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Expansion of capex to tackle global issues and decline in economic growth
Equities, Markets - January 27, 2025

Expansion of capex to tackle global issues and decline in economic growth

Expansion of capex to tackle global issues and decline in economic growth

In present times, India is facing the issue of moderate economic growth and global tensions. In this scenario, the upcoming budget focuses on keeping the same fiscal strategy which was implemented for the previous four years. The policy also focuses on the strategy of fiscal consolidation and at the same time keeping budget expenditure higher than before pandemic expenditure levels. Further, it resolves to expand capex rapidly than expenditure of revenue levels. It will help in reducing the fiscal deficit in the economy at a moderate rate. However, the reduction in fiscal deficit continues to be higher than the target set by FRBM. This will aid in public investments leading to growth in the medium term.

Factors helping reduction in fiscal deficit
Following the financial year 2021-2022, the capital expenditure has played a crucial role in improving the GDP of the country. The factors such as growth in tax collections on personal incomes, big dividends of RBI, and expansion of GST revenue will aid in contracting the fiscal deficit.

There is a crucial requirement of fiscal consolidation in order to achieve lower debt levels and its costs, and also leading to expenditure in productive areas.

Need for high capex
India has a long term goal of becoming a developed nation in the year 2047. To achieve this, it aims to develop its infrastructures in terms of railways, highways, clean energy aims for creating an energy generation capacity of 500 GWs in the year 2030, and a strong agricultural sector in terms of better climate risk management and storage facilities. With the help of the PLI scheme, it focuses on expansion of local manufacturing activities in key sectors in the country. These are the reasons that the outline of the budget plan continues to be the same for years.

Economic Performance
India recorded a moderate growth in GDP to about 6.4 percent. The reason for this is due to contraction in capital formation and public spending did not fulfil the target of 17 percent. Also, the investment share in the growth of GDP fell to about 2 percent in the current financial year compared to the previous financial year growth of about 4 percent. In the upcoming budget, it will concentrate on keeping the capital spending in the range of about 3 to 3.4 percent of the total GDP. It will be considered as the highest in the period of the previous 20 years.

The expansion of capex levels will aid in promoting private sector investments as well investments at state level. It will also encourage growth in the medium term and also maintain growth levels close to 6.5 percent in the upcoming periods.

Growth drivers
Compared to private consumption, investment plays an important role in expansion of growth in the long term. In present times, there are a lot of worries regarding contraction in private consumption due to low consumption levels in urban areas. However, it is projected to grow in the second half of the financial year 2025. There is also a need for tax reduction in personal income but it’s not possible due to slowdown growth of corporate tax, considering moderate manufacturing activity.

In present times, the tax-to-GDP ratio accounts to 11.6 percent compared to the 1.5 percent ratio during the before pandemic period due rise in GST collections. In order to expand GST collection, there is a need to ease the GST rates and also increase the average GST. Apart from this, it needs to bring products such as petroleum under the GST base.

Focus on import duties
Currently, India’s import duties are higher compared to other manufacturing countries like Vietnam and China in Asia. It has increased to about 17 percent in the year 2023 compared to 13.37 percent in the year 2015. The reason for high tariffs was to protect India from China’s dumping strategy and also to promote domestic manufacturing in key sectors such as electronics. However, the high level of tariffs are becoming harmful for India in terms of acting as a replacement for China in trade and also to adopt global supply chains. It also affects domestic production due to high tariffs on inputs. In present times, Trump is planning to impose duties on China. This could be a chance for India to shine but it will be affected due to high tariff levels. It needs to lower tariff levels to make the Indian manufacturing sector strong.

Government borrowings
It helps in covering fiscal deficit as well as affect the resources of the private sector. In the upcoming financial year, the government is anticipated to have expenditure of about 14.5 percent compared to current projection of 14.8 percent. While the spending on segments such as pension, salaries, subsidies, and interest payment will be about 11.3 percent. The capex is anticipated to be about 3.2 percent.

In terms of revenue collections considering both tax and non-tax revenue and deducting states’ shares, it will be about 10 percent. Further, the fiscal deficit is anticipated to account for 4.5 percent in the upcoming year compared to 4.9 percent in the current financial year.

The government aims to have gross borrowing of about 14 trillion and net borrowing of about 11.4 trillion. It is similar to the borrowing in the previous year indicating almost no change in the borrowing levels. It will only help in slight lowering of debt-to-GDP ratio. There is a need for reduction in debts and rapid economic growth.

In order to achieve rapid fiscal consolidation, the government is required to contract the budget base as per the previous pandemic levels but it will adversely affect capex. This is the reason why it needs to maintain the high capex. It can be supported by stable growth in revenue levels and also remaining unused capex funds can be used to maintain the strength of government investment. It will also help to protect from global uncertainties in the economy.

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India to not worry about Trump’s Immigration Policy
Equities, Markets - January 27, 2025

India to not worry about Trump’s Immigration Policy

India to not worry about Trump’s Immigration Policy

Overview
Birthright citizenship, which is granted automatically to children born in the US to non-citizen parents, has been targeted by US President Donald Trump. The order titled “Protecting the Meaning and Value of American Citizenship,” one of the first few Presidential Actions the White House lists on its website, states that people born in the United States but not under its authority are not eligible for birthright citizenship.

