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  • India's Forex Reserves Declined by $2.16 bn to $584.24 bn (And we still don't care)

India's Forex Reserves Declined by $2.16 bn to $584.24 bn (And we still don't care)

Author

ADITYA SINGH
April 29, 2023

Saturday, April 29th 2023

Good Morning ☕

Welcome to today's news highlights. In the economic front, India's forex reserves have taken a hit, declining by $2.16 billion to reach $584.24 billion. However, there is a silver lining as the output of eight core sector industries grew by 3.6% in March 2023.

In the banking sector, recent reports suggest that India's banks may have it all, except caution. On the regulatory front, SEBI has imposed a fine of Rs 12 crore on Karvy and a penalty of Rs 7 crore on its former chairman C. Parthasarathy. In another development, SEBI has banned five entities in the LIC front-running case.

1. India's forex reserves declined by $2.16 bn to $584.24 bn

India's foreign exchange reserves decreased by $2.164 billion to $584.248 billion for the week ended April 21, 2023, due to the deployment of the reserves by the central bank to defend the rupee amid global pressures. The foreign currency assets decreased by $2.146 billion to $514.489 billion, while the gold reserves dropped by $24 million to $46.151 billion. The Special Drawing Rights (SDRs) increased by $19 million to $18.431 billion, and the reserve position with the IMF decreased by $14 million to $5.176 billion.

2. Output of eight core sector industries saw a 3.6% growth in March 2023

India's core sector output increased by 3.6% on an annual basis in March, compared to 6% in February. While crude oil, power, and cement production declined, the production of coal, fertilizers, steel, natural gas, and refinery products saw growth.

The cumulative growth rate of ICI during 2022-23 was reported at 7.6% compared to the corresponding period of the previous year. The core sector industries have a 40.27% weight in the overall Index of Industrial Production. The decline in March was caused by a drop in output from three sectors: cement, electricity, and crude oil.

3. India’s banks have it all, except caution

Indian banks have returned to profitability and regained investors' trust after spending much of the last decade recovering from a fallout caused by lax underwriting standards on corporate loans. However, recent full-year results have shown a decline in provisions for future loan losses, a trend that could be imprudent. While muted consumer and capital expenditure has resulted in only mild post-pandemic credit recovery across Asia, India has seen double-digit loan growth, which could lead to an increase in delinquencies on unsecured loans. Indian banks will have to pay more to savers, sacrificing high profitability with incremental credit-to-deposit ratio running at 111%. Banks are also warned to be cautious of the quality of their loans to small and medium-sized enterprises, which could weaken asset quality and credit profiles when the economic cycle turns.

4. SEBI Imposes Rs 12 crore fine on Karvy and a ₹7 crore penalty on its former chairman C. Parthasarathy

India's Securities and Exchange Board (Sebi) has imposed a fine of INR 12 crore ($1.6m) on Karvy Broking and INR 7 crore on its former chairman C. Parthasarathy, and banned them from dealing in securities for seven years. Sebi has also instructed two former associate companies of Karvy Broking to return INR 1,442 crore to its clients within three months, and has barred former Karvy directors from holding directorship positions in listed firms. The regulator found Karvy guilty of violating multiple securities market laws, including prevention of fraudulent trade practices and stock broker regulations, after it diverted client funds worth INR 2,300 crore to related entities in 2019.

5. SEBI Bans 5 Entities In LIC Front-Running Case

Securities and Exchange Board of India (SEBI) has banned three individuals and two entities from securities markets for front-running trades in Life Insurance Corporation of India. Among the individuals was LIC's employee Yogesh Garg.

The SEBI order said the entities shall cease and desist from engaging in any fraudulent, manipulative, or unfair trade practice, including front-running. SEBI impounded INR 2.44 crore from their accounts. The entities are directed to provide a full inventory of all assets held in their name immediately. SEBI advised LIC to review its processes and take all necessary additional measures to prevent, detect, and remediate any fraudulent, manipulative, or unfair trade practices by its employees in relation to its investment activities.

6. Xpressbees raises $40 mn from Malaysian sovereign wealth fund Khazanah Nasional Berhad

Indian logistics company Xpressbees has raised $40m from Khazanah Nasional Berhad, Malaysia’s sovereign wealth fund, through a secondary purchase from early investor Elevation Capital. The deal values the company at around $1.3bn to $1.4bn. Xpressbees, which delivers around two million packages daily to over 5,000 cities in India, has recently seen other investors including Blackstone Growth, TPG Growth, and Alibaba Group. Amitava Saha, CEO of Xpressbees, said the investment would help the company become a "dominant end-to-end logistics player".

