Welcome to Samosa Capital’s evening briefing — the best way to stay up-to-date on India’s financial markets. Here’s what’s in today’s newsletter:

• Jewelry Companies Are Shining Bright,

• Indian Services Continue Improving,

• And, Loan to Deposit Ratios are Becoming Safer.

• Finally, we’ll close with Gupshup, a round-up of the most important headlines.

Have a question you want us to answer? Fill out this form and you could be featured in our newsletter.

—Shreyas, [email protected]

Market Update

The Nifty and Sensex are down more than 1.5 percent today amid strong market performance in the United States); correction fears before 25FY 3rd quarter earnings; and two new reported cases of HMPV. Earnings are going to kick off later this week with Tata Consultancy Services on January 9th. Bonds and the rupee are also losing value due to strong dollar sentiment and rising yields.

Live Event

Our friends at Corridor Connect are hosting an evening panel discussion on Indian markets in New York City on Thursday, January 16th. See flyer to sign up and for more information.

Seats are running out for our upcoming “Future of India” expert panel and networking event on Wednesday, February 12, 2025, in New York City. Buy now here, or earn a free ticket by sharing Samosa Capital with three friends.

Jewelry Companies Are Shining Bright

Titan Company, India’s leading jeweler and watchmaker, reported a robust 24 percent rise in third-quarter revenue, fueled by booming domestic demand for jewelry during the festive and wedding seasons. This marks an acceleration from the 22 percent growth reported in the same period last year. 

So what? India’s rising middle class is spending more than ever adorning itself during this holiday season. Titan’s jewelry segment, which accounts for 87 percent of its total revenue, saw a 26 percent y-o-y increase in sales during the quarter ended December 31, lifted especially by Diwali, Christmas, and the wedding season.

Why now? The July 2024 reduction in gold import duties (6 percent from the previous 15 percent) further sweetened the deal for buyers, making gold more affordable.

But... Despite the impressive topline growth, Titan faced headwinds due to the July customs duty cut on gold. The company estimated a loss of 2.75 billion to 2.80 billion rupees in Q3 due to higher-priced inventory bought before the tariff reduction.

India’s love for gold will continue. As India remains the world’s second-largest gold consumer, Titan’s strong festive demand and its ability to leverage bullion’s dual appeal as jewelry and investment position the company for continued growth in 2025.

Indian Services Continue Improving

India’s services sector, a key pillar of the economy, ended 2024 on a strong note. The HSBC India Services Purchasing Managers' Index (PMI) rose to 59.3 in December, up from 58.4 in November (a reading above 50 indicates expansion).

Good news: Demand surged, with the new business sub-index — an indicator of demand — growing at its fastest rate in four months, driven by robust domestic and international orders. Firms are hiring: surveys reveal that firms are hiring at their fastest rate since 2005, with 10 percent of all firms expanding their workforce.

Offsetting manufacturing slowdown: The strength of the services sector offset a slowdown in manufacturing, lifting the Composite PMI to 59.2 in December from 58.6 in November. This underscores the services sector’s vital role in maintaining economic momentum as manufacturing faces challenges.

Loan to Deposit Ratios are Becoming Safer

HDFC Bank, India’s largest private lender by assets, reported a 4.2 percent quarter-on-quarter growth in deposits for the December quarter, outpacing its 0.9 percent loan growth. This reflects the bank’s effort to rebalance its loan-to-deposit ratio, which rose to 110 percent after its merger with parent HDFC in July 2023. 

Who cares? A high loan-to-deposit ratio poses risks, as it can strain liquidity during bank runs or economic downturns. HDFC’s performance often serves as a bellwether for India’s banking sector. Deposits grew to $286 billion (₹24.5 trillion) during the quarter, although at a slower pace than the 5.1 percent growth in the previous quarter. Low-cost current and savings account deposits, a key source of liquidity, rose by a modest 1.1 percent.