The campaign that US President Donald Trump has launched against immigrants has created a stir. About 17 lakh Indian families with one or more members employed or enrolled in school in the US have experienced some anxiety as a result. However, we might be overestimating the negative effects of Trump’s anti-immigration policies. It is true that his agenda, which involves mass deportations of illegal immigrants, will have an impact on lakhs of Indian families. A total of 7.25 lakh Indians reside in the United States without the required papers and about 18000 of them have been identified as being a part of the initial mass deportation phase.

The effort may potentially reach students enrolled in American colleges as well as those who wish to live and work in the United States through legal channels, such as H1B visas. It is anticipated that the new administration will revise regulations to make it more difficult for current migrants to renew their visas or for new migrants to obtain visas. There are over 3.3 lakh Indian kids enrolled in American schools, and many more are in line to enroll. On H1B visas, an estimated 5.8 lakh Indians are employed in the United States.

Impact of Immigration Policy on Indian IT workers
On Tuesday, US President Donald Trump reaffirmed his support for the H-1B visa program, calling it crucial for luring highly qualified workers to the country. Indian IT workers were reassured by his comments, although H-1B holders, green card applicants, and their families may face difficulties as a result of recent changes to US immigration laws. According to Roma Priya, founder of Burgeon Law, the presidential order of Birthright Citizenship presents important legal issues concerning the citizenship status of those born in the United States to parents who are not citizens or lawful permanent residents of the United States.

The Indian IT industry, which mainly depends on the H-1B visa program, applauded Trump’s comments. The initiative is essential for tackling the skills gap in the United States, according to the National Association of Software and Service Companies (Nasscom), a trade association that represents India’s business process and IT industries. Given that India and Indian talent are crucial to the expansion of the US economy, Nasscom has no reason to be less optimistic about the growth story of the Indian IT sector, according to Shivendra Singh, vice president of Nasscom. Additionally, he denied typical complaints of the H-1B program, such as the assertion that it substitutes American labor or lowers salaries.

Steps India should take to benefit from this opportunity
India would benefit from a reverse brain drain if Trump’s anti-immigration policies were to cause it. However, the only way to capitalize on the scenario is for local companies to get over their penny-wise mindset and provide the incoming personnel the greatest price.

China’s Thousand Talent program, which drew in thousands of Chinese expatriates with foreign education and expertise, was crucial to the nation’s technical advancement. In addition to joining Chinese enterprises, many of the foreign-returned executives went on to form start-ups or lead research organizations. Beijing broadened the plan to entice talented foreigners to come and work in China. As a result, many American and European businesses now struggle to compete with their Chinese counterparts.

In order to find opportunities and put Indian executives who are either expelled or return on their own as a result of Trump’s anti-immigration policies, the government should collaborate with local companies to develop a program. Indian businesses are adapting to what seems to be a new revolution in artificial intelligence (AI), which has the potential to significantly change how many different industries produce and deliver goods. Getting the assistance of people who have worked for large, multinational corporations might be beneficial. Indian IT companies have placed less emphasis on innovation and more on commercial development and services. India produces very few well-known electronics and software items worldwide. In addition to hiring Indians who have experience with global companies, it would be prudent to draw in skilled foreign workers who could create new research and development capabilities.

Limitations of Trump’s Immigration Policy
Despite his grandiose declarations, Trump will have very little chance of deporting the 18 million illegal immigrants in the United States during his four-year administration. 580 individuals were deported on the first day. Deporting them all would take 82 years at the current rate. Even if the rate of deportations increases fourfold, he would still require twenty years—a very difficult task.

Vice-President JD Vance has already lowered the forecasts, stating that the government will concentrate on deporting the first million illegal immigrants and strive to do what is feasible. Trump has already stated that his administration would track down illegals who have a criminal history. However, it has come to light that determining the origins of immigrants is not a simple process.

Three challenges to the deportation policy have already been encountered. The country that has sent the most illegal migrants, Mexico, has blocked the landing of a U.S. military plane carrying deportees. Additionally, a U.S. court has declared the new order to be flagrantly unlawful, blocking the operation of immigration agents. On another front, senior officials in New Jersey and New York, sanctuary states, have declined to work with immigration authorities. As it happens, American companies prefer the low-wage illegal aliens to stay on their payrolls, working in farms and industries.

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UGRO Capital Acquires Profectus Capital in Ambitious ₹1,400 Crore Deal
Business, Equities, Markets - January 27, 2025

The stable growth of Shriram Finance driven by policy aid and balance credit mix

The stable growth of Shriram Finance driven by policy aid and balance credit mix

Shriram Finance remains the biggest Non-Banking Financial Company in the retail segment. Its current market price is about Rs. 527 and market capitalisation is around Rs. 99,157 crore. The ratings given to the stock is over-weight.

The performance of the company was affected by a hike in operating spendings and provisions. Despite the prevailing contraction in the industry, the quality of assets of the company continued to be strong due to a healthy balance of different credits.

Performance of the stock
During the period of the previous three months, the shares of the company recorded a decline of about 19 percent. Since 10th January, 2025, the stock has traded in accordance with a new split basis as it was split into a ratio of 1:5.

Healthy credit mix
The commercial auto industry is facing a declining trend in the present times. Despite this, the growth in AUM was higher than predicted due to a rise in loans taken for passenger vehicles, MSME, and two-wheelers.

