Election Results Spark ₹12,436.22 Crore Sell-Off by FPIs, Market Volatility Expected and more.

Election Results Spark ₹12,436.22 Crore Sell-Off by FPIs, Market Volatility Expected

The unexpected outcome of the 2024 Lok Sabha elections led Foreign Portfolio Investors (FPIs) to become net sellers, unloading ₹12,436.22 crore in equities on Tuesday. This caused a significant drop in the Nifty-50 and Sensex by over 5%. Analysts foresee near-term volatility as FPIs reconsider their India equity allocations amid political uncertainty and delayed US Federal Reserve rate cuts. Long-term investment attractiveness in India, however, remains positive.

Foreign Portfolio Investors (FPIs)

Foreign Portfolio Investors (FPIs) are non-residents who invest in a country’s financial assets, such as stocks and bonds. These investments are typically short-term and influenced by factors like political stability, interest rates, and currency strength. High inflows can boost markets, while significant outflows can lead to market declines. FPIs are crucial for providing liquidity and reflecting global investor sentiment towards a country’s economy.

Source: Live Mint

Indian Markets Suffer Worst Day in 4 Years Amid Narrow Modi Win

Indian shares experienced their steepest decline in over four years, with the NSE Nifty 50 falling 5.9% and the S&P BSE Sensex dropping 5.7%, after election results showed Prime Minister Modi’s alliance falling short of a predicted landslide victory. High-frequency trading and margin calls exacerbated the sell-off. Analysts highlight potential policy shifts and market volatility, despite BJP likely forming the government. Defensive FMCG stocks rose, but finance, energy, and infrastructure sectors plummeted.

High-Frequency Trading

High-Frequency Trading (HFT) refers to the use of powerful computers to transact a large number of orders at extremely high speeds. It leverages complex algorithms to analyze multiple markets and execute orders based on market conditions. HFT firms often earn profits by exploiting small price discrepancies and benefiting from rapid trade execution, but can contribute to significant market volatility during events like election results or economic announcements.

Source: Reuters

Infosys Chairman Nilekani Highlights GenAI’s Potential, Downplays Risks

Infosys Chairman Nandan Nilekani emphasized the enormous potential of Generative AI (GenAI) in the company’s FY24 annual report. Nilekani believes GenAI can enhance productivity and simplify lives, with fears about its risks, including human extinction, diminishing as the technology becomes clearer. Nilekani compared GenAI to transformative technologies like electricity and the internet. Infosys CEO Salil Parekh noted the company’s ongoing GenAI projects in software engineering and customer support, underscoring the growing integration of AI in enterprise solutions.

Generative AI (GenAI)

Generative AI (GenAI) refers to AI systems capable of generating new content, such as text, images, and music, based on the data they have been trained on. Unlike traditional AI, which follows set rules, GenAI can create innovative outputs, making it valuable in creative and business applications. Examples include chatbots generating customer support responses and AI models creating original artworks. GenAI’s potential lies in its ability to streamline processes and enhance productivity across various sectors.

Source: Live Mint

Adani Group Loses Rs 3.6 Trillion in Market Cap Amid Election Uncertainty

Shares of Adani Group companies plunged on Tuesday, wiping off Rs 3.6 trillion from their combined market valuation, now standing at Rs 15.78 trillion. Eight out of ten firms hit their lower circuit limits as election results showed a closer contest than expected. Adani Ports and Adani Enterprises were the worst hit, falling 21.3% and 19.4%, respectively. Monday’s rally boosted their valuation to Rs 19.42 trillion, but it fell sharply post-election results.

Lower Circuit Limit

Lower Circuit Limit is a mechanism used by stock exchanges to curb excessive volatility in the market. It is the maximum allowable limit within which a stock’s price can decrease in a single trading session. When a stock hits its lower circuit limit, trading is halted to prevent panic selling and allow investors to reassess the stock’s value. This helps in maintaining market stability during times of significant financial stress or unexpected events.

Source: Financial Express

Tax Issues May Drive Airlines Away from India, Warns IATA

At IATA’s 80th annual general meeting, Director General Willie Walsh warned that tax complexities in India could lead to international airlines exiting the market. Walsh highlighted concerns over double taxation risks and the intricate tax system. Recent investigations into alleged tax evasion by foreign airlines have intensified these fears. In 2022-23, foreign carriers held a 56% share of India’s international air traffic.

Double Taxation

Double taxation occurs when the same income is taxed in two different jurisdictions, leading to a heavier tax burden on the taxpayer. In the context of international airlines, this can happen when both the airline’s home country and the country it operates in claim tax rights over the same income. This is often avoided through air service agreements and tax treaties designed to allocate taxing rights and avoid excessive taxation on cross-border income.

Source: Mint

Tata Motors Finance to Merge with Tata Capital

Tata Motors announced the merger of Tata Motor Finance with Tata Capital, approved by their respective boards. This move aligns with Tata Motors’ strategy to focus on core businesses and emerging technologies. Post-merger, Tata Capital will issue equity shares to Tata Motor Finance shareholders, resulting in Tata Motors holding a 4.7% stake in the merged entity. The merger, expected to complete in 9-12 months, aims to expand Tata Capital’s presence in CV/PV financing.

