Business News at 09:30 am on 6th February 2023

The Securities and Exchange Board of India has gone into ‘high alert’ mode with regard to front-running in mutual fund houses and broking firms, which is a serious stock market offence. According to sources, auditors of the market regulator have started visiting fund houses and seeking call record data of fund houses and senior officials. In addition, they are also seeking backup data of transactions being made by fund houses for audit. An industry source said quote, “Sebi does not want to be caught on the backfoot when it comes to front-running cases. It is extremely worried that some fund houses are following the guidelines on paper and not in spirit,” unquote. According to him, the idea is to keep the fund houses on their toes and ensure that guidelines are followed stringently. Front-running is the practice of purchasing shares/ other securities based on advance non-public information regarding a large transaction that will affect the price of a security. It comes under the category of market manipulation and insider trading. It constitutes a serious violation and falls under the Sebi, Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market, Regulations, 2003.

Next to Economy, Smaller government allocation for rural schemes and elevated inflation could weigh on sales growth at consumer-oriented companies, including makers of fast moving consumer goods and discretionary products. The allocation for core rural sector schemes in Budget 2023-24 is down 16% over the revised estimates for financial year 23; adjusted for food subsidies, the fall is 6%. In absolute terms, the budgeted allocation has come off from Rs 8.5 trillion in financial year 21 to Rs 5.4 trillion in financial year 24. Support for rural programmes had held up consumption during the pandemic. Analysts say the weak rural sales growth since the March 2022 quarter may result in optically better growth from the March 2023 quarter, but demand is muted and consumers are downtrading. Rural FMCG volumes contracted 2.8% year-on-year in the October-December period, while urban volumes grew 1.6% year-on-year, data from Nielsen showed. On-the-ground demand in the hinterland is still badly affected by inflationary pressures. Net financial savings of households are estimated to have fallen to a three-decade low of about 4% of GDP in H1FY23 from 7.3% in FY22, suggesting savings boosted consumption.

Let us have talk on Industry, The government is set to allow the Competition Commission of India to take decisions on mergers and acquisitions with its current board strength of two, pending the regulator reaching the quorum of three members. This will be done by invoking the “doctrine of necessity” clause, which gives the government overarching powers to take measures that may not be part of the law concerned, but it could still use at a particular time to deal with an exigency or to restore stability. A notification to this effect may be issued soon so that the regulator could start clearing M&A deals from this week itself, according to official sources. The move comes at a time when a clutch of mergers and acquisition deals with combined transaction value of over Rs 10,000 crore are pending approval from the CCI for its lack of quorum. Industry has expressed concerns over the situation, and cited that even some foreign direct investment proposals are hanging fire due to the regulatory delay.

Meanwhile, Around 101 tech firms fired 25,436 employees globally in the first few weeks of January, according to layoff tracking site layoff.fyi. The tech industry, including Big Tech and startups, together laid off over 17,000 employees in India in 2022. Even as they continue to sack employees at frequent intervals, startups maintain they are also on the lookout for fresh talent and therefore hiring. For instance, Zomato, which recently fired over 100 employees, has said it is hiring for 800 roles. Cars24, which let go 600 staffers last year, announced it is looking for 500 new recruits. In December 2022, UpGrad sacked 70 people, but plans to increase its total headcount by 1,400 to 9,100 by March.

Lastly, India Inc feels that the measures announced in the Union Budget would invigorate the critical demand drivers of consumption and investment, which would lead to a pick-up in private capex. Industry captains feel that measures related to digital infrastructure, emphasis on urbanisation and green growth address growth concerns. Further, the 33% rise in capital spending by the government for FY24 will push the overall productivity of the economy and lead to creation of jobs. Continued support to the vehicle scrappage plan, extension of Customs duty on lithium-ion batteries by another year, and 50 additional sites for improving regional air connectivity are some of the other measures announced in the Budget, which are seen to give a push to investments.