The progress in medium and heavy commercial vehicles was not much due to bad weather conditions, prolonged elections, and also due to contraction in spending on infrastructure. In contrast to this, the two-wheelers and Passenger vehicles recorded a strong growth potential. Further, rise in rural consumption levels lead to boost to growth in demand for farm equipment and tractors.

There is a potential for Commercial vehicles to grow in case of increase in market activity. Apart from this, the growth in loans for the non-auto segment will lead to expansion of credit growth. The company recorded a consecutive fall in the gold loans segment. Despite this, it is anticipated to record a slight hike in the growth following the fourth quarter of the financial year 2025. The company expects its AUM to grow in the range of 15 to 20 percent.

Sale of its subsidiary
In the month of December 2024, the company sold shares of about 84.44 percent of its housing finance subsidiary to Warburg Pincus. The sale was worth about Rs. 3,929 crore. The money acquired from the sale of the subsidiary will help to finance its further growth in its key business areas having high returns. It will give an opportunity to the company to focus on growth of operations which give high returns to the company.

This sales agreement helped the company to raise its capital adequacy ratio to about 84 basis points on a quarter-on-quarter basis in the third quarter of the current financial year. The sale of the housing finance subsidiary of the company led to a special profit of about Rs. 1,489.39 crore to the company after deduction of its taxes.

Performance of asset class
In midst of tension across the industry, the company was able to maintain low cost of loans. The reason for this is efforts taken regarding collection of loan amounts and loan approvals. This has resulted in a good quality of assets of the company. The company has maintained a target of keeping the cost of loans below the range of 2 percent. The company was able to keep its loan cost in the range of 1.85 percent.

Performance of NIMs
Even though the loan cost is low and stable returns observed by the company, the contraction in net interest margins was recorded. The reason for this is surplus liquidity in the company. In the fourth quarter of the current financial year, the company is projected to record a hike of 20 basis points in the net interest margins, when the issues of cash flow are resolved. The expansion in assets with higher returns will help to improve net interest margins. Further, the possibility of RBI reducing interest rates will help in the progress of the company.

In the third quarter of the financial year 2025, the cost of employees and other overhead was spiked. This resulted in the expansion of the cost-to-income ratio of the Shriram Finance company compared to being in range of about 28 percent in the current financial year. Further, the ratio is anticipated to fall in the financial year 2026. The reason for this is progress in digitization and productivity of the company.

In addition to this, expansion of NIMs, stable loan cost and a healthy growth in AUM will lead to boost to Return on Equity (ROE) of the company.

Projection
Shriram Finance was able to tackle the prevailing economic challenges in the economy. It was able to outshadow its competitors. One of the reasons for this is power to set prices as it has a strong position in the rural areas and financing of used vehicles segments. It also has the advantage of selling extra products to their existing consumers.

Following its merger, the company is able to diversify its services resulting in better risk management and not depending on one type of financing only.

Further, the recovery would be observed in the commercial vehicles segment due to rise in rural demand and better macroeconomic situation. It is also due to growth in logistics operations due to good monsoon and expansion in infrastructure expenditure in the first half year of the financial year 2026.

In present times, the company’s stock price is about 1.8 times compared to its projected book value for the financial year 2026. Further, the current fall in the stock price can act as a chance for long-term investors to purchase and hold the stock.

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Sensex Jumps 450 Points Amid Renewed US-China Trade Hopes and Strong Sectoral Buying
Equities, Markets - January 27, 2025

In midst of US tariffs, Asian markets observed rise in the early trading

In midst of US tariffs, Asian markets observed rise in the early trading

Overview
Following the decision of the US President on enforcing sanctions and tariffs on Colombia, stocks in Asian markets surged in the initial trading hours. The reason for implementing sanctions and tariffs on Colombia was due to the country hindering the US immigration goals. Despite the surge in Asian stocks, investors are still vigilant due to global uncertainties prevailing in the market.

Global Market
When the markets open, futures in the Hong Kong market are anticipated to see small gains. Also, the stocks in the Japanese market surged. In contrast to this, the futures in the US market decline. It led to a decline in the improvement made in the previous week. The performance observed in the previous week was considered as the best performance for the presidential tenure after 1985. Due to the Australia Day holiday, the Australian market remains closed.

In the previous week, the international markets recorded an improvement. In the initial period, there was concern prevailing in the markets about the rise of international trade war in the initial days of Trump’s administration. However, these worries were eased due to Trump not immediately imposing tariffs on regions such as China, Mexico, and Canada.

In present times, the worries have appeared again due to Trump implementing sanctions and tariffs on Colombia. The reason for this was Colombia ‘s denial to allow deportation planes of the US.

Asian markets
A strategist working in BNY in Hong Kong, Wee Khoon Chong stated that it is too soon to say that Asian markets will be off the radar from the tariff threats. The markets in Asia continue to be at risk due to unpredictability about tariffs. He further stated that lower or less aggressive tariffs would be a good thing in the short-term period.

Impact of the sanctions on the world
In the initial trading hours of the Asian markets, the dollar was raised slightly due to these sanctions. In contrast to this, the Mexican peso recorded a fall in the value. It helped the US dollar to lower the big loss recorded in the previous week, which it acquired over a period of year. While, currencies such as Australian dollar which are usually affected by Chinese tariffs, registered a surge in the market. In the emerging markets, currencies of Latin America and Eastern Europeans also face rise in the markets.