Non-Banking Financial Company (NBFC)

A Non-Banking Financial Company (NBFC) is a financial institution that offers various banking services but does not have a banking license. NBFCs provide loans and credit, asset financing, and investment in various sectors, similar to traditional banks. However, they cannot accept demand deposits or issue checks drawn on themselves. Their operations are regulated by the Reserve Bank of India (RBI) to ensure financial stability and protect customer interests.

Source: Economic Times

Cheap Vietnamese Steel Imports Ascend in Indian Market

According to BigMint data, 35,000-40,000 tonnes of hot-rolled coil were booked from Vietnam to India at $590-595 per tonne, about ₹2,000-3,000 per tonne cheaper than domestic rates. This development concerns Indian steel manufacturers, fearing margin pressure due to rising imports. In 2023-24, India imported 8.3 million tonnes of steel, with Vietnam contributing nearly 1 million tonnes. Industry experts suggest aligning domestic prices with global rates to curb cheap imports.

Predatory Pricing

Predatory pricing refers to the strategy where a company sets its prices extremely low with the intent to eliminate competition and gain market dominance. This practice can harm local businesses by making it difficult for them to compete. Once competitors are driven out, the company can then raise prices to recoup losses. Predatory pricing is often considered anti-competitive and can be subject to regulatory scrutiny and legal challenges.

Source: Mint

Google Data Leak Reveals Past Privacy Mishaps, Sparks Resignation Calls

A Google data leak exposed numerous privacy incidents from 2013 to 2018, including recording children’s voices, exposing user addresses, and saving license plates via Street View. Business Insider reports increasing calls for CEO Sundar Pichai’s resignation. Google claims these issues were resolved and some were internal simulations or false alarms. Recently, another leak of 2,500 internal documents raised concerns in the SEO and publishing sectors about search ranking algorithms.

Data Collection Practices

Data collection practices refer to the methods and processes by which organizations gather, store, and use personal and non-personal information from users. This data can include anything from personal identifiers, browsing history, and location data to behavioral insights. Effective data collection practices ensure transparency, user consent, and data protection. Inadequate practices can lead to privacy breaches, legal consequences, and loss of consumer trust. Companies must adhere to regulations like GDPR and CCPA to ensure ethical data handling.

Source: Business Today

EPFO Introduces Four Major Changes to EPF Accounts and Claims in May 2024

The Employees’ Provident Fund Organisation (EPFO) has introduced four major changes to EPF accounts in May 2024. These include an extended auto-settlement facility for housing, education, and marriage claims, faster multi-location claim settlements, a new rule for processing EPF death claims without Aadhaar, and the relaxation of the mandatory uploading of cheque leaf images for certain online claims. These changes aim to streamline processes and reduce delays for EPF members.

EPF Auto-Settlement Facility

The EPF auto-settlement facility allows for automatic processing of claims up to Rs 1 lakh for housing, education, and marriage without human intervention, enhancing efficiency and reducing processing time.

Source: Economic Times

Modi’s Tight Win in India, Apple WWDC Buzz, and Market Movements

India’s PM Narendra Modi claimed victory in a heated election but may need more ally support. Global X ETFs’ Malcolm Dorson views a coalition government as beneficial for investors. Piper Sandler’s Michael Kantrowitz suggests an economic slowdown could favor equities. Ahead of Apple’s WWDC, analysts like Wamsi Mohan predict significant AI-related announcements. Oil prices drop after OPEC+ decisions, impacting energy stocks.

Coalition Government in India

A coalition government involves multiple political parties sharing power, offering checks and balances, which can lead to more stable and inclusive governance. This setup often requires negotiation and compromise, potentially leading to broader-based policies and reforms.

Source: Yahoo Finance

Finance Minister Celebrates Banking Boom Amidst Election Season

Finance Minister Nirmala Sitharaman credited the Modi administration for India’s banking revival, following S&P Global’s upgrade of six Indian banks’ outlooks to ‘positive’. In a tweetstorm, she highlighted the transformation from a “cesspool of bad loans” to a ₹3 lakh crore ($36 billion) profit. Sitharaman blamed the UPA-era’s “phone banking” for past issues, contrasting it with the current government’s focus on public welfare. Key metrics included deposit growth surpassing ₹200 lakh crore and loan growth exceeding 20% in FY24.

Credit-to-Deposit Ratio

The credit-to-deposit ratio measures a bank’s lending against its deposits. A higher ratio indicates efficient use of deposits for loans, promoting economic activity. India’s recent 80% ratio reflects strong lending practices and economic growth.

Source: CNBC-TV18

India’s Finance Ministry and Planning Commission: A Complex, Tense Relationship

Author AK Bhattacharya, at the launch of his book “India’s Finance Ministers: Stumbling into Reforms (1977–1998),” highlighted the enduring tussle between India’s finance ministry and the Planning Commission. Despite stable majority governments, frequent changes in finance ministers were noted. Bhattacharya and former bureaucrats discussed the Planning Commission’s overreach, such as setting borrowing limits for state governments, leading to conflicts over budget allocations. The Commission, replaced by NITI Aayog in 2014, often clashed with the finance ministry over fund distribution and policy authority.

Planning Commission’s Role and Conflicts

The Planning Commission, established in 1950 and dissolved in 2014, aimed to develop five-year plans for India’s economic growth. It often clashed with the finance ministry over budget allocations and policy control. The Commission’s influence extended to setting state borrowing limits and distributing development funds, leading to frequent conflicts and a complex, often contentious relationship with the finance ministry.

Source: MSN