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NATO Eases Defence Spending Demand Following Spain's Objection to 5% GDP Commitment
Equities, Markets - January 24, 2025

India's Debt-to-GDP Ratio: Balancing Growth and Fiscal Prudence

India’s Debt-to-GDP Ratio: Balancing Growth and Fiscal Prudence

Overview
Since governments in both developed and emerging nations provided varying degrees of fiscal stimulus following the Covid epidemic, sovereign debt as a percentage of GDP has been a hot topic of discussion worldwide. In developed countries like the US, the debt-to-GDP ratio has risen to unmanageable levels notwithstanding the rollback of stimulus measures. India’s ratio needs to be watched even though it is low when compared to its immediate developing market rivals.

FRBM Act target not achieved
According to Barclays, since the peak of the pandemic year, the central government debt to GDP ratio has remained at about 60%. That is significantly more than the 40 percent threshold set by the Fiscal Responsibility and Budget Management Act (FRBM) to be met by FY25.

The goal set by the FRBM Act was for the total debt of the central and state governments to reach 60% of GDP by 2024–2025, with the central government’s debt standing at 40%. Following the pandemic, the FRBM targets were halted, necessitating an increase in government spending to bolster the economy.

Fiscal Deficit to reduce Debt
In her budget address last year, Finance Minister Nirmala Sitharaman stated that starting in 2026–2027, the fiscal policy will aim for a fiscal deficit that would assist in the debt’s downward trajectory. Although no specific goals were stated, the idea is that the amount of government debt must decrease. After all, the current administration has repeatedly emphasized the importance of economic restraint and prudence.

To reduce debt to 40 percent of GDP from the present 57 percent is a tall task and is unlikely to be achieved in a handful of years. Indeed, the need to boost spending, be it capex or revenue towards slowing sectors, has emerged yet again. With the economy facing a cyclical slowdown, the pressure of the government has increased to lift consumption through measures that would force the government to forgo tax revenue.

External Debt on the rise
According to the Finance Ministry, India’s external debt increased 4.3% from June 2024 to $711.8 billion as of September of this year. The external debt was $637.1 billion at the end of September 2023.

According to India’s Quarterly External Debt Report, the country’s external debt was $711.8 billion in September 2024, $29.6 billion more than it was at the end of June 2024. Further the report highlights that the external debt to GDP ratio was 19.4% in September 2024 compared to 18.8% in June 2024. With a proportion of 53.4% of India’s external debt as of the end of September 2024, the US dollar-denominated debt was still the highest, followed by the Indian Rupee (31.2%), Japanese Yen (6.6%), SDR (5.0%), and Euro (3.0%).

It stated that both the general government’s and the non-government sector’s outstanding external debt rose from June 2024 to September-end 2024. According to the report, loans accounted for the highest portion of foreign debt (33.7%), followed by currency and deposits (23.1%), trade credit and advances (18.3%), and debt securities (17.2%). Further, debt servicing (principal repayments plus interest payments) accounted for 6.7% of current receipts at the end of September 2024, up from 6.6% in June 2024.

Market Opinion
Speaking about the impending Union Budget and India’s overall economic prospects, Nadir Godrej, Chairperson of Godrej Industries Group, says that although a budget deficit may appear worrisome in the near term, it need not be detrimental if it fosters growth. In an interview with Siddharth Zarabi, Editor of Business Today, at the World Economic Forum in Davos, he stated that the debt-to-GDP ratio is the most important indicator to keep an eye on since it shows the nation’s total debt in relation to its economic production.

According to Godrej, India’s debt-to-GDP ratio would improve and worries about the sustainability of its debt would be allayed if the country’s economic growth rate rose from the anticipated 6.7% to 9%. According to him, if a budget deficit is properly employed to spur growth, then a certain amount of it is acceptable.

Godrej emphasizes the value of government capital spending, despite the fact that it could seem excessive at first. According to him, even if these expenditures may appear high up front, they produce worthwhile assets (such as public facilities, energy infrastructure, and roads) that will pay off later on, increasing productivity and stimulating the economy. Government investment on infrastructure and other long-term initiatives that support the expansion of the economy in the future is referred to as capital expenditure.

Conclusion
What is heartening is that fiscal deficit is likely to reduce to 4.5 percent of GDP for FY26 but that is a job half done. Financing this deficit in a way that does not require the government to borrow large amounts from the bond market is critical towards reducing the debt load. This is where it gets tricky for the budget.

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Impact of Trump 2.0 on Indian Equity Market

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India: Infrastructure Set to Outpace IT as the Growth Engine
Equities, Markets - January 23, 2025

Stimulate Economic growth by tax relief, deregulation, and expansion of capex

Stimulate Economic growth by tax relief, deregulation, and expansion of capex

Overview
Chairman and managing partner of EY India, Rajiv Memani stated that to boost economic growth in India, the government of India has to focus on factors such as deregulation of firms, tax relief to population on their personal income, expansion of capital spending, and also improvement in the business-friendly environment in India.