Impact of China’s activity data
There is a possibility that it will show weak growth in the manufacturing sector of the country for the year 2024 and it will perform the same in the current year as well. Apart from this, the trading in Asian markets are likely to be impacted because important markets will be closed in the mid week due to Lunar New Year.

Impact of the US tech earnings reports
The beginning of the season of the tech companies of the US publishing their earnings reports will be crucial for the international stock markets in the world. Many investors are curious to observe if the demand for artificial intelligence (AI) has surged according to the high projections. In the initial part of the week, the tech industry was strengthened by the joint venture of Open AI, Oracle, and SoftBank Group which accounts for 100 billion dollars. The purpose of this venture is to finance Artificial intelligence infrastructure. These steps were taken with the help of the US President Trump.

Performance of the US economy
In the meeting of the Federal Open Market committee on Wednesday, it is anticipated that the US will not reduce its interest rates. Following the month of September when they started the cycle of reducing interest rates, this will be the first time that the US will not reduce its rates.

The performance in the US is in good state driven by slowdown in reduction in inflation and strong growth in employment levels. This is the reason why there is no need to reduce interest rates at this point of time. Also, the federal open market committee is quite vigilant about cutting rates due to unpredictability prevailing in the market about deregulation, stance on energy policies, US trade related policies, and initiatives taken by the government to improve their functioning.

Impact on commodities market
The oil recorded a fall in its first week of the year. The reason for this is the US’s warning to Russia regarding ending the war with Ukraine or else sanctions will be imposed on Moscow. It also ordered OPEC countries to reduce crude prices. The third biggest producer of Coffee is Colombia. As the sanctions are imposed on Colombia, it is yet to be seen what will happen to prices of coffee in the market.

While the gold in the market recorded a rise for the fourth consecutive week. In the previous week, the US President directed an order to establish a group of key agencies. This group will give recommendations and create policies and regulations related to cryptocurrency. It resulted in Bitcoin recording high in the previous week. Currently, bitcoin is registering a slight decline in the trend.

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Interest Payment Burden to reduce in FY26
Equities, Markets - January 27, 2025

Budget needs to focus on local infrastructure

Budget needs to focus on local infrastructure

Overview
With some workers returning to agriculture, the post-pandemic job market structure exhibits retrogression. The increase of labor earnings has been hampered by this trend. According to research, the multiplier from public investments in local infrastructure passes through MSMEs and contributes to a favorable work environment. The budget should prioritize that.

The release of this year’s Union Budget coincides with a number of concerning structural change and employment data. Following the Covid-19 pandemic, overall economic growth recovered rapidly; however, current growth figures suggest that this impetus is waning. It is too soon to tell if the slowdown in GDP growth predicted for FY25 would be a one-time event or a long-term decline in growth. In any event, it is evident that concerted policy action is required on the employment front.

Increase in labour force in agriculture post pandemic
According to recent data from KLEMS and periodic labour force survey (PLFS), the pandemic caused a structural regression in the Indian economy, which has not yet been reversed as of 2023–2024.

An increase in the percentage of jobs in agriculture and self-employment is what is meant by structural retrogression in the Indian economy. Such a shift in employment from other sectors of the economy to more stable industries like agriculture was anticipated during the pandemic. As of 2023–2024, there were more workers in agriculture than at any other point since the early 2000s, indicating that employment in this industry has continued to rise after the epidemic. After the pandemic, labor productivity in the agricultural sector stalled as a result of the value created there not increasing proportionately.

In addition to agriculture, we anticipate that if more conventional wage or salaried employment opportunities are established, the percentage of self-employed workers—especially own-account and unpaid family workers—will decline with economic growth. However, from roughly 52% of the workforce prior to the epidemic to 58% in 2023–2024, the percentage of self-employed workers has grown. The growth has persisted after the pandemic, which is concerning.

Stagnation in earnings of major corporates and businesses
The fact that other industries where household businesses are commonly found, like food, beverages, and tobacco, textiles, leather and footwear, trade, and domestic services, were also less productive in real terms as of 2022–2023 than they were in 2017–18 suggests that the phenomenon of crowding into the self-employment sector appears to be more widespread than just agriculture. In other words, employment has increased more quickly than output in each of these sectors, most likely as a result of workers moving in from other parts of the economy where there is less need for labor.

This has the effect of completely stagnating or even decreasing real earnings overall. The PLFS provides quarterly data on earnings from regular salaried labor, self-employment, and casual wage work; the most recent data covers the April–June 2024 quarter. Earnings from regular salaried work have increased by an average of 5.3% annually in nominal terms or 0% annually in real terms since 2017–18 (the first year for which PLFS data are available). Earnings from regular wage jobs actually decreased by 0.14 percent annually over the April-June 2022 and April-June 2024 quarters.

Positive outlook
The fact that conventional pay employment increased by 11% in 2023–2024—its largest one-year growth in recent memory—surpassed the 8.6% increase in predicted self-employment. To ensure that the proportion of regular wage workers in the economy grows consistently, every effort must be made to ensure that this process continues.

MSMEs are a way of creating newer jobs
The bigger puzzle is why, in spite of a robust recovery in overall GDP growth, regular wage employment has not grown more quickly. Additionally, we should remember that the majority of job creation, even for paying positions, occurs in unlisted businesses and informal enterprises (more generally, MSMEs) rather than huge corporate firms. To allow businesses to grow, save, and invest, a new push for policy is required.

