre stage

The 13th edition of the Auto Expo, touted to be its biggest show ever, started on 3 February in Greater Noida. The expo comes even as the auto industry has been dealing with a number of issues. Demand has been volatile. Domestic passenger car sales grew 21.8% in October over the same month the previous year, after growing 9.48% in September. The growth was down to 12.87% in December. Nevertheless, car sales have continued to grow for 14 months in a row, although in fits and starts. Tailwinds for the industry are lower fuel prices and interest rates.

Credit growth rises for fifth fortnight in a row

The amount of capital that banks have lent out increased to Rs73.06 trillion in the fortnight ending 22 January compared with Rs65.65 trillion in January 2015. This growth of 11.3% over the corresponding period in the previous year is the fifth straight period of growth, according to figures released by RBI. A comparison of monthly credit and deposit growth figures show that deposit growth has slowed down slightly even as credit growth has picked up possibly on account of lower interest rates. However, lower rates have also helped retail loan demand, and companies too are seeking capital to complete unfinished projects, according to news reports. Capacity expansion as a driver of credit growth is still said to be insignificant.

Baltic Dry Index on a downward drift

The Baltic Dry Index came in at 303 on 3 February, continuing a downward drift that has seen it fall 36.6% since the new year began. The index is an indicator of shipping costs. News reports now indicate that ship owners are looking at a situation where they may have to close down operations in as little as six months. The index had touched a high of 11,000 in 2008. Volatile trade conditions following the financial crises have resulted in most shipping stocks now trading lower than 2008 levels.

Net profits up in results season

The ongoing results season showed net profits are up 15.88% for the three months ending December 2015, over the same period in 2014 for 634 companies, excluding banks and financial entities. Operating profit margins too came in at 16.54, broadly in line with the previous two quarters. Falling commodity prices have reduced raw material expenses for companies. Operating profit margins have been in excess of 16% for three quarters in a row now. The last time this happened was in 2011.

Falling rupee, rising debt worries

The rupee fell for three straight days last week, touching a low of Rs68.07 against the dollar on Wednesday. A falling rupee spells bad news for companies that have borrowed abroad on the back of low interest rates. They now face the prospect of increasing loan payments as the rupee depreciates against the currency in which they have to make repayments. A company that had interest payments of $100 when the rupee was at 50 then needed to shell out Rs5,000. This changed to Rs6,000 at 60, and is now approaching Rs7,000. Mint’s report on Tuesday highlighted the issue by looking at 14 companies from 10 indebted corporate groups. In a recent report, Credit Suisse highlighted the firms as part of the top 10 indebted corporate groups. Nine of the firms have more than 30% of the total debt denominated in foreign currencies. They include Essar Oil, Reliance Communications and Adani Ports.

Alphabet overtakes Apple, temporarily

Alphabet, the firm that runs Google, became the world’s most valuable company on Tuesday. Its shares rose 1.7% after the declaration of its Q4 2015 results. It was worth $531.02 billion at close of trade on Tuesday, compared with $523.85 billion for Apple. The stock subsequently fell, and had a market capitalization of $507.05 billion on Tuesday compared with $534.22 billion for Apple. A Reuters report indicated that Alphabet could be valued at $628 billion in the next 12 months based on analyst price targets. Apple is expected to be valued at $748.5 billion.

India importing corn

India has started to import corn for the first time in 16 years following two drought years. Bloomberg data shows that the country’s annual corn production declined 2.43% the year before last, and fell another 11.28% last year. It had exported 2.8 million tonnes of corn in the financial year ending March 2015. This is now expected to turn into an import figure of 2 million tonnes for the current financial year. A report that appeared on Tuesday indicated that India may also have to import sugar by October. The country is also expected to import 5 million tonnes of lentils.

TeamLease IPO oversubscribed

Investors bid for more than five dozen times the number of shares on offer during the initial public offering (IPO) of TeamLease Services Ltd. An IPO is a process by which companies offer shares to the public for the first time. The 66 times over-subscription is the highest since VRL Logistics was oversubscribed 74 times in April 2015. TeamLease provides staffing services. It was looking to raise Rs423 crore at the upper end of its price band. As much as Rs150 crore of the IPO proceeds will go to the company, while the rest will go to the private equity investors exiting the firm.

Graphics by Ajay Negi/Mint.

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Published: 06 Feb 2016, 11:44 PM IST
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