With over 10 deals announced in 2024, the cement sector logged the highest number of pacts, including acquisitions and fresh financial investments, in a single calendar year since 2014, with the combined value of investments over $3.5 billion. During the year so far, 11 deals have been announced, according to Bloomberg data.
Notwithstanding the fact that the country's pharmaceutical (pharma) pricing regulator has allowed a 12 per cent price increase for medicines listed under the National List of Essential Medicines (NLEM) in 2023, analysts and industry insiders predict that the overall domestic pharma industry will only witness a price hike of 5-6 per cent. This is attributed to higher competitive intensity in the market. Krishnakumar V, executive director and chief operating officer (CEO) of Eris Lifesciences, a domestic-focused pharma company, noted that the NLEM segment experienced growth suppression of around 150 basis points due to price reductions during the January to July period this year.
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Marico may buck the industry trend with the fast-moving consumer goods (FMCG) major reporting strong growth and favourable commentary in a weak quarter for the industry. The company reported consolidated revenue growth of 8 per cent year-on-year (Y-o-Y) in Q2FY25. Domestic revenue growth was 8 per cent Y-o-Y with 5 per cent volume growth (4 per cent in Q1FY25).
The government on Wednesday raised the minimum support price (MSP) for paddy by 5.35 per cent to Rs 2,300 per quintal for the 2024-25 kharif marketing season. The hike in paddy support price comes despite the government sitting on surplus rice stocks, but it is significant ahead of elections in states like Haryana, Maharashtra, Jharkhand, and Delhi.
Fast-moving consumer goods (FMCG) companies are expected to witness pressure on volumes in the October-December quarter. However, price hikes will help push up revenues, said brokerages.For India's largest engineering firm, Larsen and Toubro (L&T), the analysts expect a 20 per cent growth in consolidated revenue, and an 8.1 per cent core business Ebitda margin, up 40 bps from a year ago.
Milk supplies could improve with the monsoon, provided the rains are not excessive.
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'Spending by the middle class is limited with a focus on savings. However, there is buoyancy at the top-end.'
The stock of Crompton Greaves Consumer Electricals has shed about 12 per cent since the start of the month due to a muted near-term outlook. Demand slowdown across segments and pre-buying in cooling products in the June quarter are expected to weigh on revenues going ahead. In addition to pre-buying in the preceding quarter, demand conditions are soft on account of lower consumer spending due to inflationary conditions, weakness in rural demand and the fact that Q2 remains a soft quarter after a strong summer.
Cement manufacturers have hiked prices after a challenging Q1FY25, and Q2FY25 (so far) when general elections and seasonal factors cut down on construction activity. The August prices are currently around 3-6 per cent above July 2024 but may not be sustainable in the face of weak demand. H2FY25 may see realisation growth which, if it happens, would drive average operating profit/tonne improvements in H2FY25 over a muted H1FY25.
Petrol and diesel sales in the country fell in July over the previous month as the onset of monsoon chipped away demand in some sectors and restricted mobility, preliminary industry data showed. Diesel, the most widely used fuel in the country, saw consumption drop 13.1 per cent to 6.44 million tonnes from 7.39 million tonnes of demand in June. The arrival and intensity of monsoon weigh heavily on diesel demand in the country and consumption traditionally is lower in July-September than in April-June.
Indian consumers are likely to get respite from rising prices just before the festival season. Some consumer companies, including automakers, have indicated that they are planning to pause price hikes just before demand picks up in August, while keeping a close eye on volatile raw material prices.
The government has readied a big legislative agenda for the Monsoon Session of Parliament beginning Monday even as the Opposition is raring to corner the ruling dispensation over a host of issues, including handling of the second wave of COVID-19, rise in fuel prices and farmers' stir.
The Reserve Bank is unlikely to cut the benchmark interest rate in its forthcoming bi-monthly monetary policy review later in the week as retail inflation is still a cause of concern, and there is a possibility of the Middle East crisis deteriorating further, impacting crude oil and commodity prices, say experts.
Most brokerages are betting that the new government will shift to a policy focussing on boosting rural incomes and consumption since that has clearly been a pain point.
The FMCG industry hopes for a revival in consumption growth in 2025 with some 'green shoots' already visible, after having a challenging year amid escalating input costs and a double-digit rise in food inflation, which ultimately slowed down the pace of the urban market growth in the second half of 2024. Soaring prices of commodities such as palm oil, coffee, cocoa and wheat forced FMCG players to go for a hike of 3 to 5 per cent or resort to shrinkflation by reducing pack sizes and grammage to retain attractive price points, fearing a volume loss.
Agriculture activity, according to recent channel checks by Prabhudas Lilladher, is expected to continue at a strong pace in FY22.
Reserve Bank of India (RBI) is unlikely to cut the benchmark interest rate at its upcoming monetary policy review meeting, taking place soon after the announcement of the Lok Sabha election results, amid inflation challenges, said experts. The Monetary Policy Committee (MPC) may also refrain from rate cut as economic growth is picking up, notwithstanding the elevated interest rate of 6.5 per cent (repo) prevailing since February 2023. The meeting of the Reserve Bank Governor Shaktikanta Das headed MPC is scheduled for June 5 to 7.