He further states that if the government of India implements these factors, and also raises funds from capital markets or disinvestments, it will help to observe if these factors can be implemented at faster speed to boost economic growth in the country.

Reason for weak economic growth
In recent times, the economic growth has weakened. The reasons for this are seasonal variations in several industries, and uncertainty among investors due to general elections. Apart from this, it is due to a number of geopolitical tensions in the world leading to an impact on pricing of international products. This has ultimately resulted in affecting the growth of GDP in India.

Steps to be taken for boosting economic growth
During the past few quarters, growth of India’s GDP has faced a slumping trend. The country’s annual growth is expected to grow by about 6.4 percent. Also, the budget 2025 is anticipated to have some capital spending plans which will help to boost the investment cycle in the economy and in turn stimulate economic growth of India.

In the previous six months, the lower consumption levels have resulted in slowdown in economic growth. He further states that tax relief in personal income will help stimulate consumption levels in the market. It will give relaxation to economic classes such as the middle-income and lower income population living in urban areas and also to the population living in rural areas. However, the government of India needs to make sure that it fulfills its promise of sustaining fiscal deficit at low levels, while implementing tax relief.

Adoption of ease of doing business and deregulation in the economy will also aid India’s GDP growth. Memani supported this idea with the plans of Trump 2.0 to lower the intervention of the federal government. He also believes that this will become a pattern followed by many countries in the world. He thinks that countries around the globe will take actions to make business easier to operate in the country. In present times, there are many regulations and requirements of approval to operate or start a business. Also, the process of finalisation of capital expenditure plans is also slow. If measures are taken to reduce this, it will help in boosting the economic growth in the country.

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Impact of Trump 2.0 on Indian Equity Market

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Godfrey Phillips India Outshines Peers Amid Sector-Wide FMCG Upswing
Equities, Markets, Research, Result Updates - January 23, 2025

HUL Q3FY25: Muted Growth, Strategic Acquisitions

HUL Q3FY25: Muted Growth, Strategic Acquisitions

Overview
The FMCG (fast-moving consumer products) giant Hindustan Unilever experienced modest volume increase during the October–December 2024 quarter. Despite cost challenges and seasonality, earnings growth was unchanged, and urban demand remained unimpressive.

Q3FY25 Results see a muted growth
For the third quarter that ended on December 31, Hindustan Unilever reported a 19% increase in consolidated net profit. Due primarily to the extraordinary gain realized from the sale of its Pureit business, the company declared a consolidated net profit of Rs 2,989 crore, up from Rs 2,508 crore. Consolidated revenue increased from Rs 15,259 crore to Rs 15,559 crore during the quarter that ended on December 31 of last year. Due to a weak product mix and volume growth that fell short of forecasts, brokers cut their target price on HUL shares.

In Q3FY25, underlying volume growth (UVG) decreased. In some categories, premium segments increased faster than mass segments. Despite a mild winter, the high-margin skin care items underperformed, while the home care (HC) division—the largest segment with lower realization—grew faster than the firm as a whole.

An aggressive development throughout the liquid format and a robust portfolio propelled growth in the resilient category of HC. The product formulation adjustment (soap) is also paying off. Smaller packets sold well through general trade channels in both rural and urban areas, while organized trade expanded by double digits. Pricing and the better performance of major brands drove the rise of oral care.

HUL implemented proactive price increases that limited the erosion of its gross margins even while the prices of tea and palm oil continued to fluctuate. Despite inflationary and mix pressure, the EBITDA margin held up well during the quarter, despite the subdued sequential growth in ad spends.

Disinvestment to boost margins
The recently established B&W (beauty & well-being) category has seen fierce competition from cutting-edge direct-to-consumer firms. Against this backdrop, HUL has announced that it has acquired Minimalist, a high-end brand that operates in the rapidly expanding beauty industry.

For Rs 2,955 crore, HUL plans to purchase a 90.5% share in Uprising Science. The Minimalist brand is owned by the company. In two years, the remaining portion will be purchased. Regulatory clearances are required before the acquisition is anticipated to be finalized in Q1FY26.

Skin and hair care are the specialty of minimalist, and the digital-first company has successfully tapped into the growing wealthy beauty sector, which is one of HUL’s main areas of focus. With an annual revenue run rate of Rs 500 crore, it is among the brands with the quickest pace of growth.

HUL will use complementary skills, such as R&D and innovation, technology, offline expansion, global presence, and cost effectiveness, to expand the brand to greater heights, given the beauty market’s substantial headroom for development (low per-capita spend). The investment is anticipated to unlock growth and margin synergies in the upcoming year and will be a solid strategic match for HUL’s beauty portfolio.

Additionally, HUL announced that it has acquired Vishwatej Oil Industries’ palm business venture. In the long run, the backward integration will lessen the volatility of palm oil prices and enhance the supply of palm oil derivatives, a vital raw resource.

Future Outlook
According to management, the moderate urban trend in the near future is only temporary, while the growth in rural consumption will continue to be higher. The urban market’s growth rate will be influenced by employment levels, food inflation, and real wage growth. If commodity inflation persists, the low-single-digit price increase will continue in the foreseeable future.

