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Mumbai: Upgrades continued to exceed downgrades during the October-March rating reviews of Indian companies despite a rise in borrowing costs and supply constraints caused by the war in West Asia and the Red Sea crisis.Domestic consumption, demand across several sectors, government spending on public infrastructure, and healthy balance sheets helped in improving credit profiles, rating agencies said. Major rating companies have recorded more upgrades than downgrades, although the pace moderated sequentially.The ratio of upgrades to downgrades, is stabilising at pre-Covid levels. For Crisil, the largest rating company, the ratio improved to 1.79 during October- March of 2023-24, compared with 0.77 in October-March of 2019-20. It was 1.21 in the first half of FY20, before the onset of the pandemic.The ratio for other major rating agencies was above one, although there was a sequential decline, likely due to the base effect. For ICRA, the number of instances of defaults dipped to 5 in FY24, compared with 22 in FY23 and 42 in FY22.108957860"Corporate India's performance in FY24 remained on track, with upgrades continuing to outpace downgrades significantly" said Arvind Rao, head of the credit policy group at India Ratings.Upgrades were driven by sectors such as roads, renewables, construction, auto components, hospitality and education. Export-oriented sectors such as textiles and marine exports saw more downgrades because of global headwinds."Pressures on operating margins are the primary reasons for downgrades," said Somasekhar Vemuri, senior director at Crisil Ratings.For FY25, the credit quality outlook remains positive, driven by domestic demand, low corporate debt levels and tailwinds from the ongoing infrastructure build-out.With capacity utilisation peaking, expected interest rate cuts and deleveraged balance sheets, a broad-based pick-up in corporate capex is in sight. Crisil expects the central bank to cut rates in the second half of this fiscal."Indian corporates have demonstrated resilience amid the lingering global challenges, manifesting in the uptick in the ratio. Their performance is supported by strong domestic demand, enhanced profitability, scaling up and project commissioning of infrastructure projects," said Sachin Gupta, chief rating officer at CareEdge Ratings.In the banking sector, the asset quality of banks and NBFCs has also been at its decadal best with the profitability and the capitalisation indicators expected to remain healthy in the near term. However, a little uptick in delinquencies is expected due to some possible repayment issues in unsecured loans."The key downside factors that could throw a spanner in the works would be how the monsoons pan out this year and how the complicated geopolitical landscape evolves," said K Ravichandran, chief ratings officer at ICRA.

India’s imports from China declined 3% in calendar year 2023 over 2022, the commerce and industry ministry said Monday, adding that exports to both China and the EU rose 7.1% and 2.1%, respectively during the period.The statement comes more than a week after report by the United Nations Conference on Trade and Development (UNCTAD) showed that India’s trade dependence on China and the EU increased in 2023 while it reduced on Saudi Arabia.In its Global Trade Update on March 22, the UNCTAD said that India’s trade dependence on China and the EU increased 1.2% each in 2023 while it reduced 0.6% on Saudi Arabia. Trade interdependence between China and the US decreased further in 2023.“The current observation of increasing India's trade dependence may carry negative connotation. However, detail analysis indicated trade dynamics in favor of India,” the ministry said.India’s imports from EU increased 9.7% in CY2023, it said, adding that India mostly imports capital goods (35% in CY2022) and intermediate goods and raw materials (50% in CY2022) from the EU that are further used as input.The highest increase of import from EU in CY2023 is observed in parts of telephone sets, telephones for cellular networks or for other wireless networks and of other apparatus for the transmission or reception of voice, images or other data which is an input for manufacturing of mobile and smart phones at $2.4 billion in 2023.India’s export of smart phones have risen 98.42% in CY2023 at $14.27 billionfrom $7.19 billion in 2022.“As such, trade dynamics in CY2023 indicated a much more favorable trade performance for India with both EU and China,” the ministry said.