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After some enforced slowdown in offtake during April-May 2024 due to elections, the cement sector is looking at a possible demand rebound which may help it to push up prices. The April'24 offtake was muted while May'24 saw some improvement with a likely 5-6 per cent rise in demand month-on-month (MoM). In June, some price hikes seem to have been taken, which suggests more sustained improvement in demand.
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TVS Motor Company met expectations in terms of revenue and posted a strong margin performance in Q1FY25. The key drivers were material cost savings and a better mix. The domestic demand outlook looks good with a rural rebound but geopolitical uncertainties in key export markets may dent overall growth.
The Reserve Bank of India on Friday raised the benchmark lending rate by 50 basis points to 5.40 per cent to tame inflation.
The Reserve Bank of India (RBI) on Wednesday announced to increase the policy repo rate by 50 basis points to 4.9 per cent, the second hike in five weeks aimed at quelling the inflation. The MPC vote was unanimous and has decided to keep stance withdrawal from accommodative, RBI Governor Shaktikanta Das said in a press conference on Wednesday. The decision was taken during a three-day meeting of the RBI's Monetary Policy Committee (MPC) to review the interest rates in the country. The MPC voted unanimously to increase the policy repo rate by 50 bps to 4.90 per cent," Das said.
Online sports platform Mobile Premier League has laid off around 350 people or about half of India team to cut down on expenses and bear the burden of increased GST of 28 per cent, according to an internal company email. The GST Council has decided to levy a 28 per cent GST on online gaming and casinos on the face value of bets at the entry level. The Centre will bring amendments to the Central GST law in the ongoing monsoon session of Parliament, following which states will pass the amendments in their respective assemblies to pave the way for the introduction of changes in the law by October 1.
If you are bullish on the consumption theme, consider specialised mutual funds that focus on this theme. Remember that such sectoral mutual funds should not make up more than 5% to 10% of your equity portfolio.
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Hero MotoCorp, a major player in the two-wheeler market, has seen a 9 per cent rise in its stock since the beginning of the month. This increase, driven by the largest motorcycle company by volume, is attributed to expectations of a revival in rural sales due to normal monsoons, government measures to boost consumption, recent market share gains, and a large valuation discount compared to peers. In the near term, the company's volume performance and growth trajectory, particularly in rural markets and entry-level segments, are expected to be key drivers.
Britannia Industries reported revenue growth of 4 per cent year-on-year (Y-o-Y) in Q1FY25 and volume growth of 8 per cent implying price trends were adverse. Other operating income jumped 195 per cent, due to the incentive received for the Ranjangaon plant. The non-biscuit portfolio (rusk, cake, bread) remained key to growth and contributed 25 per cent of the total revenue.
'There is no immediate threat to the government, and they would prefer the growth agenda.'
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Even as cement companies continue to announce ambitious expansion plans, analysts turn cautious over the sector as incremental supply is expected to coincide with a weak demand growth period, and other headwinds of higher fuel costs, weak monsoons and general elections. In August, JSW Cement said it will take its current 19 million tonnes (MT) capacity to 60 MT in the next five years. The country's top producers have massive expansion plans underway - UltraTech Cement targeting 200 MT, Adani Cement aiming for 140 MT and Dalmia Cement planning for 110-130 MT.
Auto industry volumes have grown by 2.5 per cent overall, led by domestic sales of three-wheelers, two-wheelers and passenger vehicles (PVs) in the first quarter of this financial year. Analysts predict an 18 per cent growth in revenues for automotive original equipment manufacturers (OEMs) and profit growth of 69 per cent year-on-year (YoY). However, on a sequential basis, a decline in revenues as well as earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins is expected.
'If rate cuts happen, bond yields will come down and investors will make mark-to-market capital gains on them.'
The move came a day after Parliament approved two agriculture sector-reform bills which have been bitterly opposed by the opposition parties like Congress and TMC.
With another quarter of steady growth in demand, cement companies are expected to report strong year-on-year (Y-o-Y) growth in earnings, according to analysts. The September quarter (Q2FY24) also witnessed a resumption of price hikes in certain markets. UltraTech Cement, India's largest cement producer, reported a 15 per cent Y-o-Y increase in cement sales in the country for the quarter under review.
Elevated food price-led inflation could become a sore point for markets, which they seem to be ignoring at current levels, observe analysts. Retail inflation in India - as measured by the Consumer Price Index (CPI) - came in at a three-month high of 6.52 per cent in January 2023, compared with 5.72 per cent in December and 5.88 per cent in November 2022. The inflation print for February, according to Madan Sabnavis, chief economist at Bank of Baroda, will be critical for the Reserve Bank of India's monetary policy committee.
Earnings growth, attractive valuations and change in FPI flows from negative to positive over the next 12 months are some of the key triggers for an upside. "A poor monsoon, high inflation and further rate hike are some of the key risks