HUL’s business foundation will be strengthened by strategic measures that will also influence the company’s future growth trajectory. While cost-cutting measures will support long-term, sustainable growth, divestitures will increase operational efficiency and streamline concentration on core competencies.

HUL will increase its footprint in high-growth beauty markets and take advantage of the secular trend of premium product growth by making a strategic investment in the B&W category. With more releases in the March quarter and increased innovation intensity, the business intends to increase its position in the premium segment by 900 basis points.

Market Sentiment
The stock is currently trading at 51 times its expected earnings for FY26, which is a decent valuation. We believe that a significant re-rating still depends on steady increases in domestic volume growth.

Brokers’ opinions on the massive FMCG company are divided. However, most broking houses have cut their target price for Hindustan Unilever shares after the earnings announcement since they think the company’s short-term prospects will be restrained because of urban weakness.
Reiterating its ‘buy’ recommendation with a price target of Rs 2,675 per share, Emkay Global stated that while the dismal near-term outlook is weighing down on valuations, comparatively stronger execution is projected to help HUL in its medium-to-long term performance.

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Impact of Trump 2.0 on Indian Equity Market

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24% Tariffs: Japan Faces Economic Shockwaves
Business, Equities, Markets - January 23, 2025

Weak Capex result in lesser centre’s spending

Weak Capex result in lesser centre’s spending

Overview
India’s remarkable economic expansion appears to have encountered a roadblock. Along with other factors including the global downturn and geopolitical concerns, the decrease in central government spending is now commonly seen as the primary cause of the weak growth at home.

Further, the government is battling economic issues such as slower domestic growth, rising welfare spending, and the need for consistent capital investment, even as the country approaches the date of the budget presentation, with Finance Minister Nirmala Sitharaman scheduled to present the Union Budget in the Lok Sabha on February 1. A declining rupee, muted economic growth, and increased global geopolitical uncertainty—especially with Donald Trump taking the helm as the 47th US President—will all be factors in the Budget.

Capex over the years
The total amount spent by the center has been declining since FY2021, when it reached a decadal high of 17.7% of GDP. Motilal Oswal Securities Financial Services notes in its study that the Center’s spending is expected to fall to a six-year low of 14.3% in FY2026. Keep in mind that revenue expenditures and capital expenditures (capex) make up the majority of government spending. Even after the general elections, government projects and capital expenditures have not improved, which has worried economists in recent years. As of November 2024, the overall expenditure was 56.9 percent of the Budgeted Estimate (FY2025), which is a two-decade low, down from 58.9 percent in FY2024. Regretfully, even the Center’s overall spending growth in FY2024 has fallen into the single digits (7.7%).

Key Reason for lowered government spending rate
The Center’s capex shortage is the reason for the lower spending. The government has used less than half of the Budget Estimates for capital expenditures between April and November, according to statistics made public by the Controller General of Accounts. Economists emphasize that in order to reach the FY2025 objective of INR 11.1 trillion, the Center’s capital expenditures must increase by 65% year over year between December and March. According to the Motilal Oswal estimate, FY2025’s capital expenditures will be short by almost INR1 trillion.

Budget Expectations
Motilal Oswal believes that capital expenditure loans to the states ought to be connected to their performance indicators, like the welfare-to-capex ratio and capital expenditure accomplishment in relation to budgetary goals. For example, states that prioritize welfare programs (such as monthly stipends) ought to be closely examined prior to being granted interest-free loans. It said that this will assist solve the Rs 1 trillion capex shortage projected in FY25 and guarantee fiscal prudence.

Simplifying GST slabs and lowering these burdens will increase disposable incomes, as indirect taxes make up over 60% of total tax receipts. According to Motilal Oswal, corporations should either make dividend income tax deductible or go back to previous methods in order to avoid double taxation. Investors may benefit from these actions, which may also increase tax compliance.

According to the brokerage business, increasing household income must come before increasing consumption. Supporting the nation’s second-largest employer, the construction industry, and giving MSMEs non-inflationary aid will help sustainably increase incomes. In order to help MSMEs stay competitive and integrate into the formal economy, Motilal Oswal fought for targeted aid.

Motilal Oswal stated that the government should aim for a fiscal deficit of 4.5% of GDP in FY26 while raising capital expenditures by 10% to 15%, even though revenue growth is slower. A capital expenditure surge is essential for economic momentum because FY25 spending is expected to fall to a six-year low of 14.3% of GDP. Based on CGA statistics, GoI’s capital expenditures decreased by 14.7% in the first seven months of the fiscal year. To achieve the 17.1% annual growth that was anticipated, GoI’s capital expenditures would need to increase by 60.5% in the remaining five months of the fiscal year.

Despite a significant tax cut in 2019, corporate capital expenditures climbed at a mere 8% CAGR from FY20 to FY24. According to Motilal Oswal, policymakers ought to concentrate on establishing an atmosphere that is conducive to sustainable investments, particularly when government capital expenditures are increasing at a 16 percent compound annual growth rate throughout the same time frame.

