Market Update: IPO performance, economic trends, and global Insights

Primary Market Update:

This week commencing 28th April, one mainboard IPO of JNK India made a stellar market debut, lists with a 50% premium over the issue price.

Since 2004, there hasn't been a single IPO launch during the month of May in the last four General Election cycles.

Typically, the period from April to June during these years has been slow for the primary markets due to election uncertainty, according to Mahavir Lunawat, Managing Director, Pantomath Capital Advisors Pvt. Ltd.

However, this trend is expected to change now as, 3 mainboard IPOs of Indegene Limited, TBO Tek Limited and Aadhar Housing Finance are set to be launched next week to raise 6,392 crores, he noted.

Indian Market Update:

Indian market remained positive for the week and reached a lifetime high levels during the week.

It made a high of 22782.30 levels on nifty. India's core sector growth eased to 5.2% in March 2024 from 7.1% in the preceding month.

The slowdown in sectors like steel, fertilizers, and refinery products, alongside robust growth in cement and electricity, indicates a mixed industrial performance, Lunawat said.

The IMF has upgraded India's economic growth forecast to 6.8% for FY25, driven by robust public investment.

In April, India's GST collection reached a record Rs 2.1 lakh crore, up 12.4% from Rs 1.87 lakh crore the previous year, driven by a robust 13% increase in domestic transactions indicating strong local demand, he said.

It signifies the overall momentum in the economy and the effectiveness of the tax collection system.

India's forex reserves stood at $640.33 billion as on 3rd week of April.

Auto sales in India increased by about 2% to 338,341 vehicles in April, up from 332,468 in the previous year, driven by strong demand and improved stock availability post-semiconductor shortages.

Indian banks are currently seeing loan growth at rates of 17% to 18% for private sector banks and 12% to 14% for public sector banks, which exceeds deposit growth by 2 to 3 percentage points.

Due to this discrepancy, banks might need to adjust their lending rates, noted Lunawat.

S&P Global Ratings predicts that loan growth will need to decrease from 16% in FY24 to around 14% in FY25 to align better with the slower deposit growth rates, ensuring sustained financial health and profitability within the sector, Lunawat said.

Mumbai recorded its highest-ever stamp duty collection at Rs 1,047 crore and over 11,475 property transactions, marking a 16% year-on-year increase, in April.

This surge in property registrations, driven by strong demand and positive market sentiments, significantly boosted state revenue and underscored the city's robust real estate market despite challenges like rising mortgage rates.

Global Market Update:

The US market remained volatile & traded in a thin range for the week. In March and April 2024, the US economy displayed a mix of strengths and weaknesses, highlighted by varied economic indicators.

On the positive side, personal spending rose by 0.8% in March, driven by a significant 1.3% increase in spending on goods like gasoline.

Personal income also grew by 0.5%, supported by dividends and steady wage growth, which bodes well for future consumer spending.

However, the US faced economic headwinds as the S&P Global US Composite PMI dropped to 50.9 and the Manufacturing PMI decreased to 49.9 in April, indicating marginal growth and contraction respectively, due to declines in new orders and employment.

Moreover, GDP growth for Q1 CY2024 slowed to 1.6%, well below the forecasted 2.5%, hampered by lower consumer spending and negative inventory contributions.

Inflationary pressures also persisted; the core PCE price index escalated to 3.7% in Q1CY24, up from 2% the previous quarter, and the overall PCE price index rose by 0.3% in March, driven by a 0.4% increase in service prices and a slight 0.1% rise in goods prices.

These figures reflect ongoing challenges in managing inflation and economic volatility in the manufacturing sector, according to Lunawat.

The FED Monitory Policy meeting ended this week. The Federal Reserve held its funds rate unchanged at 5.25%-5.50% and acknowledged the lack of progress in tackling inflation, as largely expected.

During the press conference, FED governor Powell struck a less hawkish tone than expected, ruling out the possibility of a rate hike in the June meeting.

The central bank acknowledged that inflation is still high and does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.

The US Federal Bank’s announcements indicated a sudden change in its schedule regarding interest rates. During its meeting on March 20, the policymakers at the Fed had anticipated three rate decreases in 2024, possibly starting in June. Reductions in rates by the Fed are expected to gradually result in decreased borrowing expenses for individuals and businesses, including mortgages, auto loans, and credit card rates.

Chair Jerome Powell said at a news conference, “In recent months, inflation has shown a lack of further progress toward our two percent objective." “It is likely that gaining greater confidence," Powell added, "will take longer than previously expected."

Brent crude oil prices witnessed profit booking & trading near $84 per barrel, influenced by speculation that the U.S. might replenish its strategic petroleum reserves, targeting purchases at or below $79 per barrel.

Despite this, prices remain close to 7-week lows, primarily due to reduced geopolitical risks following progress in ceasefire talks between Israel and Hamas and an unexpected rise in U.S. crude inventories, which increased by 7.3 million barrels last week against a forecasted decline.

Additionally, a significant increase in U.S. crude production, the sharpest monthly rise in nearly three-and-a-half years, has contributed to profit booking in the oil market.