Customers retreating from mkt as gold price nears Rs 70,000 mark - Business Guardian
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Customers retreating from mkt as gold price nears Rs 70,000 mark

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As the price of pure gold approaches the Rs 70,000 per 10-gram threshold, customers have noticeably withdrawn from the market. Within just a single month, prices in Mumbai’s Zaveri Bazaar have surged nearly 10 percent, reaching approximately Rs 68,500 per 10 grams. The Mumbai spot market now reflects a significant discount of $15-20 per ounce or Rs 400-550 per 10 grams, a consequence of the steep price escalation within the past month.

Gold imports, which stood at approximately 100 tonnes in February, experienced a sharp decline in March, with industry estimates suggesting a mere 25 tonnes were imported. Jewellers are closely monitoring the upcoming marriage season and the demand for Akshaya Tritiya in the first week of May. While they are gearing up to meet potential demand if gold prices decrease, the fabrication of jewellery has been impacted. Additionally, the movement of gold has been constrained due to heightened vigilance during the election code of conduct.

Bhargava Vaidya, a consultant in the bullion industry, noted, “Marriage demand in India has remained steady, or perhaps slightly increased in value terms. However, with escalating prices, demand has dwindled in terms of quantity. At the current price level, this trend in demand is expected to persist.”

A decade ago, the price of gold stood at Rs 28,430 per 10 grams, marking a 141 percent increase, translating to a compounding annual return of 9.2 percent. This substantial return is reshaping market demand. Surendra Mehta, National Secretary of the Indian Bullion and Jewellers Association, acknowledged the current trend of customers staying away from the market, stating, “The preference for jewellery is gradually shifting towards coins, bars, and other gold investment avenues.”

This shift is particularly noticeable in the preference of men over women in gold investment. Although jewellery still holds a higher share in total demand, sovereign gold bonds and exchange-traded funds have emerged as viable alternatives for gold investors. With rising prices affecting demand in terms of quantity, low-caratage jewellery is now preferred. Mehta anticipates a cascading effect of the record-high prices in the future, suggesting that “more and more people will view gold as an investment avenue, thereby reinstating its status as a store of value.”

Vaidya echoes this sentiment, emphasizing the importance of gold in investment portfolios amidst price fluctuations of 10-15 percent. He recommends investors allocate 10-15 percent of their portfolio to gold.

The upcoming Akshaya Tritiya in May is poised to be a significant event for gold demand. Jewellers are preparing to reduce their jewellery stocks during this period, hoping for a moderation in prices beforehand. Market insiders speculate that customers might return if international gold prices retreat to around $2,100.

The high prices are posing challenges for jewellers in various ways. Speaking anonymously, a prominent jeweller revealed that the stock of gold jewellery across national stores is estimated to be around 300-400 tonnes, significantly increasing their inventory costs compared to a decade ago when it was only 100 tonnes. This surge in inventory is attributed to the expansion of retail chains. Traditionally, demand has been centered around 22-carat jewellery, but high prices may prompt a shift towards 18-carat jewellery. There’s even a possibility of increased demand for 14-carat jewellery. In light of these circumstances, the demand during Akshaya Tritiya will be pivotal for jewellers.

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Markets

Top 7 firms gain Rs 67,259.99 cr in market cap; Reliance leads

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The combined market valuation of seven of the 10 most valued firms climbed Rs 67,259.99 crore in a holiday-shortened last week, with Reliance Industries emerging as the biggest gainer, amid an overall optimistic trend in equities. Last week, the BSE benchmark climbed 819.41 points or 1.12 per cent. Markets saw just three trading sessions last week, as they were closed on Monday for Holi and Good Friday on 29 March. The valuation of Reliance Industries jumped Rs 45,262.59 crore to reach Rs 20,14,010.63 crore.