Conclusion
In the meantime, the private sector is also in a cautious attitude. Corporate concerns about growing input costs and geopolitical uncertainty are also reflected in the slowdown in domestic private investments during the third quarter of FY2025. Additionally, Indian corporations’ weak third-quarter results highlight declining consumption, which may subsequently reduce investor interest.

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Impact of Trump 2.0 on Indian Equity Market

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MRF Q1 FY26: Revenue Up, Profits Down on Margin Pressures
Business, Equities, Markets - January 23, 2025

TATA Motor: Reorganization of the commercial vehicles business prior to public listing

TATA Motor: Reorganization of the commercial vehicles business prior to public listing

Tata Motors aims to list its commercial vehicles business on the stock exchanges in the upcoming financial year. Before listing, the company plans to reorganize its commercial vehicle business into eight different sub-segments.

The company wants to separate operations of commercial vehicles and passenger vehicles. It was made public by Tata Motors in the month of August, 2024.

Reason for separate entities
Its aim is to strengthen financial growth of the company and give both commercial and passenger vehicle businesses a way for independent growth. It also has goals regarding expansion of scope of operations at international level. Further, it aims at resolving the prevailing market issues and bringing value of transparency in progress of the segments.

The reorganization of the commercial vehicle business will be finished before public listing of the company on stock exchanges. This reorganization will aid the operations of commercial vehicles to get better financial strength and progress. It will be capable of handling situations of fluctuation in the truck operations.

Eight Segments in commercial vehicles
The executive director of Tata Motors, Girish Wagh stated that the Tata Motors has recognised eight segments in the commercial vehicles operation based on the customers and market sentiments. All of these segments are currently working on their own.

These 8 segments in the commercial vehicles business are buses and vans, international operations, AI services, truck business, smart mobility, small commercial vehicles, fleet edge, and non-vehicles business which consists of spares, services, and many more. In the truck operation, it includes intermediate and medium commercial vehicles and also heavy commercial vehicles. On the other hand, in small commercial vehicles comes vehicles such as pickups and mini trucks.
The company aims to focus on international business in its upcoming plan of action. It already has its presence in Africa and South Asia. It has a goal of expanding to regions such as the Middle East, ASEAN countries and North Africa. To achieve this goal, it focuses on creation of appropriate products according to needs and preference of the customers in these new areas. Apart from this, establishment of an efficient distribution and financing network for achieving the expansion goal of the company in international markets.

Challenges to the performance of Tata Motors
The company faced several challenges such as deduction in infrastructure expenditure, moderate economic growth, and uncertainty in the market due to elections resulting in fall in sales of bus and truck in the year of 2024.

Based on the Federations of Automobile Dealers Associations’ information, the company’s domestic sales declined to about 5.3 percent compared to its previous years’ sales of about 345,928 units. Also, its contribution in market share contracted to 34.43 percent compared to the previous record of 36.42 percent.

Impact of separate entities
In the last few years, Tata Motors published its financial performance separately for both Commercial vehicles and passenger vehicles operations. Dam Capital’s analyst, Mitul Shah stated that with the public listing of commercial vehicle business, an independent financial report with a separate balance sheet of the entity will lead to more information and better transparency in the functioning of the business. Further, he stated that in case the company gave progress about each segment in the commercial vehicles entity then it will aid investors to make better decisions about the valuation of the stocks and the company as well.

In present times, commercial business of the company has come across various challenges due to slowdown in the domestic commercial vehicle industry and also other challenges prevailing in the market. It steps towards creation of new models according to the needs and preference of consumers, trying new strategies and technologies will aid the company to tackle prevailing challenges and to bring robust improvement in the progress of the company in future.

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Impact of Trump 2.0 on Indian Equity Market

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Govt Raises Agri Credit Target to ₹28 Lakh Cr, But Efficiency Concerns Remain
Business, Equities, Markets - January 23, 2025

Agricultural sector in India anticipates enhancement of rural income in the upcoming Budget

Agricultural sector in India anticipates enhancement of rural income in the upcoming Budget

Overview
Every financial year, the Union budget gives a chance to make improvements in the rural areas of India. Its main purpose is to maintain agricultural productivity, increase the base of various income channels and also expand the overall productivity of rural regions in India.

According to the observations of the FMCG sector, the demand in rural areas is showing positive signs. It is partially because of factors such as sufficient reservoir levels, strong government aids, and also positive monsoon season.

Taking this matter into consideration, the Union Budget 2025 can certainly aim for strengthening of demand and income levels of hinterland areas in India.

Subsidies related to Fertilizers
Fertilizer is one of the important elements in agricultural production. The overuse of chemical fertilizers such as Urea can severely harm the agricultural land as well as its production. The government of India aims at implementation of balanced fertilization of land to enhance productivity in agriculture. To achieve this goal, it has implemented a subsidy known as Nutrient-based Subsidy. This scheme gives incentives to fertilizers which do not use urea as a component. It helps farmers to buy fertilizers at affordable prices. However, recently the amount of funds given for subsidy under this scheme has declined due to the hike in cost incurred on making these fertilizers.

