On this version, we provide a fast glimpse into the modifications in India’s fiscal and financial insurance policies. We additionally speak concerning the challenges that automakers Volkswagen and Kia are dealing with from tax authorities, and SEBI’s new guidelines for algo buying and selling.
Welcome to Kuvera’s weekly digest on probably the most vital developments associated to enterprise, finance, and the markets.
tl;dr Hear the article in short as a substitute?
“I hate to be a kicker, I all the time lengthy for peace,
However the wheel that does the squeaking is the one which will get the grease.”
Henry Wheeler Shaw, the American humorist higher identified by his pen identify Josh Billings, supposedly wrote the strains above in his poem ‘The Kicker’ within the late nineteenth century. On the time, ‘kicker’ was used to explain an individual who complained. We are saying supposedly as a result of it hasn’t been confirmed past doubt that he did write these strains!
There may be doubt over who wrote these strains however we’re positive no one will disagree with the message behind these phrases. Nonetheless, when you disagree, let’s check out the 2 greatest developments in India over the previous week.
First, final Saturday, Finance Minister Nirmala Sitharaman slashed private revenue taxes within the funds for 2025-26. After which, this Friday, Reserve Financial institution of India Governor Sanjay Malhotra introduced the financial coverage committee’s resolution to chop its benchmark rate of interest for the primary time in nearly 5 years.
Now, we gained’t go into particulars of Sitharaman’s tax reduce as a result of it has been coated advert nauseam by newspapers, web sites, TV channels, social media and what not. However we are able to’t resist from giving a gist of the funds anyway.
The funds’s greatest announcement was the reduce in revenue tax charges. Primarily, these incomes Rs 12 lakh or much less gained’t must pay any tax. These incomes greater than that threshold will even see a discount of their tax outgo. The reduce got here after a piece of center class turned extremely vocal about their dissatisfaction with excessive taxes, particularly after Sitharaman in her earlier funds elevated taxes on capital positive aspects and eliminated indexation advantages for actual property and debt funds.
For mutual fund traders, the funds provided completely nothing. Nothing straight anyway. Though the mutual fund foyer group AMFI had pitched for restoration of indexation advantages on debt funds, Sitharaman selected to disregard all its solutions. However she additionally didn’t improve the capital positive aspects tax, as some traders had feared.
Anyway, the tax reduce means individuals may have extra money to spend. The federal government is hoping that this can revive the slowing demand in consumption and increase financial progress. Critics, nevertheless, argue that the tax reduce advantages solely a small set of individuals and that it gained’t be sufficient to extend consumption or GDP progress. That wants some assist from the RBI and the central financial institution delivered it.
The RBI’s policy-setting physique, assembly for the primary time since Malhotra took over as governor, reduce the repo charge to six.25% from 6.50%, making its first discount since Might 2020 when the Covid-19 pandemic despatched the worldwide economic system right into a tailspin. The choice got here as calls for for a charge reduce grew louder from authorities officers, economists and industrialists as a result of financial slowdown.
Certainly, the central financial institution cited slowing progress and moderating inflation as causes for the speed reduce. It projected India’s GDP to broaden 6.7% subsequent 12 months, above this 12 months’s 6.4% estimate, but additionally issued a warning.
“Headwinds from geopolitical tensions, protectionist commerce insurance policies, volatility in worldwide commodity costs and monetary market uncertainties, proceed to pose draw back dangers to the outlook,” it stated.
Will the reduce in taxes and charges be sufficient to revive GDP downside? We hope so, though doubts stay.
So, what may the patron and the company world do to nudge the federal government and the RBI to decrease taxes and charges even additional? Squeak louder!
Vroom time
Staying with the squeaky wheels, India’s auto sector was within the information this week for extra causes than one.
First, the excellent news. The 12 months 2025 began on a constructive observe with automobile gross sales rising throughout the board in January, in line with the Federation of Vehicle Sellers Associations. FADA, which tracks retail gross sales from dealerships to patrons, stated that total gross sales within the month grew by 6.6% 12 months on 12 months led by a 15.5% leap in gross sales of automobiles and SUVs. Gross sales of business automobiles rose 8.22% whereas tractor gross sales elevated 5% and two-wheelers inched up 4.15%.