7. Third G20 tourism meet to be held in Srinagar on May 22

Former State Representative and Senate candidate for 2024, Robert Lancia, has expressed his excitement at being invited to the G20 conference to be held in Srinagar on May 22. Lancia believes the G20 conference in Srinagar will be an opportunity for all stakeholders to come together and discuss ways to promote economic growth and development, create employment opportunities, and enhance the standard of living for the people in the region.

The conference is the first international event to be hosted by Jammu and Kashmir since the abrogation of Articles 370 and 35-A, and will feature delegates from G20 member-states, guest countries, and international organizations.

8. State Bank of India (SBI) raises USD 750 million via bonds

State Bank of India (SBI), the country's largest lender, has raised $750 million through bonds to fund its offshore business growth. The bonds, which have a maturity of 5 years and a coupon of 4.875%, will be issued through SBI's London branch on May 5, 2023, and will be listed on the Singapore Stock Exchange and India International Exchange, GIFT City. The bank received a strong response from investors across geographies, with a final order book in excess of $2.9 billion across 181 accounts. SBI's successful issuance highlights its strong investor base in offshore capital markets, allowing it to efficiently raise funds from the world's leading fixed-income investors, said SBI Chairman Dinesh Khara.

World News 🌎

1. Amazon’s cloud services business to shed around $60 billion from its valuation of $1.126 trillion

Shares of Amazon fell by nearly 5% after the company reported a further slowdown in its cloud services business in April, raising concerns about the growth of its long-time driver. The cloud business, which funds Amazon's investments in other areas, had already slowed in the first quarter to the lowest rate since the company began breaking out unit sales. Analysts were largely optimistic about Amazon's cloud prospects, however, with around 17 raising their price targets on the stock compared to 10 that lowered their view. Amazon is still the clear market share leader in cloud computing, according to CFRA Research analyst Arun Sundaram.

2. US economy grew at weak 1.1 per cent rate in Q1 in sign of slowdown

The US economy slowed to a 1.1 percent annual pace from January to March, as higher interest rates impacted the housing market and businesses reduced inventories. The slowdown reflects the impact of the Federal Reserve's drive to tame inflation, with many economists predicting that it will send the economy into a recession sometime this year. Consumer spending, which fuels roughly 70 percent of the entire economy, has softened, and many banks have tightened their lending standards. Political risks are also growing, with Congressional Republicans threatening to let the federal government default on its debts. However, the strong job market has given Americans the confidence to keep shopping, and the US economy has surprised before.

3. Yen to regain status as preeminent haven currency after years of dollar dominance

According to Barclays Plc, the Japanese yen is expected to regain its status as a safe haven currency after years of dollar dominance as the Bank of Japan (BOJ) normalizes policy and the inflation shock fades. Analysts believe the yen will become stronger as the BOJ considers ending its policy of yield-curve control in the coming months. The yen has recently faced challenges due to higher energy prices and a worsening rate differential, but selling pressures are expected to ease as energy prices fall and the global hiking cycle slows. The BOJ is expected to maintain its policy this week.

4. Singapore takes aim at rich Chinese with 60% property tax

Singapore has doubled property taxes for foreigners in an attempt to address surging money inflows from wealthy Chinese, though the move is unlikely to cool home prices. The new measures include foreigners paying a 60% tax on any residential purchase, while the rate for using an entity or trust was raised to 65%. Singapore's housing market has defied a global slowdown with prices gaining 3.2% in Q1 2023. The new rules will likely affect about 10% of residential property transactions and properties in the S$6m and higher categories are likely to be hit hardest.

5. Here's why First Republic Bank stock fell 50% and wiped over $21 billion in value

Shares of First Republic Bank fell over 50% on Friday after it reported a massive drop in deposits, leading to speculation that regulators may take it over. The bank had already lost more than $100 billion in deposits in the first quarter, after Silicon Valley Bank's collapse stoked concerns about the soundness of other regional banks. The bank has also borrowed heavily from the Federal Reserve and government-backed lending groups, with analysts predicting at least a year of losses. The bank had received $30 billion from larger US banks in March, but they may withdraw their deposits as soon as July.

Shares of First Republic Bank plummeted to a record low amid speculation of a takeover by regulators for the troubled bank. US officials are reportedly in talks to rescue the bank, with the Federal Deposit Insurance Corp (FDIC), Treasury Department and Federal Reserve. The bank has acknowledged that it's engaged in discussions with multiple parties about strategic options, and the government's involvement is helping bring more parties to the negotiating table. However, concerns remain that deposit declines at First Republic could worsen and spark a fresh meltdown in the US banking industry, even as it recovers from the collapse of two regional lenders last month. First Republic's deposits had slumped by more than $100 billion in the first quarter.

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