Market Slump Continues…

The Indian stock market experienced another week of decline🐻, ending on 9 August. This downturn was primarily attributed to profit booking triggered by disappointing US economic data📃, fuelling recession fears. Additionally, the unwinding of the yen carry trade and the hawkish stance adopted by the Reserve Bank of India (RBI) during its recent policy meeting contributed to the bearish sentiment. The BSE Sensex and Nifty 50 were down 1.6% and 1.4%, respectively🌡

Inflation relief!

India’s retail inflation rate dropped to a five-year low of 3.54% in July, marking the first time it has fallen below the RBI’s target of 4% since August 2019🗓️. This significant decline is primarily attributed to decreased food prices, particularly for vegetables, and a higher base effect from the previous year. However, while this offers some relief, the RBI maintains a cautious outlook, projecting inflation to average 4.4% in the July-September quarter and 4.5% for the entire fiscal year (FY25). Factors such as the progress of the monsoon, cereal buffer stocks, and global food prices will influence future inflation trends🔭.  

In the recent monetary policy meeting, the RBI held its repo rate steady at 6.50% for the ninth consecutive time. The lower-than-expected inflation figure raises the possibility of an earlier-than-anticipated rate cut in the future🏦.

In another news…

Steel under pressure

India’s steel industry is squeezed between falling steel prices and rising input costs despite robust domestic demand fuelled by infrastructure spending🧱. The root of the problem lies in China, where excess steel production is being dumped onto global markets at artificially low prices🛣️.

China’s slowing economy and ailing real estate sector have dampened domestic steel demand. Still, the mills continue to operate at high capacity🏗️. In June, China’s crude steel output rose 0.2% over a year ago, while global steel output rose by 0.5%, according to World Steel Association data. This oversupply has depressed global steel prices, including in India💰.

Indian steelmakers are caught in a bind: Strong domestic sales cannot offset the impact of falling export prices and rising raw material costs. The sector’s hope lies in a potential revival of China’s economy, which could reduce the glut of cheap steel exports.

Hindenburg Saga Continues

The ongoing dispute between Hindenburg Research and the Adani Group escalated on 12 August when fresh allegations were levied against the current SEBI Chairperson, Madhabi Buch, and her husband. The short-seller claimed the couple held undisclosed interests in Adani Group’s offshore funds. The Buch family vehemently denied these allegations. 

That’s all the exciting news from last week.

The last leg of the earnings season is underway, with many analysts stating that India Inc. is returning to normal with no commodity cool-off to boost margins💸. Experts anticipate a consolidative trend in the upcoming truncated week. Market participants are expected to closely monitor inflation data📄from India and the US in the coming months.

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