To make certain, a few of the spike—particularly in automobiles and SUVs—stems from December purchases registered in January in order that patrons get the benefit of the 2025 mannequin 12 months and get a greater resale worth as and after they promote their automobiles.
Nonetheless, the trade will take each little win it will probably get at a time when gross sales typically have slowed; passenger automobile gross sales for the ten months by means of January have risen solely 5.6% from a 12 months earlier whereas gross sales of buses, vans and tractors have been nearly flat. And the trade expects the approaching months to be cautious, too.
Tightening the screws
Now, the not-so-good information. The German carmaker Volkswagen, which additionally homes Audi and Skoda manufacturers, and South Korea’s Kia have discovered themselves in a tax battle with the Indian authorities. Right here’s what has occurred to this point.
The federal government has accused VW and Kia, an affiliate of Hyundai Motor, of evading taxes by misclassifying imports of elements. Primarily, the federal government says the 2 corporations imported dozens of elements after which assembled their automobiles in India. So, what’s the issue?
India imposes a tax of greater than 100% if automakers import fully-assembled automobiles. Import duties drop to 30-35% if automakers deliver automobiles in utterly knocked down, or CKD, circumstances, after which assemble the automobiles in India utilizing some native elements. However customs duties on auto elements are simply round 5-15%.
In accordance with the federal government, VW and Kia imported all of the elements required to assemble sure high-end fashions in separate shipments as particular person components. They then used these elements to assemble fashions such because the Kia Carnival, the VW Tiguan, the Skoda Kodiaq, and the Audi A3. This, the federal government says, quantities to tax evasion.
Whereas Kia has acquired a discover for evading $155 million, VW’s tax invoice is a whopping $1.4 billion. Each corporations deny the allegations and VW has even challenged the federal government within the Bombay Excessive Court docket. VW additionally says it had knowledgeable the federal government of its import plans properly prematurely and even acquired clarifications way back to 2011.
What’s going to occur if the businesses lose in court docket? For one, they should pay double the quantity they’re accused of evading in taxes. And that can make it extraordinarily tough for them, particularly VW, to outlive in India.
Go for Algo
For the previous few months, the Securities and Trade Board of India has been warning concerning the dangers concerned in futures and choices buying and selling and defined how hundreds of retail traders misplaced billions of {dollars} by partaking in such exercise.
In September final 12 months, SEBI stated in a report that particular person F&O merchants suffered a complete lack of Rs 1.8 trillion over the past three fiscal years and that 93% of particular person merchants misplaced cash. In the meantime, institutional traders and proprietary merchants made boatloads of cash on the expense of particular person merchants.
It then took measures to curb F&O buying and selling by elevating the minimal buying and selling quantity and decreasing the variety of weekly choices contracts. After which, in December, it sought to degree the taking part in discipline.
This week, SEBI put into motion its plan that enables retail traders to make use of algorithmic buying and selling.
Algo buying and selling, for these new to the time period, refers to utilizing laptop algorithms to commerce. It’s quicker, cheaper and backed by information. This offers it a leg up. A lot in order that SEBI’s examine confirmed it accounted for 97% of overseas traders’ positive aspects and 96% of proprietary merchants’ earnings in futures and choices throughout FY24.
In a round this week, SEBI stated that brokers can provide algo buying and selling facility to retail traders however must take approval from inventory exchanges for every algorithm. As well as, an audit path of algo orders should be stored.
Will the brand new facility actually give retail traders a level-playing discipline? Or will establishments and enormous merchants discover new methods to retain their edge? Extra importantly, will it preserve retail traders hooked to F&O buying and selling? We are going to preserve you posted.