Barriers that hinder the growth at the bottom end for corporates
The absence of physical infrastructure is still a major barrier, aside from aggregate demand, which is a macro limitation that affects all businesses. Roads, energy, and water—the so-called bijli, sadak, and pani—are cited by businesses as the biggest barriers to growth, according to a 2019 IDFC Institute poll of 2500 small businesses nationwide. The government is well renowned for emphasizing the improvement of physical infrastructure. This agenda needs to be pushed further by shifting its focus to local infrastructure and small communities. India has made good progress in building highways, airports, and other major infrastructure, but we still lag far behind in terms of the quantity and quality of local roads, water, power, and other essential services.

Conclusion
In a big and diverse economy like India, the impact of a single budget—and that of only the Union government—is minimal, but the budget’s goals do give an idea of how the Union government is currently considering the economy. If the budget strongly favors removing barriers to small business growth in small towns, that would be encouraging. In order to guarantee inclusive development and long-term economic growth, India must produce the requisite number of jobs.

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Dalmia Bharat Reports Disappointing Q3 Results, Sees Limited Short-Term Growth
Equities, Markets - January 24, 2025

Dalmia Bharat Reports Disappointing Q3 Results, Sees Limited Short-Term Growth

Dalmia Bharat Reports Disappointing Q3 Results, Sees Limited Short-Term Growth

Overview
The fourth-largest cement manufacturer in India, Dalmia Bharat, released a poor set of results for the October–December 2024 period. This is because the cement industry’s overall demand is still weak because of weak consumer mood and a slowdown in housing and infrastructure development.

Q3 Result Highlights
The most recent third-quarter results from Dalmia Bharat Limited disappointed overly enthusiastic predictions by missing earnings. Overall, the outcome wasn’t great with statutory earnings missed predictions by an astounding 62%, coming in at just ₹3.25 per share, while sales was only slightly below analyst estimates at ₹32b. Investors may monitor a business’s performance, examine what analysts predict for the upcoming year, and determine whether sentiment toward the company has changed, making earnings a crucial moment for them.

The quarter’s total volume was 6.7 MT, a 2% decrease from the previous year. Volumes in the previous quarter were negatively impacted by the termination of tolling agreements with Jaiprakash Associates, labor shortages during the holiday season, a slow market environment, and insufficient government spending. Due to excess industry capacity and intense competition, realisations fell 10% year over year, even though the price situation improved sequentially. Revenues for the third quarter were Rs 3,181 crore, a 12% year-over-year (YoY) decrease.

The softening of fly ash, slag, and limestone prices resulted in favorable input costs. The decrease in power and fuel costs was driven by a shift in the fuel mix, a sharp decline in the price of coal and pet coke, and a greater contribution from green energy. As the corporation used its eastern factories to service the central markets, freight costs increased slightly. Poor realisations caused operational earnings to drop 34% year over year to Rs 511 crore from Rs 779 crore, despite a 4% YoY fall in the entire cost base.

Industry expectation
Cement prices across the board have been declining since Q3 of FY25, and they showed same patterns in October and November. However, because dealers had started raising prices in December, realizations were stronger, therefore the quarter concluded on a good note. During the busy construction season (January to June), the sector anticipates a rise in realizations driven by a pickup in demand.

On a sequential basis, the average power and fuel price for Q3 was $96/tonne, a decrease from $101/tonne. The cost curve should flatten here as the current spot costs for fuel and electricity are between $95 and $100 per tonne.

Capacity to boost
The business’s total capacity at the end of the quarter was 46.6 MT, following the start of commercial production in Ariyalur (1MT) and Kadapa (1MT). By the end of FY25, the company wants to reach a capacity of more than 49.5 MT. Of the approximately Rs 3,000 crore in investment guidance for the entire fiscal year FY25, Rs 2,000 crore has already been spent in the first nine months of FY25.

Through the utilization of captive coal blocks, route optimization, and a higher percentage of renewable energy (RE), Dalmia hopes to reduce costs by Rs 150–200/tonne over the course of the next three years. Dalmia inked 21 MW of RE power agreements in Q3FY25, bringing its total captive RE power contracts to almost 300 MW.

Share Price Movement
The stock price movement is expected to be significantly impacted by the near-term difficulties, which include increased competition in its core markets and restricted growth prospects as a result of the postponed capacity expansion plan. Supported by a better blending ratio, green power share, and lower freight cost, the company is one of the least expensive producers in the sector. The company is selling at 11x/10x FY26E/FY27E EV/EBITDA and USD82/USD80 EV/t at CMP, which is an appealing price. In order to arrive at our revised TP of INR2,100 (as opposed to the previous TP of INR2,250), analysts value DALBHARA at 12x Dec’26E EV/EBITDA.

Future Outlook
Dalmia continues to be our top choice among major cement firms, despite the company’s limited short-term development potential. Over the medium to long term, the company is anticipated to outperform the industry. This stock is worth keeping an eye on for long-term investors looking to buy on dips.

