Interest Rate Sensitives Outperform
The Reserve Bank of India’s Monetary Policy Committee (MPC) in its latest meeting maintained status quo on repo and reverse repo rates along with an accommodative stance.
Both the automotive and fast moving consumer goods’ categories experienced setbacks due to semiconductor shortage and less active ‘kirana’ stores, respectively.
Indian frontline equity indices Sensex and Nifty 50 gained 2.94 per cent and 2.85 per cent respectively during the fortnight. Meanwhile, BSE Mid-Cap and Small-Cap indices outperformed the broader markets by climbing 3.46 per cent and 4.24 per cent. The Reserve Bank of India’s Monetary Policy Committee (MPC) in its latest meeting maintained status quo on repo and reverse repo rates along with an accommodative stance. The committee has said that it is open to a soft landing from ultra-loose monetary policies if price pressures and global spill-overs were to threaten financial stability.
RBI Governor Shaktikanta Das while announcing the bi-monthly policy decision has also said that the reduction of excise duty and VAT on petrol and diesel will bring about a durable reduction in inflation by way of direct effects as well as indirect effects operating through fuel and transportation costs as well as easing of supplies and prospects of good crop. The RBI has kept the projection for retail inflation at 5.3 per cent for the current fiscal, i.e. 2021-22.
According to data available with the industry body Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales in November 2021 fell 18.6 per cent to 2,15,626 units as compared to 2,64,898 units in the year-ago period. This is the third straight month that passenger vehicle sales have contracted despite strong demand in the local market as the global shortage of semiconductors continued to limit production across automakers including market leaders Maruti Suzuki and Hyundai Motor India. BSE Auto index ascended by 3.19 per cent over the fortnight.
According to data by Bizom (a retail intelligence platform), fast-moving consumer goods (FMCG) sales growth were down 14.4 per cent in November 2021 compared to October 2021, largely due to a drop in the number of active ‘kirana’ outlets as well as stock liquidation post Diwali. However, on a year-on-year basis, sale of consumer goods was up 10.4 per cent. Active kirana outlets contracted 6.1 per cent and monthly sales per active kirana outlet were down 8.8 per cent in November 2021. During the fortnight, BSE FMCG index gained 1.85 per cent.
Buoyed by a strong pick-up in demand, India’s manufacturing activity grew at the fastest pace in 10 months in November 2021, as per the seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI). Increasing from 55.9 in October 2021 to 57.6 in November 2021, the index signalled the strongest improvement in the sector. The survey pointed out that businesses were indeed worried that inflationary pressures could hamper demand and production in the year ahead. The survey was conducted before the emergence of the Omicron variant; hence the data does not completely capture the possible increase in risk perceptions.
India’s services sector activity expanded at the second-fastest pace in more than a decade during November, driven by sustained rise in new work and improvement in market conditions. The seasonally adjusted India Services Business Activity Index stood at 58.1 in November 2021, fractionally down from 58.4 in October 2021. Meanwhile, the corona virus pandemic and travel restrictions reportedly caused a further drop in international demand for Indian services. Trading data shows that during the fortnight DIIs were net buyers to the tune of Rs 25,956.55 crore and FIIs were net sellers to the tune of 14,979.56 crore.