State Bank of India added Rs 5,533.26 crore, taking its market valuation to Rs 6,71,666.29 crore. The valuation of Life Insurance Corporation of India (LIC) climbed Rs 5,218.12 crore to Rs 5,78,484.29 crore, and that of ICICI Bank advanced Rs 4,132.67 crore to Rs 7,69,542.65 crore. The market capitalization (mcap) of HDFC Bank went up by Rs 4,029.69 crore to Rs 11,00,184.60 crore, and that of Hindustan Unilever climbed Rs 2,819.51 crore to Rs 5,32,946.04 crore.

ITC added Rs 264.15 crore, taking its mcap to Rs 5,35,032.74 crore. However, the mcap of Tata Consultancy Services (TCS) declined by Rs 10,691.45 crore to Rs 14,05,102.38 crore, and that of Infosys went lower by Rs 4,163.13 crore to Rs 6,22,117.38 crore. Bharti Airtel’s valuation dipped by Rs 3,817.18 crore to Rs 6,95,038.48 crore. Reliance Industries continued to rule the chart of the most valued firms, followed by TCS, HDFC Bank, ICICI Bank, Bharti Airtel, State Bank of India, Infosys, LIC, ITC and Hindustan Unilever.

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Markets

Foreign investors flood India with Rs 2 trillion equity investment

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Foreign Portfolio Investors (FPIs) displayed a robust resurgence in their investments in the Indian equity and debt markets during the fiscal year 2023- 24, injecting over Rs 2 lakh crore into Indian equities amidst a backdrop of optimism surrounding the country’s strong economic fundamentals. This significant inflow comes as a stark contrast to the outflows witnessed in the preceding two fiscal years, highlighting renewed investor confidence in India’s growth story.

The positive sentiment among foreign investors is attributed to several factors, including progressive policy reforms, economic stability, and attractive investment opportunities in the Indian market. Bharat Dhawan, Managing Partner at Mazars in India, expressed cautious optimism regarding the outlook for FY25, anticipating sustained FPI inflows supported by favorable macroeconomic conditions, while also acknowledging the potential impact of global geopolitical influences on market volatility.

The resurgence in FPI investments reflects India’s resilience amidst global economic uncertainties, with investors increasingly favoring Indian equities due to the country’s robust economic performance and stability. Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India, emphasized India’s standout performance compared to similar markets, further driving foreign investment inflows.

Furthermore, FPIs demonstrated a noteworthy shift in their investment behavior by pouring significant funds into the Indian debt market as well, driven by attractive yields on Indian sovereign debt relative to global counterparts. Nitin Raheja, Executive Director at Julius Baer India, highlighted the robustness of FPI investments in Indian debt, underpinned by strong macroeconomic indicators and the impending inclusion of Indian bonds in JP Morgan’s index.

Despite intermittent fluctuations in FPI investments throughout the fiscal year, the overall trend remained positive, with FPIs ending the year on a bullish note in March, signaling continued investor confidence in India’s growth prospects. However, challenges such as global geopolitical tensions and market volatility underscore the importance of strategic planning and agility in navigating investment landscapes.

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Business News

ICICI securities delisting approved for merger with ICICI bank

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ICICI Securities of India has received shareholder approval to delist its stock, as announced early Thursday. This move sets the stage for its merger with its parent company and majority shareholder, ICICI Bank. The delisting resolution garnered support from approximately 71.9% of the brokerage’s minority shareholders, surpassing the regulatory threshold of a two-thirds majority.

In early trading, ICICI Securities’ shares experienced a 4.5% decline, while ICICI Bank saw a 1.2% increase. Among public institutional investors, which own a total 16.68 per cent in the company, 83.8 per cent voted in favour of the delisting, while only 32 per cent of non-institutional public shareholders, who hold 8.55 per cent in the company, were in favour.

Norges Bank Investment Management, which holds a 3.2 per cent stake through one of its funds, making it the largest public shareholder in ICICI Securities, has previously said it voted in favour of the deal. ICICI Bank holds a roughly 75 per cent stake in the brokerage and its vote is not considered. It said last June it would buy the remaining 25 per cent in a share-swap deal and its stock has jumped 16 per cent since then, raising the implied offer price to about 726 rupees as of Wednesday’s close.