Despite this concerning situation, the government aims to have balanced use of various nutrients in the agricultural land and not completely depend on Urea as fertilizer. It indicates that the government of India will have increased allocation of funds for nutrient-based subsidy in the upcoming budget. Apart from this, the government of India will take more schemes such as Soil Health Card for farmers. It gives info of soil health of farmer’s land and which nutrients are required for the land. It helps to balance use of various nutrients and not completely depend on Urea as fertilizer.

Investors can observe performance of companies such as Paradeep Phosphates and Coromandel International.

The government of India is expected to enhance use of advanced types of fertilizers such as organic and nano fertilizers. The reason for this is to contract the use of chemical fertilizers, enhancement of production, reducing import levels of fertilizers as well as improvement in budget allocated for subsidies.

National Mission on Natural Farming
Under this programme, the government of India decided to encourage about 1 crore farmers into natural farming in a period of two years. It will help in enhancing the health of agricultural land, reduce use of fertilisers and improve agricultural production. It implements this scheme by giving certification and branding to farmers who integrate natural farming.

Increase in production of coarse grains and oil seeds
In the previous years, the government of India focused on making India self-sufficient in terms of production of oilseeds like sesame, sunflower, soybean, mustard, and groundnut. The government has taken initiatives such as providing welfare schemes and minimum support price for encouraging expansion of production of oilseeds and non-wheat products. It is expected that in this year as well, the government will take actions towards expansion of production of these crops.

Other channels of income
The latest NABARD’s report shows that a compounded annual growth rate (CAGR) of about 9.5 percent is recorded as the average monthly income of rural households for the duration of financial year 2017 and financial year 2022. In aggregate terms, the growth in income levels of rural households is around 57 percent. Though it seems good, it is quite below the target set by the government of India of making farmers’ income twice in the same period of time.

In this situation, to improve income levels of rural households, the government needs to focus on other channels of income.

In the past few years, several actions have been taken by the government of India such as white revolution, honeybee-keeping, and blue revolution to improve income levels of farmers. The budget allocated for fisheries increased by a CAGR of 24 percent and allocations of funds for dairy increased by a CAGR of about 20 percent. The initiatives were taken to aid shrimp farming in India by creation of Nucleus Breeding Centres in the previous year.

If the government again takes steps towards enhancement of these segments, then it will possibly have influence on companies such as Apex frozen foods, Avanti and many more.

Enhancement of supply chain of agriculture
The supply chain of agriculture includes logistics, crop insurance, cold storage chains, and agricultural producer markets. The improvement in these components of the supply chain will certainly lead to development of the agricultural sector and rural areas of India. Also, the strong agricultural supply chain aids in mitigating the rise in food inflation recorded in the past few years.

In conclusion, there is a possibility that the government of India will again focus on its previous year plan of bringing resilience and productivity in agricultural sector in India.

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Impact of Trump 2.0 on Indian Equity Market

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Shree Renuka Sugars Q2 FY26: Revenue Holds Up Seasonally, But Loss Widened Sharply as Costs Bite
Business, Equities, Markets - January 23, 2025

US Launches $500B Stargate AI Project, India Eyes Key Role

US Launches $500B Stargate AI Project, India Eyes Key Role

Overview
US President Donald Trump joined Oracle Chairman Larry Ellison, SoftBank CEO Masayoshi Son, and OpenAI CEO Sam Altman on January 22 to announce the establishment of Stargate, a new business aimed at developing AI infrastructure in the nation. Major IT companies will initially contribute $100 billion to the project, which has a target investment of up to $500 billion in the upcoming years. Trump claims that the project will create 100,000 new jobs in the United States.

Stargate Project
The initial funding partners in Stargate include MGX, Oracle, OpenAI, and SoftBank. Stargate’s primary partners are SoftBank and OpenAI, with Altman’s AI lab handling operations and Masayoshi Son’s company handling finance. The chairman will be Son. The primary first technological partners are Arm, Microsoft, NVIDIA, Oracle, and OpenAI. As we finalize definite agreements, we are assessing potential locations across the US for additional campuses, and the buildout is presently underway, beginning in Texas, according to OpenAI.

Opportunity for India by way of Stargate Project
Industry analysts stated on Wednesday that India has a great chance to accelerate its AI objectives by strengthening its partnerships with the United States through the $500 billion Stargate Project, which is the brainchild of OpenAI, Softbank, Oracle, and others. This can be accomplished by utilizing India’s participation in the Indo-Pacific Economic Framework for Prosperity (IPEF) and the Critical and Emerging Technology (iCET) agreement between the two countries—co-developing innovative technologies and expanding its domestic capabilities.

According to Ashok Chandak, President of the India Electronics and Semiconductor Association (IESA), proactive diplomacy, strategic investments, and cooperative approaches will be essential to ensuring that India not only gains from the global advancements in AI but also positions itself as a powerful player in the global AI landscape.