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Stable performance of Pidilite in third quarter of FY25
Equities, Markets - January 24, 2025

Stable performance of Pidilite in third quarter of FY25

Stable performance of Pidilite in third quarter of FY25

Pidilite Industries performance in the third quarter of the financial year 2025 was remarkable. The company’s current market price is about Rs. 2,910. Its market cap is Rs. 1.48 lakh crore. The rating of the company is equal weight indicating that performance of the stock will be in line with the average performance of its peers.

The company’s sales volume growth for the third quarter of the financial year 2025 was about 10 percent on a year-on-year basis. Its standalone growth in terms of value also rose to about 9 percent. This remarkable growth acts as a turning point from the previous low growth in both sales and value of the company for some quarters.

About the company
Pidilite is a leading manufacturer in the production of adhesives. Its product Fevicol has become a common household name for different adhesives across India. It is also a major manufacturer of construction chemicals, sealants, polymer emulsions.

Performance of the margins
The gross profits margins of the company increased by 100 bps on a year-on-year basis. The reason for this is contraction in production cost. In contrast to this, the operating margins of the company remain stable around 23.7 percent because of a hike in expenditure on advertisements and promotion (A&P).

The company focuses on financing its brand development, improvement and expansion of its manufacturing capacity and distribution network in order to increase production and customer base efficiently.

Performance of different segments
The Consumer and Bazaar is the biggest segment of the Pidilite. Its contribution to the revenue of the company is close to 80 percent. In the third quarter of the current financial year, the company recorded a moderate revenue growth of about 7 percent on a year-on-year basis. The reason for this is muted consumer demand.

On the contrary, a remarkable revenue growth of about 21 percent was recorded in the business to business segment. It was influenced by the positive project operations. As the prices of inputs become stable, the difference between the number of products sold and the amount of revenue earned narrows in the third quarter. The total growth in terms of volume for business to business segment was about 22 percent and consumer and business segment was about 7 percent.

Factors influencing performance
The demand in rural areas is persistently overshadowing the performance of urban demand during the last three years. The reason for this is putting efforts to educate craftsmen and customers about Pidilite and its products. One of the initiatives by Pidilite is known as ‘Pidilite ki Duniya.’

The company’s products such as floor coats, wood finishes, and tile adhesives are gaining momentum. It helps the company to strengthen its position in the market.

International performance
Its operations at global level recorded a slight growth in the third quarter of the financial year 2025. It is majorly because of rising inflation, growing political instability in some parts of the world and also rising uncertainty in the economy at global level. Despite the scenario of uncertainty, there are indications of revival in segments such as pigment and pigment emulsions. This segment has finally recorded robust demand growth compared to the muted growth for some years.

Domestic Performance
The subsidiaries of the company registered a revenue growth in double digit form. Its operating margins were also good. However, the company is facing the pressure of consumer demand. The reason for this is weak growth in real wage and rise in food inflation levels. Though, it is anticipated to relieve in the upcoming two quarters. Along with this, some construction projects are slowdown in some major metropolitan regions. The demand is low in some states of India such as Kerala and Gujarat. In the midst of these challenges, the company uses 3 to 5 percent of the revenue amount in the advertisement and promotion segment. Apart from this, Pidilite is also focusing on developing the supply chain for the future requirements.

Change in VAM price
Vinyl Acetate Monomer (VAM) is an important input material for production of adhesives. In the third quarter, the price of VAM was about 884 dollars per tonne in relation to 902 dollars per tonne in the previous year of the same period. As per the management of Pidilite, prices of VAM are anticipated to not change much in the fourth quarter of the financial year 2025. It has taken into consideration uncertainty in prices of crude oil and currency.

New Opportunities
In the second quarter of the financial year 2024, the company bought Pargo Investment at a worth of Rs. 10 crore. It marked the company’s entry into the credit business. It aims to give loans to small businesses working in its network. It has already got its regulatory approval and licence. The company has also issued its first credit in the initial period of the current financial year. The performance of this business will be observed in the upcoming few quarters. It plans to inject close to Rs. 100 crore for its credit business in the duration of upcoming 2 years. The goal of the company is to aid its dealers and contractors’ operations.

The company also marked its entry in the interior decorative paints segment by establishing Haisha Paints in the first quarter of the financial year 2024. The company is using its distribution networks in states such as Odisha, Andhra Pradesh, and Telangana to create its presence in the decorative paints market in small towns (with tier 3,4,5). Despite being a new operation, it is able to record remarkable profitability and volume growth in the past 12 months.

Projection
Pidilite has given an impressive performance in all its product categories, in spite of moderate customer sentiment. In present times, the company’s valuation is 65 times higher than its projected earnings for financial year 2026. High valuation and subdued consumer demand may restrain growth of stock in the upcoming medium term.

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Visteon Invests $10M in India's Camera Manufacturing!
Equities, Markets - January 24, 2025

Improvement in BFSI segment of IT firms is a positive light in the midst of unpredictability due to Trump 2.0

Improvement in BFSI segment of IT firms is a positive light in the midst of unpredictability due to Trump 2.0

The recent third quarter financial results of many IT companies in India are overshadowed by the beginning of the Trump regime in the USA. In the initial three weeks of the month of January 2025, the performance of NSE IT index was worse than the performance of Nifty 50. The reason for this is growing uncertainty in relation to geopolitical tensions and changes in immigration policies. Despite this, investors can expect a good situation due to gradual enhancement in the banking financial services and insurance (BFSI) sector and also due to expansion in discretionary expenses.