At this rate, ICICI Bank would pay about Rs 5,900 crore ($707.9 million) for the stake. Still, the offer price is roughly 2 per cent less than ICICI Securities’ last close of 741.70 rupees, which has irked some minority investors. Quantum Asset Management, which has a 0.21 per cent stake in ICICI Securities and voted against the deal, estimates the offer price should be around 940 rupees per share, even based on the lowest multiple among the company’s listed peers. “The dynamics have changed since they announced the delisting. Ideally they should have withdrawn the offer and come up with a revised offer, which has not happened,” said George Thomas, an associate fund manager at Quantum.

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Economic

Mumbai’s housing boom amid rising property prices: Report

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New research by AnaROCK property consultants has shown that the residential real estate market in the Mumbai Metropolitan Region (MMR) has witnessed a surge in home buying activity in recent times.

This trend is seen despite the relentless rise in property prices in the region. The MMR housing market holds the top position in both supply and demand, with new launches of about 1.57 lakh units in 2023 and sales of about 1.53 lakh units, both at all-time high levels. Both housing supply and sales in MMR have been on an upward trajectory since 2020.

New launches and housing sales in 2023 surged 27 percent and 40 percent annually, respectively, when compared to 2022. MMR witnessed a 15 percent growth in average property prices, from approximately Rs 11,890 per sq. ft. in 2022 to approximately Rs 13,700 per sq. ft. in 2023. The ANAROCK study shows that Mumbai emerged as MMR’s undisputed champion in 2023, with the highest year-on-year jump in housing sales compared to 2022.

Mumbai’s peripheral western suburbs are seeing a protracted housing boom, with sales skyrocketing by a whopping 82% compared to last year. The factors fuelling MMR’s housing boom include a strong economic outlook, rapid infrastructure development, the fear of missing out, and a wide range of options in a widely evolving market. MMR is the financial and commercial powerhouse of India, attracting a vast talent pool seeking better career prospects and a higher standard of living.

This demographic contributes significantly to the real estate sector of MMR, driving demand for housing. The government’s push for infrastructure development in the MMR is another major driver. Improved connectivity through new highways, metro lines, and projects like the Navi Mumbai International Airport, Mumbai Coastal Road Project, and the establishment of a new city, ‘Third Mumbai’, is enhancing the overall quality of life.

This is incentivizing buyers to invest in micro markets that will benefit from better infrastructure in the future. The consistent property price appreciation in MMR has instilled a fear of missing out (FOMO) among buyers. This perception is leading them to enter the market even at current high property prices. The AnaROCK study shows that real estate in MMR has historically proven to be a high-yield investment. Investors see property as a hedge against inflation and a source of stable rental income.

The MMR market is constantly transforming, offering an increasingly wider range of property options. From smaller, affordable apartments to luxurious high-rises, there are options for budgets and lifestyles. This caters to the diverse needs of today’s homebuyers and is driving the housing boom in MMR.

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Markets

Mcap of top 5 firms hits Rs 1.97 trillion

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The combined market valuation of five of the 10 most valued firms eroded by Rs 1,97,958.56 crore last week, with IT majors Tata Consultancy Services (TCS) and Infosys taking the biggest hit amid volatile trends in equities.

Last week, the BSE benchmark climbed 188.51 points or 0.25 per cent. The market valuation of TCS tanked Rs 1,10,134.58 crore to Rs 14,15,793.83 crore, the most among the top 10 firms. The valuation of Infosys tumbled Rs 52,291.05 crore to Rs 6,26,280.51 crore. IT stocks fell on Friday after tech giant Accenture lowered its revenue forecast for the sector for the 2023- 24 fiscal.

Hindustan Unilever’s market valuation fell by Rs 16,834.82 crore to Rs 5,30,126.53 crore and that of Life Insurance Corporation of India (LIC) declined by Rs 11,701.24 crore to Rs 5,73,266.17 crore. The market capitalisation (mcap) of HDFC Bank dipped Rs 6,996.87 crore to Rs 10,96,154.91 crore.

