Taper tantrum, Indian toy story, Huawei car and other news
Business news and insights in under 5 minutes.
“Whatever you can do, or dream you can, begin it. Boldness has genius, power and magic in it.”
- Johann Wolfgang von Goethe
Rise and shine! 😀
In today’s edition, we take a look at:
Why markets crashed on Friday
India comes out of recession
India’s toy manufacturing dreams
Let’s get started…
📈 How did the markets fare
BSE Sensex - 49,099.99 | -3.80% ⬇
NSE Nifty - 14,529.15 | -3.76% ⬇
10-Yr Bond Yield - 6.229% | +0.047 ⬆
S&P 500 - 3,811.15 | -0.48% ⬇
USD/INR - ₹ 73.46 | +1.45% ⬆
The country’s largest lender, State Bank of India, is preparing for a $1 billion IPO of it’s mutual fund arm according to a Bloomberg report.
Despite the sell-off in the market, shares of RailTel Corporation of India surged 28% on its market debut on Friday, after its Rs 819-crore IPO.
📰 What's happening around us
Markets
Taking cues from the U.S., Indian stock indices posted their worst fall in nine months on Friday, as talks of another “taper tantrum” began to gain momentum. The term refers to the panic caused in global financial markets in 2013 when the U.S. Federal Reserve announced future tapering or curtailing of its easy-money policy.
Let’s break that down. US bond yields (the annual return bond buyers would make), rose sharply to its highest level in a year as fears of inflation grew, due to rising commodity prices and expectations of a quick return to economic normalcy with the vaccine rolling out. Now, rising inflation could result in the Fed prematurely cutting its easy-money policy which had flooded the financial markets with massive liquidity.
In 2013, the “taper tantrum” had sparked a sell-off in emerging markets by foreign investors. India had experienced huge Rupee depreciation and a rise in borrowing costs. This was visible again on Friday with the Rupee falling by 105 paise against the Dollar as foreign portfolio investors sold shares worth Rs 8,295 crore. Bond yields in India also edged higher.
But this time around, there is hope that things could be different. Since March 2020, the Reserve Bank of India has accumulated more than $100 billion of foreign exchange reserves. Equipped with this war chest, RBI could step in, in the currency markets to ease volatility which could soothe investors’ nerves. But expect to hear the term “taper tantrum” a lot more in the coming months.
Economy
After two consecutive quarters of contraction, the Indian economy has managed to claw itself out of recession (technical recession - wherein the economy witnessed negative growth for two consecutive quarters). Buoyed by pent-up demand, festive spending and an increase in government expenditure, GDP rose 0.4% in the October-December quarter compared to a 7.3% contraction in the previous quarter. Agriculture and manufacturing grew at 3.9% and 1.6% respectively, whereas, trade, hotel, transport, and communication continued to suffer, contracting 7.7% in Q3FY21.
Experts feel the pace of recovery currently is uneven at best with only select sectors poised to do better. The sectoral variation, pace and trend in recovery implies that the economy will need both fiscal and monetary policy support in the foreseeable future to ensure the recovery doesn’t falter.
Manufacturing
The Indian toy story is adding a new chapter with Aequs Pvt Ltd setting up India’s first toy manufacturing cluster to cater to some of the biggest names in the global toy industry. It will be developed with an investment of $500 million over 400 acres in Koppal, Karnataka.
Prime Minister Narendra Modi has been batting for boosting toy manufacturing in the country with the government preparing a National Toy Action Plan with a view to make the domestic toy industry competitive.
As part of the big push to make a global toy manufacturing hub, India has given approval for the building of eight toy manufacturing clusters at a cost of Rs 2,300 crore. Of the eight clusters, three will come up in Madhya Pradesh, two in Rajasthan, and one each in Karnataka, Uttar Pradesh and Tamil Nadu.
Aequs is a contract manufacturer catering to some of the largest North American and European toy brands. Last year, the company exported $100 million worth of toys. The market size of India’s toy industry is about $1.7 billion according to the Chairman of Aequs with the country importing $1.2 billion worth of toys annually. India will be looking to reduce its import dependancy as well as get a bigger slice of the $90 billion global toy industry.
🎯 News Bites
The second phase of India’s vaccination drive against the coronavirus is set to kick off today, covering people above the age of 60 and also individuals above 45 years with comorbidities. Private hospitals can charge up to Rs 250 for a dose of Covid-19 vaccine. At government hospitals, vaccination will be for free.
Asia’s richest man Mukesh Ambani’s Reliance Strategic Business Ventures has upped stake in US-based skyTran Inc, a tech company that provides smart mobility systems. The stake was increased to 54.46% from 26.3% for $26.76 million.
The government has once again extended the deadline for filing GST annual returns (GSTR-9 and GSTR-9C) for FY2019-20 by a month till March 31. The deadline was earlier extended from December 31, 2020, to February 28.
As US debt grows to a record $29 trillion, US Congressman Alex Mooney pointed out that the US owes India $216 billion.
Apple, Sony, Xiaomi and now Huawei? The Chinese tech giant is reportedly set to enter the electric vehicle segment and is looking for partners to manufacture its EVs. The winners of the massive competition in the segment will surely be the consumers.
That's it for today. Have a great Monday!
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