Market Wrap
India’s benchmark inventory market indices, the Sensex and the Nifty, rose marginally this week as a reduce in taxes and rates of interest helped offset the rising worldwide commerce tensions on account of US President Donald Trump’s tariff wars. Sensex closed the week with a achieve of 0.4% and Nifty rose 0.2%
Most banks and non-bank lenders ended with positive aspects on charge reduce hopes. IndusInd Financial institution and Bajaj Finance had been the highest performers amongst Nifty shares, gaining over 8% every through the week. Bajaj Finserv, Axis Financial institution, Shriram Finance, HDFC Financial institution and Kotak Mahindra Financial institution additionally ended within the inexperienced.
Auto shares M&M, Maruti Suzuki, Eicher and Bajaj Auto edged greater due to sturdy quarterly earnings. ITC Resorts, Adani Ports, JSW Metal and Bharti Airtel had been the opposite main gainers.
State Financial institution of India was the only real lender to shut within the pink. Energy Grid, Bharat Electronics, ONGC and Larsen & Toubro had been the largest losers, dragged down by considerations over the average rise within the authorities’s deliberate capex within the funds. Coal India and NTPC additionally dropped.
Consumption-driven shares similar to Trent, Hindustan Unilever, Nestle India and ITC slipped on considerations of slowing progress and tepid earnings that had been pushed principally by worth hikes.
Earnings Snapshot
- Titan revenue falls to Rs 1,047 crore from Rs 1,053 crore however tops analysts’ estimates
- SBI working revenue grows 15.8% to Rs 23,551 crore, internet revenue jumps 84%
- Zudio chain operator Trent’s revenue rises 34% to just about Rs 500 crore, tops estimates
- Bharti Airtel consolidated revenue jumps to Rs 14,781 crore from Rs 2,442 crore on one-time achieve, tariff hike
- ITC revenue inches 1% greater to Rs 5,638 crore, exceeds market expectations
- Mahindra & Mahindra revenue jumps 19% 12 months on 12 months to Rs 2,964 crore
- Ola Electrical loss widens to Rs 564 crore from Rs 376 crore a 12 months earlier
- Hero MotoCorp revenue revs up 12% to Rs 1,203 crore, tops analysts’ estimates
- Britannia consolidated internet revenue up 5% at Rs 582 crore
- Asian Paints revenue slumps 23% to Rs 1,111 crore as income drops 6%; lacking forecasts
- Swiggy Q3 consolidated loss widens to Rs 799 crore from Rs 574 crore a 12 months earlier
- Sula Vineyards Q3 consolidated internet revenue falls 35% to Rs 28.06 crore
- Jockey India licensee Web page Industries revenue rises to Rs 205 crore from Rs 152 crore a 12 months in the past
- Energy Grid Corp consolidated internet revenue falls 4% on-year to Rs 3,862 crore
- Cognizant This autumn income at $5.08 billion, adjusted EPS at $1.21; expects 2025 income beneath estimates
- PVR Inox consolidated internet revenue up at Rs 35.9 crore from Rs 12.8 crore a 12 months in the past
Different Headlines
- OpenAI CEO Sam Altman visits India, says nation now its second-largest market
- Finance ministry asks employees to keep away from AI instruments like ChatGPT, DeepSeek, studies Reuters
- RBI governor warns lenders towards rising digital frauds
- BlackRock plans to rent 1,200 individuals in India to develop AI hubs, studies Bloomberg Information
- HSBC India Companies Buying Managers’ Index falls to two-year low of 56.5 in January
- HSBC India Manufacturing PMI climbs to six-month excessive of 57.7 in January
- US invitations PM Modi to fulfill with President Donald Trump
- Reliance Retail begins promoting fashionwear from Shein, 5 years after ban on Chinese language agency
- Hexaware Applied sciences to launch $1-billion IPO subsequent week
- Embassy Group-controlled India franchisee of WeWork information DRHP for IPO
- Meals supply platform Zomato to rebrand as ‘Everlasting’
That’s all for this week. Till subsequent week, joyful investing!
Interested by how we take into consideration the markets?
Learn extra: Zen And The Artwork Of Investing
Watch right here: Investing in Worldwide Markets
Begin investing by means of a platform that brings objective planning and investing to your fingertips. Go to kuvera.in to find Direct Plans and Mounted Deposits and begin investing as we speak. #MutualFundSahiHai #KuveraSabseSahiHai