However, the valuation of Reliance Industries Limited jumped Rs 49,152.89 crore to reach Rs 19,68,748.04 crore. State Bank of India added Rs 12,851.44 crore, taking its mcap to Rs 6,66,133.03 crore. The mcap of ITC climbed Rs 11,108.51 crore to Rs 5,34,768.59 crore and that of Bharti Airtel went up by Rs 9,430.48 crore to Rs 6,98,855.66 crore.

I C I C I B a n k’s m c a p jumped Rs 8,191.79 crore to Rs 7,65,409.98 crore. In the ranking of the most valued firms, Reliance Industries retained the number one title followed by TCS, HDFC Bank, ICICI Bank, Bharti Airtel, State Bank of India, Infosys, LIC, ITC a

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Markets

Stock market soars on US Fed rate cut signal, Sensex up 539 points, Nifty above 22,000

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On Thursday, the Indian stock market witnessed a significant surge, with benchmark Sensex rallying 539 points and Nifty closing above the 22,000 level. This upward movement was primarily driven by buying activity in metal, power, and energy shares, coupled with a global market rally following the US Federal Reserve’s projection of three rate cuts for the year.

The 30-share BSE Sensex surged by 539.50 points or 0.75 percent to settle at 72,641.19, marking its second consecutive day of gains. At its peak during the day, it soared by 780.77 points or 1.08 percent to touch 72,882.46. Similarly, the NSE Nifty climbed by 172.85 points or 0.79 percent to reach 22,011.95. Leading the gains in the Sensex basket were stocks like NTPC, Power Grid, IndusInd Bank, Tata Steel, Tata Motors, JSW Steel, Tech Mahindra, and Larsen & Toubro.

On the other hand, Bharti Airtel, Maruti, ICICI Bank, and Asian Paints were among the laggards. In the broader Asian markets, Seoul, Tokyo, and Hong Kong recorded significant gains, while Shanghai ended lower. European markets also traded in positive territory, following Wall Street’s remarkable gains on Wednesday, where the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all hit record highs. Vinod Nair, Head of Research at Geojit Financial Services, attributed the market optimism to signals from the Federal Reserve indicating its commitment to three interest rate cuts this year, despite inflation remaining above the long-term target.

Ajit Mishra, SVP – Technical Research at Religare Broking Ltd, noted that the Nifty faced resistance at its short-term moving average of 20 EMA, suggesting potential consolidation ahead. Deepak Jasani, Head of Retail Research at HDFC Securities, highlighted the positive momentum in global markets, driven by the Federal Reserve’s indications of future rate cuts, providing room for regional central banks to consider monetary easing. In the broader market, both the BSE midcap and smallcap indices witnessed substantial gains of 2.36 percent and 2.01 percent, respectively.

Across sectors, power, realty, industrials, capital goods, metal, services, commodities, and consumer discretionary segments all ended in the green. However, amidst the market rally, global oil benchmark Brent crude dipped marginally to USD 85.88 a barrel. Foreign institutional investors offloaded equities worth Rs 2,599.19 crore on Wednesday, as per exchange data.

On Wednesday, the BSE benchmark rebounded by 89.64 points or 0.12 percent to settle at 72,101.69, while the NSE Nifty climbed by 21.65 points or 0.10 percent to 21,839.10. Overall, Thursday’s market activity reflected a robust bullish sentiment driven by positive global cues and the Federal Reserve’s stance on interest rate cuts.

Investors exhibited confidence amidst the backdrop of improving economic conditions and anticipation of monetary policy support. While certain sectors outperformed, such as power, realty, and industrials, others faced resistance, signalling potential consolidation in the near term. With the broader market witnessing significant gains and all indices ending in the green, market participants remain vigilant for further developments in global economic trends and central bank policies, which are expected to continue influencing market dynamics in the days ahead.

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