Business News

Mumbai: Overseas interest in debt placed in the fully accessible route (FAR) remained markedly volatile through February, reflecting strategic flows and ebbs on either side of the biggest policy event in nearly five years - a reduction in benchmark rates.The first week of the month saw inflows of ₹4,970 crore as funds flowed into Indian debt in anticipation of a rate cut. The second week, however, saw outflows of ₹8,163 crore as a rate cut materialised and the rupee touched record lows, making Indian bonds less attractive to foreign investors, experts said.The third and fourth weeks of February saw inflows of ₹4,797 crore. On a net basis, inflows during the month touched ₹1,388 crore, CCIL data showed.Indian bonds are now part of three global indices - the JP Morgan emerging market index, the FTSE Russell index and the Bloomberg Emerging Market local currency government bond index. 118614510Indian bonds were included in the Bloomberg index last month, but economists did not expect large inflows as the total assets under management of the index is not significant.Fund managers do not anticipate significant inflows into index-eligible government bonds, due to an uncertain global environment as assets under management in global emerging market indices have been declining."The rupee volatility has added to the anxiety of foreign investors, which has led to outflows. It has been two months since Donald Trump took office, and I think we will have to wait for another six weeks or so for things to settle down," said Anshul Chandak, head of treasury at RBL Bank. "Overall, the outlook on emerging market bonds is not very favourable," Chandak said. The total inflows into index-eligible bonds have tapered from a peak of ₹22,005 crore seen in August 2024, the month when Indian debt was first included in the JP Morgan emerging market index , the CCIL data showed.The 10-year US Treasury bond, which was trading at a yield of 4.50% on February 21, was down to 4.27% on Thursday, according to LSEG data. The fall in yields came after a series of reports signalled that the world's biggest economy was facing growing challenges from elevated borrowing costs and inflation. "Foreign flows into Indian debt are expected to be volatile. From a long-term perspective, US yields are expected to be elevated and there are increased external sector vulnerabilities. Hence, portfolio inflows into emerging countries like India are likely to remain on a cautious footing," said Anubhuti Sahay, head of India economic research at Standard Chartered Bank.Inflows could go up if the rate cut by the Reserve Bank of India is higher than the already anticipated 50 basis points, Sahay said.In contrast to the 10-year US Treasury, the benchmark 10-year Indian government bond yield closed at 6.70% on Thursday. Higher bond yields raises the cost of borrowing for Indian companies as government bond yields are the reference gauge for pricing corporate debt.

Mumbai: Cables and wire makers - the stock market darlings in the recent bull run - tumbled in Thursday's trading, emerging among the day's biggest losers, after UltraTech Cement announced its foray into the sector with an ₹1,800 crore investment. Investors worried that the Aditya Birla Group's entry into this business would hurt the profitability of existing players, like the shakeup in the paint industry after the conglomerate's venture into the industry.KEI Industries plunged 21%, followed by RR Kabel and Polycab which fell 19-20%. Havells India and Finolex Cables fell 6% each."UltraTech's entry into the cables and wires (C&W) segment will likely increase competitive intensity in the industry," said Arun Agarwal, vice president of fundamental research at Kotak Securities. "Adoption of aggressive pricing by the new entrant to penetrate the market potentially poses risk to margins in the C&W industry."India's largest cement company has plans to invest ₹1,800 crore over the next two years, and the plant is expected to be commissioned by December 2026. UltraTech shares ended 5% lower on Thursday."Unlike the paint industry, which is highly concentrated with well-established brands and significant entry barriers, the cables and wires industry is far more fragmented, lacking a dominant market leader and comprising numerous local players," said Divyam Mour, research analyst at Samco Securities. "This fragmented structure makes it easier for new entrants to establish themselves."118614390Mour also said that UltraTech is well-positioned to leverage synergies from its existing cement business, and by cross-selling its wires and cables products to its existing customers, UltraTech can streamline distribution and minimise additional supply chain investments. This will help them focus primarily on production, and enhance profitability and provide them a competitive edge.HSBC said ₹1,800 crore is a significant investment in the building wire and low voltage construction cables segment, which has relatively low barriers to entry."This development may weigh on share price performance in the near term," said the brokerage in a client note. "UltraTech's entry and scale-up are coming at a time when the industry is likely at the end phase of its cycle, with significant capacity addition plans by the incumbents."Some analysts said the market may be overestimating the magnitude of this decision. "The top five companies have already lost a significant market-cap due to the selloff today, which we think could be an overreaction by the markets," said Manish Valecha, research analyst at Anand Rathi Institutional Equities. "Currently the sector makes ₹1.8 lakh crore in revenue, and with UltraTech's investment of ₹1,800 crore, its first full year revenues could be around ₹6,500-7,000 crore, amounting to 3-4% of the total market share, which will be taken from both organised and unorganised players."Mour said the selloff in shares of established cable companies appears excessive considering UltraTech's production is scheduled to commence only by next December and existing players still have time to adapt and implement strategies to counter this new competition.Valecha said that there is a strong possibility of a pullback in the coming days. Polycab is his top pick.