India has the possibility of benefiting from the Stargate Project, even if its main goal is to strengthen US supremacy in the AI ecosystem. Nvidia, Arm, Microsoft, Softbank, Oracle, and OpenAI are just a few of the big businesses that are actively using Indian expertise and already have a sizable presence in India. Chandak went on to say that this gives Indian professionals the chance to work on this enormous project and advance their knowledge of cutting-edge AI technologies.

During the 120-day review process, there is cautious hope that the US administration would take industry input into account and loosen its restrictions on AI exports, particularly with regard to India and other key allies.

Need for AI Policy
Dr. Ajai Chowdhry, the head of HCL and chairman of the National Quantum Mission, said that this endeavor demonstrates the US’s real intention to regulate large language models (LLMs) and keep strong control over AI. There is a need to develop our own AI policy and begin tightly managing our own data if we want to achieve strategic autonomy. Additionally, Chowdhry stressed that we need to create domestic data center hardware since it will become more and more difficult to manage our data in any other way. He went on to say that in order to develop a new AI policy, the government and industry must collaborate.

The first data centers are now being built in Texas as part of the Stargate Project; 20 centers totaling half a million square feet are planned. According to Ellison of Oracle, these centers might enable AI applications that range from sophisticated healthcare solutions to electronic health records.

IndiaAI Mission
An important step towards strengthening India’s AI ecosystem was taken in March 2024, when the Cabinet authorized an allocation of more than Rs 10,300 crore for the IndiaAI Mission. The IndiaAI Mission’s key initiatives, such as the IndiaAI Compute Capacity, IndiaAI Innovation Centre (IAIC), IndiaAI Datasets Platform, IndiaAI Application Development Initiative, IndiaAI FutureSkills, IndiaAI Startup Financing, and Safe & Trusted AI, are expected to be accelerated by this significant financial infusion, which is planned to take place over the course of the next five years. The IndiaAI Compute Capacity, a key component of this endeavor, aims to establish a state-of-the-art, scalable AI computing infrastructure by deploying more than 10,000 Graphics Processing Units (GPUs) through smart public-private partnerships.

The main goal of this investment is to support India’s AI innovation ecosystem by ensuring a systematic execution of the IndiaAI Mission through a public-private partnership approach. The government claims that about 8.6 lakh applicants have signed up for the IndiaAI “Future Skills” program, which was created in partnership with business partners to offer training in line with the most recent standards.

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Impact of Trump 2.0 on Indian Equity Market

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IndiQube Q2 FY26: Scaling Workspace Portfolio as Core Metrics Improve
Business, Equities, Markets - January 22, 2025

IT Firms witness healthiest recovery in Q3FY25

IT Firms witness healthiest recovery in Q3FY25

Overview
After a period of slow growth, the Indian IT sector saw its biggest rebound in Q3 FY25, signaling a dramatic turnabout. The most recent quarter offers fresh hope for the sector with rising revenue numbers, significant deal wins, and indications of a recovery in discretionary spending. The third quarter of FY25 was a turning point, as businesses demonstrated their best recovery in 18 months. Despite the difficulties of a typically bad time characterized by furloughs, the quarter ending December 31, 2024, saw better constant currency revenue, deal wins, and operating margins.

The IT services markets have shown the strongest recovery in the past 18 months, according to these results (Q3FY25). Phil Fersht, CEO of HFS Research, told Moneycontrol that many businesses have begun to increase their investments in AI, data infrastructure, and cyber security since the US market is no longer paralyzed by the election.

Quarter 3: Recovery of the Eurozone
Q3 highlighted the recovery in a few other sectors, including the Eurozone, whereas Q2 focused on the banking, financial services, and insurance (BFSI) vertical and the North American geography. According to Gaurav Parab, Principal Research Analyst at consultancy firm NelsonHall, growth in other sectors has followed the BFSI rebound in prior quarters, as anticipated. Growth in other verticals has also been made possible by the BFSI recovery. This, according to Parab, was due to geopolitical clarity, a clear US mandate, and the settlement of disputes that endangered international stability.

Hiring Trends
There is no longer any doubt about the US’s H1-B visa regulations or whether IT companies would have been negatively impacted. Since they have been recruiting more locals for a while, the big companies, including TCS, Infosys, HCLTech, and Wipro, have stated that they rely very little on these visas. Additionally, the top five exporters of IT services added 10,412 workers over a nine-month period (9MFY25), which represents a cautious recovery after they laid off roughly 57,608 workers during the same period the previous year.

Coming to hiring figures of major tech firms, over 5,000 new hires were added by Infosys in Q3, and the company anticipates hiring over 20,000 new hires in FY26. Further, HCLTech has consistent hiring momentum by adding 2,134 new people to its workforce. Despite a long-term hiring expectation of 40,000 new hires in FY25, TCS saw a drop of 5,370 employees. Speaking of Wipro, although Wipro reduced its workforce by 1,157 workers, the firm placed a strong emphasis on increasing retention and matching hiring strategies to demand. Lastly, business restructuring was the main reason given by Tech Mahindra for their 3,785 employee layoffs.
Thus, across the board, attrition rates were still high but controllable. Hiring is anticipated to increase in FY26 as the demand climate improves.

