Banks Might Need To Adjust Their Lending Rates; IPOs of Indegene, TBO Tek and Aadhar Housing Finance are set to be launched next week to raise Rs6,392 crores
Mahavir Lunawat,
Managing Director,
Pantomath Capital Advisors
Mumbai, May 4, 2024: This week commencing 28th April, 1 mainboard IPO of JNK India makes stellar market debut, lists with 50% premium over issue price.
Primary Market Update:
Since 2004, there hasn't been a single IPO launch during the month of May in the last four General Election cycles. Typically, the period from April to June during these years has been slow for the primary markets due to election uncertainty. However, this trend is expected to change now as, 3 mainboard IPOs of Indegene Limited, TBO Tek Limited and Aadhar Housing Finance are set to be launched next week to raise 6,392 crores.
Indian Market Update:
Indian market remained positive for the week & Made a life time high levels during the week. It made a high of 22782.30 levels on nifty. India's core sector growth eased to 5.2% in March 2024 from 7.1% in preceding month. The slowdown in sectors like steel, fertilizers, and refinery products, alongside robust growth in cement and electricity, indicates a mixed industrial performance. The IMF has upgraded India's economic growth forecast to 6.8% for FY25, driven by robust public investment. In April, India's GST collection reached a record ₹2.1 lakh crore, up 12.4% from ₹1.87 lakh crore the previous year, driven by a robust 13% increase in domestic transactions indicating strong local demand. It signifies the overall momentum in the economy and the effectiveness of the tax collection system. India's forex reserves stood at $640.33 billion as on 3rd week of April.
Auto sales in India increased by about 2% to 338,341 vehicles in April, up from 332,468 in the previous year, driven by strong demand and improved stock availability post-semiconductor shortages. Indian banks are currently seeing loan growth at rates of 17% to18% for private sector banks and 12% to 14% for public sector banks, which exceeds deposit growth by 2 to 3 percentage points. Due to this discrepancy, banks might need to adjust their lending rates. S&P Global Ratings predicts that loan growth will need to decrease from 16% in FY24 to around 14% in FY25 to align better with the slower deposit growth rates, ensuring sustained financial health and profitability within the sector.
Mumbai recorded its highest-ever stamp duty collection at Rs 1,047 crore and over 11,475 property transactions, marking a 16% year-on-year increase, in April. This surge in property registrations, driven by strong demand and positive market sentiments, significantly boosted state revenue and underscored the city's robust real estate market despite challenges like rising mortgage rates
Global Market Update:
US market remained volatile & traded in thin range for the week. In March and April 2024, the US economy displayed a mix of strengths and weaknesses, highlighted by varied economic indicators. On the positive side, personal spending rose by 0.8% in March, driven by a significant 1.3% increase in spending on goods like gasoline. Personal income also grew by 0.5%, supported by dividends and steady wage growth, which bodes well for future consumer spending. However, the US faced economic headwinds as the S&P Global US Composite PMI dropped to 50.9 and the Manufacturing PMI decreased to 49.9 in April, indicating marginal growth and contraction respectively, due to declines in new orders and employment. Moreover, GDP growth for Q1 CY2024 slowed to 1.6%, well below the forecasted 2.5%, hampered by lower consumer spending and negative inventory contributions. Inflationary pressures also persisted; the core PCE price index escalated to 3.7% in Q1CY24, up from 2% the previous quarter, and the overall PCE price index rose by 0.3% in March, driven by a 0.4% increase in service prices and a slight 0.1% rise in goods prices. These figures reflect ongoing challenges in managing inflation and economic volatility in the manufacturing sector.
FED Monitory Policy meet ended this week. The Federal Reserve held its funds rate unchanged at 5.25%-5.50% and acknowledged the lack of progress in tackling inflation, as largely expected. During the press conference FED governor Powell struck a less hawkish tone than expected, ruling out the possibility of a rate hike in the June meeting. The central bank acknowledged that inflation is still high and do not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.
Brent crude oil prices witnessed profit boking & trading near $84 per barrel, influenced by speculation that the U.S. might replenish its strategic petroleum reserves, targeting purchases at or below $79 per barrel. Despite this, prices remain close to 7-week lows, primarily due to reduced geopolitical risks following progress in ceasefire talks between Israel and Hamas and an unexpected rise in U.S. crude inventories, which increased by 7.3 million barrels last week against a forecasted decline. Additionally, a significant increase in U.S. crude production, the sharpest monthly rise in nearly three-and-a-half years, has contributed to profit booking in the oil market.