Performance of BFSI
The revenue growth in the BFSI segment in the third quarter of the financial year 2025 was better for companies such as Infosys, Tata Consultancy Services (TCS), and Wipro. In contrast to this, the revenue growth in the BFSI segment for HCL Technologies was falling at a slow rate in the third quarter of the financial year 2025, indicating progress in the operations of the company. The CEO of the HCL technologies, Vijayakumar stated that the company is recording progress in customer spendings in regard to financial services.

After the declaration of financial results of the companies, several companies’ management hinted about gradual progress in business deals and also an increase in discretionary expenses in the BFSI sector. The CEO of Wipro, Srini Pallia stated that the company expects for the budgets of the BFSI sector to expand slightly in the future.

The ISG Index highlights the performance of commercial outsourcing deals having worth of more than or equal to 5 million dollars. In the recent data of ISG index for the December quarter, it showed enhancement in contract rewards. In the quarter of December 2024, BFSI annual contract value for the America region (comprising the US) recorded a hike of 21 percent compared to the same period from the previous year. The president of ISG, Steve Hall, signals that there are positive trends in the BFSI segment of the managed services. The reason for this is due to the rise in the rate of discretionary expenses.

In the initial time period of the year 2024, there was a fall in customer spending but now the BFSI segment is coming back to health. In the third quarter of the financial year 2025, TCS company recorded a modest growth on a year-on-year basis in the BFSI segment compared to slow down in growth for about a year. Earlier Tech Mahindra had a small existence in the BFSI segment. However, now the company is anticipated to enhance its progress in financial services under the guidance and perspective of the new CEO of the company.

Impact of the improvement in BFSI
It will aid in the performance of IT firms in the upcoming period. Though, the improvement in total revenue growth is dependent on progress in other operating segments as well. Factors such as monetary policies of the government and stable macroeconomic conditions will play an important role in the improvement of the sector.

Importance of BFSI segment in IT services
The BFSI segment is the biggest contributor in the IT companies on an international level. In India, it is the largest operating segment for major IT firms. The major companies like Wipro and TCS recorded revenue growth in the BSFI segment in the range of about 32 to 33 percent in the financial year 2024-2025. While the growth in BFSI segment for Tech Mahindra was recorded around 16 percent. In the same period, the revenue growth in the BFSI segment for IT firms such as HCL was 22.1 percent and 27.4 percent for Infosys.

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Contraction in Banking Stocks to around 6 percent due to RBI's repo rate cut
Equities, Markets - January 24, 2025

Fed Holds Steady: Rates Unlikely to Drop Amid Policy Uncertainty

Fed Holds Steady: Rates Unlikely to Drop Amid Policy Uncertainty

Overview
The bond manager’s investment chief predicts the US central bank will hold off on making cuts until it has more information about Trump’s policies. According to bond fund behemoth Pimco, the Fed is prepared to leave interest rates steady “for the foreseeable future” and may even raise borrowing costs while central bankers wait for clarification on Donald Trump’s objectives.

Market Commentary on Fed Rate Cuts
According to Ed Yardeni, President of Yardeni Research, this strategy is anticipated to maintain the dollar’s strength due to significant inflows into US capital markets and competitive bond yields. Although market optimism was bolstered by Fed Governor Christopher Waller’s recent remarks regarding inflation approaching the target level, Yardeni rejected the possibility of further rate decreases in the near future.

The chief investment officer of the $2 trillion asset management, Dan Ivascyn, stated that he anticipated the US central bank to maintain stable interest rates until there was more clarity either on the data front or the policy front.

Ivascyn’s comments coincide with a Wall Street discussion concerning the Fed’s rate-cutting cycle’s future due to worries that increased inflation could be exacerbated at a time when the US economy has shown more resilient than anticipated if Donald Trump implements his plans to impose sweeping tariffs. According to Ivascyn, several of the new regulations have the potential to have a very favorable long-term impact on productivity and growth. He also mentioned that there was a conflict between what would make sense in the long run and what might put some strain on things in the short term.

Ivascyn cited a number of recent polls that indicated a rise in consumers’ inflation expectations, which is sometimes a leading indication, to support his claim that rate hikes were undoubtedly feasible but not in his baseline scenario. Pimco has been boosting its exposure to government bonds in order to capitalize on the strong yields available, according to Ivascyn. Further, Ivascyn said that a positive outlook for fixed income is not based on the Fed making further cuts.

Fed unlikely to alter Rate Cuts
In December, Fed chief Jay Powell stated that inflation was trending sideways and labor market concerns had decreased, indicating that the central bank would likely be more cautious about rate reduction this year. Additionally, he pointed out that some officials have started to factor Trump’s proposed policies into their projections.

Fed policymakers are anticipated to hold off on raising rates until at least the summer when they meet for the first time this year on January 28–29. The Federal Open Market Committee is unlikely to lower interest rates on January 29. According to the CME FedWatch Tool, fixed income markets presently forecast a 99.5% chance that interest rates will remain unchanged at their current level of 4.25% to 4.5%. Interest rate cuts in March or May are still feasible, though. At one or both of those meetings, the odds are about equal.

According to the employment data for December, job creation has remained strong. The job market remains strong, according to Federal Reserve Governor Lisa Cook, who stated this on January 6. The unemployment rate is still low, and Americans are generally earning wages that are increasing more quickly than inflation. Although it was made a few days prior to the latest jobs report, this remark largely echoed its analysis.