Discretionary Spending on the rise in Q3FY25
In their Q3FY25 earnings conferences, the leading IT services companies in India stated that they have a “cautiously optimistic” outlook on discretionary spending. Although there were signs of recovery, businesses were hesitant to declare it a full-fledged comeback. Early indications of improvement were seen in discretionary spending overall, as clients resumed investments in particular fields like artificial intelligence, cloud computing, and digital transformation.

According to TCS CEO K Krithivasan, the company is confident that 2025 could surpass 2024 because of certain early indications of discretionary expenditure. TCS’ immediate rival, Infosys, reported increasing discretionary expenditure in industries including financial services and retail in the US and Europe, supporting its enhanced revenue growth estimate. Salil Parekh pointed out that client investments are gradually becoming more optimistic, while the rate is still slow.

Similar opinions were expressed by HCLTech, the third-largest provider of IT services in India, which attributed the increase in discretionary expenditure to customers’ emphasis on efficiency and innovation, especially in Generative AI (Gen AI) and data-driven transactions. However, Wipro is witnessing a gradual but steady recovery in discretionary expenditure. While clients are still cautious, there is increasing momentum in areas related to transformative projects, according to Chief Executive Officer Srinivas Pallia.

High TCV deal wins and management commentary about the increase in discretionary spending are favorable signals, according to Pareekh Jain, Founder, and CEO of EIIRTrend. Additionally, most providers are seeing a steady increase in discretionary demand in particular categories, according to Yugal Joshi, leader of technology services research at management consulting firm Everest Group. Joshi further added that they refer to it as “green shoots” rather than a trend. Although it is more difficult to make a trend from this, discretionary demand typically rises after a decline of five to eight quarters, and the period is nearly over. As a result, clients’ discretionary spending will improve in the future.

The Gen AI Boost
In Q3FY25, generative artificial intelligence (Gen AI) became a major growth driver, progressing from pilot to active client operations deployment. According to TCS, Gen AI revenue increased in Q3 FY25 and made up roughly 10–12% of total revenue last quarter. Infosys’ emphasis on advanced AI skills is demonstrated by the development of more than 100 agentic AI solutions and the expansion of its small language model offerings. More feasible AI use cases were made possible by HCLTech’s approximately 85% cost reduction in the implementation of big language models when compared to early 2023.

Future Outlook
The prognosis for the IT industry is cautiously bullish as companies go into Q4 and beyond. IT majors are setting themselves up for long-term success as discretionary spending appears to be steadily increasing. In FY26, several factors will be carefully examined, including the conversion of big deal wins into actual revenue growth, the expansion of AI-led transformation initiatives, the sustained demand in the BFSI, retail, and healthcare sectors, hiring trends and attrition rate management, and macroeconomic stability in the US and Europe.

The Indian IT industry seems to have made progress, despite ongoing threats like shorter deal cycles and difficulties in emerging markets. The industry may have a significant resurgence in FY26 if the recovery momentum continues.

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Interest Payment Burden to reduce in FY26
Business, Equities, Markets - January 22, 2025

No requirement of capital investment in state-run banks in the Budget 2025

No requirement of capital investment in state-run banks in the Budget 2025

According to the Reserve Bank of India (RBI) regulations, banks in India are required to maintain a Capital to Risk-Weighted Assets Ratio of atleast 11.50 percent. It aims to maintain capital adequacy in the banks in order to fulfill financial commitments as well as to mitigate financial losses. It is to give protection from various risks such as operational risk, credit risk, and market risk.

Most of the public sector banks in India not only fulfill the criteria but also have CRAR of around 16 percent and more as well.

Capital Adaquecy of Public Sector Banks
In the month of December 2024, the Bank of Maharashtra’s CRAR is about 18.71 percent which is the highest record in between all the public sector banks in India. While, the position of lowest capital position is held by Bank of Baroda. It has a CRAR of about 16.26 percent. Even the lowest CRAR fulfills the criteria of RBI’s capital adequacy regulations.

Overall, it indicates state-run banks are not in need of capital financing at this point of time.

Asset quality of Public Sector Banks
In recent times, asset quality of state-run banks is not risky. In the month of September, 2024, their ratio of gross non-performing assets fell to 2.6 percent of the total credits. As per the recent report of RBI’s Financial Stability, it is the lowest record compared to the records of the previous 12 years. While, the net non-performing assets ratio is close to 0.6 percent.

Financial health of Public Sector Banks
The macro stress tests conducted on Public Sector Banks indicates that these banks have the strong capability to tackle stressful situations. In the month of September, 2024, public sector banks’ capital adequacy was about 16.60 percent. It indicates their strong financial health. It also hints that it is improbable for the Union budget 2025 to provide capital financing for state-run banks in India.
Probability of Capital Investment in Public Sector Banks
In the past, the government of India has often taken an initiative of providing capital investment to state-run banks. In the previous 10 Union Budgets of India, the government of India has given capital investment to public sector banks for about three times. The total capital financing accounts to Rs. 3.35 lakh crore.

