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Royalty payments by Indian subsidiaries of multinationals to their overseas parents increased nearly 42% in the past five years, underscoring the growing cash generating potential of the local units, according to analysts. An ET study of 10 companies — including Hindustan Unilever (HUL), Nestlé, Maruti Suzuki, Bosch, Colgate-Palmolive, Bata, Whirlpool and 3M India — showed that their cumulative payout to their parents crossed the Rs 8,000 crore mark in 2023-24, up from about Rs 5,600 crore in 2018-19. 113972434“The significant growth in royalty payments by MNCs to their parent companies over the past five years highlights the increasing importance of Indian operations as cash generators for global parents,” said Mohit Yadav, founder of business intelligence firm AltInfo. 113938840Royalty refers to payments made to an owner of an asset, such as intellectual property, by another entity for the use of that asset. HUL in 2023 increased the royalty and central services fees payment to Unilever group to 3.45% of turnover, from 2.65%, staggered over three years.However, Nestle’s proposal this year to increase royalty from India to its Swiss parent faced resistance from local shareholders, with the majority rejecting the proposal. The maker of Maggi instant noodles and Nescafé coffee had proposed to increase the royalty payout to 5.25% of net sales, from 4.5%, over five years. “While some companies like Nestlé faced resistance in raising royalty percentages, HUL successfully increased its royalty payments, reflecting both the profitability of its Indian business and the parent company’s ability to extract higher returns,” said Yadav of AltInfo. 113959778“This trend underscores the delicate balance multinationals must strike between maximising returns for global shareholders and maintaining the interests of local stakeholders in the Indian market.” Overseas firms have licence agreements with their Indian units, under which royalty is calculated as a percentage of the gross or net revenue, in return for use of all or certain brand names, trademarks, research and development and technology. A surge in revenue of the local unit therefore pushes up the payout even when the royalty rates remain the same. HUL said in its latest annual report that the royalty agreements allow the business to “bring in bigger, better and faster innovations to Indian consumers from the global R&D teams.”

On the back of one of the major FII selloffs seen in recent times, the markets succumbed to strong corrective pressure through the week and ended the week on a very weak note. The Nifty 50 remained under selling pressure for the entire week; at no point in time, did it show any intention to stage a technical pullback. While the weakness persisted in all five trading sessions, the trading range also got wider. The Nifty found itself having oscillated in an 1167-point range over the past five days. There was a resultant rise in the volatility as well; the India VIX surged by 18.10% to 14.13 on a week-on-week basis. The benchmark Nifty 50 closed with a deep weekly cut of 1164.35 points (-4.45%). 113963565We have evident reasons like the money flowing out of the Indian markets to theChinese markets, geopolitical tensions in the Middle East, and SEBI announcing changes in the derivatives trading landscape to write about when we talk and assign reasons for market declines. was trading almost 10% above its 50-week MA. So, even the slightest reversion to the could have seen violent retracements from higher levels. Despite the kind of fall we have seen over the past few days, the Nifty has not even tested the nearest 20-week MA which currently stands at 24441. This speaks a lot about the extent to which the markets had run up much ahead of their curve.The derivatives data suggest that the markets may attempt to find support at 25,000 levels. Besides being a psychologically important level, the 25,000 strikes not only hold the highest PUT OI as of now but have a very negligible existence of Call OI. So, even if we continue with an overall downtrend, some minor technical rebound from the current levels cannot be ruled out. By and large, a stable start is expected for the week, and the levels of 25300 and 25450 shall act as resistance. The supports are expected to come in at 24910 and 24600.The weekly RSI is 59.70; it has crossed under 70 from an overbought zone which is bearish. It stays neutral and does not show any divergence against the price. The weekly MACD looks like being on the verge of a negative crossover as evidenced by a narrowing Histogram. A large bearish candle that emerged hints at the kind of strong selling pressure that was witnessed throughout the week.The pattern analysis shows that despite the kind of decline that we have seen, the primary trend stays intact. On the daily chart, we have tested the 50-DMA; on the weekly chart, we have not even tested the nearest 20-week MA. So long as we are above the 24000-24400 zone, there is little chance of the primary uptrend getting disrupted.All in all, from a short-term technical lens, the behavior of Nifty vis-à-vis the levels of 25000 would be very crucial to watch. If the Nifty has to find some ground and put a base for itself in place, it will have to keep its head above 25000 levels. Any violation of this level on a closing basis would invite more weakness for the index. Then, the levels of 20-week MA may get tested over the coming days. While navigating this turbulent phase, it is recommended that we cut down on highly leveraged positions and stay invested in low-beta defensive pockets. While staying mindful when managing risks, a highly cautious approach is advised for the coming week.In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed. 113963578 113963587Relative Rotation Graphs (RRG) show Nifty IT, Pharma, Consumption, Services Sector, and FMCG indices are inside the leading quadrant. However, a couple of them are showing some paring of their relative momentum. However, broadly speaking, these groups may show some resilience and may relatively outperform the broader markets.Nifty Midcap 100 Index has rolled inside the weakening quadrant. Besides this, the Nifty Auto is also inside the weakening quadrant and is seen rolling towards the lagging quadrant.The Nifty PSE Index has rolled inside the lagging quadrant. Along with theInfrastructure Index which is also inside the lagging quadrant it is set to relatively underperform the broader markets. The Nifty Bank, Energy, Realty, Metal, PSU Bank, Financial Services, and Commodities Index are also inside the lagging quadrant.However, they all are seen improving their relative momentum against the broader Nifty 500 index.The Nifty Media Index is the only one inside the improving quadrant; however, it is seen rapidly giving up on its relative momentum against the broader markets.Important Note: RRGTM charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based in Vadodara. He can be reached at milan.vaishnav@equityresearch.asia

A 'Buy China, Sell India' trade is getting played out in emerging markets as FIIs have sold Indian stocks worth around Rs 30,718 crores in the first 3 days of October.The sudden U-turn in FII strategy has been mainly triggered by the outperformance of Chinese stocks."The Hang Seng index shot up by 26% in the last one month and this bullishness is expected to continue since valuations of Chinese stocks are very low and the Chinese economy is expected to do well in response to the monetary and fiscal stimulus being implemented by the Chinese authorities," said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.The increase in geopolitical tensions between Israel and Iran is also weighing on risk assets. The crude prices have risen in recent days, although there has not been a sharp spike so far. The situation may change if Israel attacks oil installations in Iran."On the macro side, PMI manufacturing weakened from 57.5 in August to 56.5 in September, PMI services weakened from 60.9 in August to 57.7 in September, central government expenditure was down 1.2% yoy in 5MFY25 and GST collections growth moderated to 6.5% yoy in August 2024. FPI flows are expected to remain volatile," Shrikant Chouhan, Head of Equity Research, Kotak Securities said.If the momentum in Chinese stocks continues FIIs may continue to sell in India where valuations are elevated, analysts said."It remains to be seen how long the optimism lasts. Massive FII selling in financials especially frontline banking stocks have made their valuations attractive. Long-term domestic investors may utilise this opportunity to buy high quality banking stocks," Vijayakumar said.The broader geopolitical landscape adds complexity to the situation. While geopolitical tensions in the Middle East have raised concerns, global equity markets, including the US, have shown resilience. However, the duration of this FII selling trend will depend on the sustained momentum in the Chinese markets.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)