Perhaps the strength of the labor market reduces the pressure on the FOMC to lower interest rates. However, December’s CPI inflation statistics, which was released in January, revealed that inflation was still lower than some had anticipated. In the end, that might help the FOMC lower rates in 2025 if inflation seems to be on track to reach 2% annually. Numerous measures of inflation are more in line with an annual rate of 3%.

Treasury Yield to increase in future
The 10-year Treasury yield is now trading at 4.5% after falling to about 3.6% in September due to a sell-off in US government bonds fueled by the more hawkish outlook. Ivascyn also cited high equity valuations and cautioned that stocks would be impacted by a further increase in Treasury yields.

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Interest Payment Burden to reduce in FY26
Equities, Markets - January 24, 2025

Role of upcoming budget to enhance economic growth

Role of upcoming budget to enhance economic growth

Overview
Following the Covid-19 pandemic, many countries in the world suffered from aggressive contractionary monetary policy, high inflation levels, and constant geopolitical issues. In the midst of this scenario, India’s growth was a silver lining. The reason for this robust growth was government expenditure on the country’ infrastructure was unparalleled. It resulted in India recording the highest growth levels for each quarter compared to other major countries in the world. This trend went on for many quarters till the second quarter of the financial year 2025.

India recorded a 5.4 percent growth on a year-on-year basis in the September quarter of the financial year 2024-25. It was the most moderate growth in the period of the last two years. The Finance Ministry of India and Reserve Bank of India stated that the slump in growth is just temporary in nature and not a long-term shift of the economy towards moderate growth levels. Despite this, the scenario shown by the earning reports of the third quarter of non-financial firms was falling for the third quarter in a row. The only exception to this pattern was some of the big companies.

Due to this gloomy situation prevailing in the market, different segments in the economy are expecting a thrust from the Union budget for the economy of the country.

Factors needed for the economic growth
To boost economic growth, a country needs to fulfill the four factors of GDP which is investment from both public and private sector, net export levels (difference between exports and imports) and consumption.

After the Pandemic, the economic growth in India is strongly pushed by government expenditure. However, channels of government expenditure have crossed way beyond their capacity. In recent times, government expenditure is declining which has resulted in a decline in growth levels. In the second quarter of financial year 2025, the growth in investment by the government was just 4.4 percent. Looking at this situation, it is time for private sector investment to step in to promote economic growth in the country.

The export levels in the country are suffering from moderate growth. In the second quarter of the financial year 2025, the export growth fell to 2.8 percent year-on-year which is the most significant hindrance to economic growth. In contrast to this, the growth of consumption level in the same quarter was 6 percent year-on-year increasing. Also, the anticipated household consumption growth for this financial year is about 7.2 percent. In India, household consumption levels have more than half of the share in the growth of its GDP.

Despite this good situation in consumption levels, it certainly has its own issues too. After the Covid-19, the urban demand was high for a long period of time and now it has lost its breath. While, the major part of consumption level is contributed by increasing rural expenditure levels in the latest quarters. The rural expense has increased due to factors such as some government schemes (like MGNREGA) and favorable monsoon season.

To have robust economic growth in India, the government needs to encourage private investment, a push to export levels and strong urban demand.

Role of Budget
Tax relief is one of the important measures that the government of India is anticipated to take in order to encourage urban demand in the country. The contribution of personal income tax was about 53 percent in the total direct tax collection of the government in the financial year 2024. It showed that people pay more taxes compared to tax paid by companies. It is also important to consider the truth that about three percent of the population in the country gives taxes. It is quite concerning in terms of tax pressure on the people paying taxes. Taking this scenario in consideration, it is anticipated that the government will raise the exemption limit on earnings, providing high standard deduction, adoption of medical insurance deduction (Section 80D Deduction) in new tax policy, increase the limits on investments and saving on which tax deduction is allowed (Section 80C Limit), and make income tax brackets fairer.

In the case of private investment, the investment levels are quite inconsistent. Despite this, many new technology industries are growing with the help of government actions. This kind of support is anticipated to remain in future as well. However, government stimulus is constantly changing. For instance, initially the government of India was focusing on incentivising swapping of batteries but now it is focusing on creating more charging infrastructure. It is difficult to identify which incentive will perform well in the economy. However, it is important to understand that all the attempts of the government are focused on promoting these new technology industries.

Apart from this, many industries in the country are anticipating a fall in interest rates in the month of February and also rise in demand levels. In present times, these industries are working with high production capacity. They have high cash levels but not using it to invest in new plans. The reason for high cash is raised through various channels, particularly through IPOs in the year 2024. When consumption levels in the country will be raised then companies will start to use their cash. Also, they will go for loans in case of favorable stock market situations and fall in interest rate in the economy. However, these actions of the industries rely on the condition that consumption demand needs to rise.

Focus on fiscal consolidation
The government of India needs to focus on fiscal consolidation. In the current financial year, it should keep the fiscal deficit in the range of 4.9 percent and below 4.5 percent in the upcoming financial year. It would lead to financial reliability in the current situation of uncertainty.

In conclusion, the government of India needs to focus on tax reliefs and investment leading to creation of economic growth in the long term, along with focus on fiscal consolidation.

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