The main purpose of these capital investments in the state-run banks is to fulfill the regulations. It is also to maintain strong credit growth. It is important to maintain credit growth as it helps to expand the scope of lending to businesses and people. It results in boosting economic growth. This purpose of boosting credit growth is important in state-run banks compared to private sector banks.

Apart from the funding through the Union Budget, state-run banks were able to get capital financing from the Indian government. It got capital investment of about Rs. 20,000 crore in the financial year 2022. In this same financial year, four state-run banks in India got capital financing of about Rs. 14,500 crore in the month of March. This financing was done with the use of pure discount bonds.

The overall financial health of public sector banks indicates that the budget 2025 may not have new capital investment for public sector banks in India.

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Trump Tariffs Push US Inflation to Eight-Month High
Business, Equities, Markets - January 22, 2025

Trump Regime: Opportunities of transformation in the midst of Chaos

Trump Regime: Opportunities of transformation in the midst of Chaos

Overview
On 20th January, 2025, Donald Trump became the US President for the second time. Before taking his oath on Monday, an article was published by the Wall Street Journal regarding Trump not making any statement regarding tariffs matter on his first day of official authority. This resulted in the dollar going down and a hike in US stock futures. This indicated that the investors are relieved. However, he made an announcement of implementation of 25 percent of import tariffs on goods from Mexico and Canada by 1st February, 2025. This led to fall in US stock futures as well as rise in dollar indicating investors are nervous. This whole situation implies the impact of Trump’s news and actions on the markets and also indicates that such uncertainty will prevail in the upcoming 4 years as well. The Indian stock market has also been facing fluctuations since yesterday.

Trend of Crypto Coins
Before his official oath on Monday, he launched a meme coin known as $Trump. The price trend of this coin was quite volatile as first it spiked high and later fell at a rate. The same situation was observed in the crypto coin launched by Melania Trump which is known as $Melania. This overall trend shows how investors need to get ready for a ride of excitement and later nervousness in this uncertain cryptomarket and overall market.

This situation is not actually difficult for US investors as Trump and his allies understand and work for fulfilment of the needs of US investors. In contrast to this, other countries’ stock markets, especially countries like Panama, Canada, and Mexico, have to take cope unaided.

Policies of New Trump Regime
The current uncertainty in the market indicates strong unpredictability of policies implemented under Trump’s regime. Trump has constantly focused on matters such as tariffs, change in immigration policy, and increase in oil production. So far, his actions are aligning with his agendas during election campaigns. His focus has not yet shifted towards China but there is a high chance that it will move towards it. Apart from this, it seems Trump looks at tariff matters from the point of negotiation tool or strategy to gain upper hand. It is possible that he is trying to get compromises from other nations.

Trump’s ideas seem to move towards expansionism. Although, he looks like someone who is only focusing on domestic matters. He is considering taking over regions such as Greenland, Panama Canal, and Canada. It indicates his idea towards expanding territory of the United States as he mentioned about growth in wealth, expansion of territories, in his oath ceremony speech. Trump also seems to admire the work of Willian Mckinley as the US President. The US President William Mckinley took control of regions such as the Philippines and Gaum from Spain, and also Puerto Rico, and Cuba.

Trump believes that the United States is a special country. It should be allowed to do anything it wants, without considering its effect on the other economies in the world. This is also one of the reasons why he wants the country to leave the Paris Agreement, the OECD tax treaty and World Health Organization (WHO).

United States’ Dominance
In the shadows of all his strong speeches, the main purpose is to keep the supremacy of the United Stated in all aspects including dominance in the economy. Currently, China is facing economic issues. Despite this, it is one of the emerging economies in terms of technology hub. Trump’s regime wants to ensure that the United States is no longer in a falling state and it is approaching to become the biggest dominant nation in the world.

Trump looks at China as the biggest competitor of the United States. It indicates that the country’s focus will be on the Asian region. Countries in Asia such as Taiwan and India could possibly play a major role in his strategies. Though, the United States looks at Taiwan as a challenge for establishing its supremacy in the semiconductor industry. Trump also believes that European countries should give fees to the country for protecting them. These countries are highly dependent on the United States and now going through a state of fear that Trump might sign a peace agreement with Russia in regards to the Ukraine situation.

Chaos of Trump’s regime
There is a lot of unpredictability in Trump’s ideas and his actions. He wants to stay away from wars but he was the one who aided the ceasefire in the Gaza region. Currently, China is suffering from an economic situation of capital outflow and deflation. In this situation, it is possible that China will agree with tariffs changes by the United States. Apart from this, there are several conflicts of interest among various groups. The people focusing on strengthening the domestic market have different views compared to ideas of supporters of Trump’s views and outlook of international entrepreneurs like Elon Musk. One of the instances of this situation is the H1-B visa case.

In conclusion, Trump’s regime will surely bring a lot of chaos in the upcoming four years. However, there is a chance of opportunities for reforms in this situation of uncertainty.

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