Securitizing its way to safety: To address its elevated loan-to-deposit ratio, HDFC Bank securitized $2.5 billion (₹216 billion) of loans in the December quarter, a strategic move to offload assets and improve liquidity. The bank has also begun offering retail loans for sale to manage its balance sheet more effectively. 

RBI lets HDFC eat more of the pie: In a separate announcement, the Reserve Bank of India (RBI) has granted HDFC Bank approval to acquire up to a 9.5 percent stake in Kotak Mahindra Bank, AU Small Finance Bank, and Capital Small Finance Bank within the next year. This move could bolster HDFC Bank’s market influence and diversify its portfolio.

Gupshup

Macro

• Morgan Stanley estimates that Indian bond indices will fall short of the $30 billion (₹2.6 trillion) inflow estimate. Indices will likely only attract around $15 billion (₹1.3 trillion) due to rising UST yields, a falling rupee, trade uncertainty, and a hawkish Federal Reserve. Foreign ownership of the FAR (accessible for foreigners) is now 6 percent compared to 3.5 percent at the beginning of 2024. The JPM EM index weights Indian bonds at 7 percent, though may increase the weight to 10 percent in the coming months.

• The rupee continues to hit record lows at 85.85 even with RBI intervention. Throughout the last few weeks, the rupee has continued to slide even with state-run banks offering dollars to stem depreciation. Market participants expect to see such intervention become more limited under RBI Governor Sanjay Malhotra.

Equities

• Short sellers covering Nifty options led to Indian stocks rallying 2 ITC, a consumer goods conglomerate, repriced shares at $5.35 (₹459) after spinning off the hotel division. The shares fell by 5 percent since opening and the new hotel spinoff shares have not been listed yet, though they are expected to trade anywhere from $1.38 to $3.50 (₹113 to ₹300). The current shareholders are going to own 60 percent of the hotel company once spun out — the subsidiary will have ownership of 44 luxury hotels across India.  

• US pizza chain Papa John's plans 2025 entry to India, one year later than expected. Papa John’s unveiled new plans to create 650 franchises by 2030. Papa John’s first exited the country in 2017 after having trouble competing with Domino’s and Pizza Hut.

• ​​3 HMPV confirmed cases have spooked investors. Cases in Gujarat and Karnataka have led to wide selloffs to the tune of 2 percent across industries. India’s VIX (a measure of volatility and often fear) jumped to 16 percent.

Alts

• India is planning $3 billion (₹257.4 billion) in aid for electronics. The Ministry of Electronics is proposing $2.7 billion (₹230 billion) in subsidies to boost exports and manufacturing capability. The components targeted by the reforms are memory, storage, processors, and camera components.

• Stonepeak's Digital Edge gets $1 billion (₹85.8 billion) in loans for data centers across India and Korea. The debt consists of 2 equal-sized loans for each country. Digital Edge is planning on developing data centers at Navi Mumbai, which will considerably boost AI capability within the US. 

• India aims to secure $107 billion (₹9.2 trillion) in private capital to expand its power grid. States are expected to leverage existing assets as collateral to raise funds for new transmission lines. Additionally, transmission pricing regulations are set to be restructured to include a revenue assurance model, ensuring consistent returns for investors.

Policy

• The US National Security Adviser will discuss Chinese dams during India visit. Jake Sullivan is meeting with Indian officials in New Delhi to discuss nuclear cooperation, AI, space, military licensing, and economic capacity. Chinese dams have been controversial for their downstream impacts on Indian communities; Sullivan may be trying to broker peace between the two countries on the issue.

• The government aims to increase exports to $2 trillion (₹171 trillion) by 2030. Commerce Minister Piyush Goyal announced plans to revamp special economic zones (SEZs) to support businesses in targeted regions. The government also seeks to accelerate growth in export-ready sectors like industrials, which have historically lagged behind IT services.

See you Tuesday.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.