The pressing question on the top of investors’ minds: Will the recent turmoil in small and midcaps, caused by increasing Sebi oversight and regulatory overhang, morph into a manic price correction in the broader space? Or will it be another transient stumble that will subside soon? First, a bit of context on the recent correction, before we dive deeper into those questions. When the year began, there were no signs of any stalling for the stellar run for smallcaps. The one-way run that started in April’23, continued its bullish course well into mid-March until it hit the wall of Sebi strictures. The blow came in the form of stress test prescriptions from Sebi for the small and midcap mutual funds, besides the sudden coordinated actions from RBI-Sebi in stemming the flows into the primary markets. This coming on the top of an unusually strong comment from the regulator on the market level, calling it a froth in the small-cap space, set off a sharp slump in the small and midcap segment. This resulted in the small-cap index crashing by over 14% from the highs it touched in Feb, before making a marginal recovery in the subsequent trading sessions. The index is still down by 8%+ from the peak even after this recovery, reflecting the nervousness in the broader space. Now, the key question that the investors are grappling with is, is this the beginning of another bear cycle in the small and mid-cap markets as happened in 2018? Investors are rightly worried as there is an eerie similarity to the 2018 downcycle. The smallcap index was up by over 58%+ in 2017 when the sharp slide started in 2018. The situation is not far different now with the index up by over 47%+ in the previous year 2023. Valuation multiples are at a historical high across the market segments. But the similarities stop there. In 2018, the market was staring at the prospect of the interest rate tightening cycle and was worried about the consequent macro risk events like the IL&FS crisis and balance sheet issues in the banking sector in general. If one goes back and looks at all past downcycles, one will realize that in addition to expensive valuation, one needs other key ingredients either in the form of macro risk events or a hawkish interest rate environment for sharp price corrections in the broader space. One would find this common pattern across all the down cycles. Do we find such a pattern now? Yes, valuations are indeed expensive across the market segment compared to historical levels. Is that alone sufficient for a sharp price correction? In the current context, two key ingredients that are critical for sharp price corrections are missing in that pattern. The global macro looks resilient with the recessionary risks in the developed world receding convincingly. With the Fed set for multiple interest rate cuts this year, the interest rate outlook is far more benign now. In such a situation, sharp price correction looks more and more unlikely. Having said that, given the expensive multiples in which the broader space is trading, markets are likely to get into a consolidation phase with actions shifting to a bottom-up stock-specific arena, as further upside at the index level may be limited. If one is on the right stock at the right price, it is still possible to eke out decent returns in this emerging scenario of range-bound markets in the small and mid-cap space as the markets are likely to reward stock-specific actions.There is another compelling reason why we believe that the markets will turn stock-specific. It stems primarily from the nature of current economic expansion which is led by investments. The current cycle of expansion looks strikingly similar to the FY03-07 cycle that was propelled by private capex. In that cycle, the investment-to-GDP ratio rose from 27% in FY03 to 39% in FY08 which was close to peak. Investment to GDP then hovered around those levels until it peaked in FY2011. It suffered a decade of decline over the subsequent years to hit a low of 28% in FY2021. From that low, it has now bounced back to over 34% in FY24. As per the consensus estimates, this ratio is likely to move up to over 36% by FY27. This sharp rise in the investment ratio is likely to be the defining nature of the current expansion.Currently the investments are led by public capex. As has been highlighted in many forums, Govt’s capex has moved from around 1.6% of GDP a few years back to 3.4% of GDP now (as per FY25 interim budget). Now, it is time for the baton to shift to private investments. With corporate profits as a per cent of GDP moving from a trough of 1.1% FY2020 to 5.3% in FY23, it is a question of time before the corporates start loosening their purse strings for capex. Early signs are already there for everyone to see in terms of greenfield capacities being put up by India Inc in steel, cement, renewables, ports and airports. As the capex cycle extends, the impact will trickle down by lag effect to consumption that has been currently under pressure.Overall, given this benign macro-outlook, this is not an easy market for investors who are waiting on the fence for a sharp price correction. It doesn’t look like this will get any easier in the coming weeks and months. Yes, the recent correction in the smallmid cap space has taken some froth away from the valuations, but expecting a sharper price correction may only lead to a major disappointment to investors. Of course, the disclaimer is if there is a surprise in the upcoming election outcome, the scenario could be significantly different for the markets’ direction. Assuming there is no surprise on that, investors may not have much choice but to look at SIPs or look at AIF or PMS funds, which will invest in a phased and cautious manner using the cool-off, wobble or consolidation that is likely to be the nature of the current market direction, instead of waiting endlessly for a sharp price correction in the broader markets!

Latest monthly customer data collated by the Telecom Regulatory Authority of India (Trai) shows Airtel added more active mobile users than Jio in January 2024. But the Mukesh Ambani-owned telco added more higher-paying 4G and 5G users than its closest rival in that month. Vodafone Idea (Vi) continued to lose both active mobile users as well as 3G and 4G users, according to data released by Trai on Monday.Airtel and Jio added 3.55 million and 1.1 million active users respectively in January 2024, while Vi lost 1.72 million active users, latest customer data put out by the Telecom Regulatory Authority of India (Trai) showed.Active, or visitor location register (VLR), data put out every month by Trai indicates the number of mobile users regularly using a mobile network.Airtel’s active user base jumped to 381.09 million in January while Jio’s rose to 425.61 million. By contrast, Vi’s active user base shrank to 194.96 million, as per Trai data.Latest Trai wireless broadband user data showed that Jio and Airtel added 4.18 million and 2.39 million 4G/5G users respectively in January, while Vi lost 0.51 million 3G/4G users. Vi is yet to roll out 5G networks. On the gross customer additions score, Jio’s gains were sharply higher than Airtel’s. Trai data showed that Jio added 4.17 million mobile users in January while Airtel reported a modest 0.75 million additions.Vi continued to suffer customer losses, resulting in its gross mobile user base shrinking further by 1.52 million to 221.52 million. Jio and Airtel’s gross user bases were higher at 463.99 million and 382.48 million respectively in January.Trai data also showed Jio has widened customer market share to 39.97% (39.69%) while Airtel’s was unchanged at 32.95% over the previous month. Vi’s narrowed to 19.09% (19.25%).The combination of Airtel and Jio customer gains resulted in India’s mobile user base rising by 0.19% to nearly 1.161 billion in end-December.Overall wireless tele-density increased to 83.05% in January 2024.Jio also consolidated its market leadership in the landline segment in January.The telco added 0.25 million wireline users, boosting its landline user base to 11.29 million. Second-ranked Airtel added 0.1 million users, boosting its wireline user base to about 8.41 million. Third-ranked state-owned BSNL, though, recovered some lost ground, adding 0.36 million wireline users, to boost its landline user base to 6.5 million, current Trai data showed.