(Bloomberg) — India is showing nascent signs of reversing a troubling trend as private investment picks up, aided by improving consumption and softening inflation, data show.
“I am cautiously optimistic about growth with some signs of gradual, though uneven, revival of consumption demand,” said Jayanth Rama Varma, an external member of India’s monetary policy committee. A modest increase in private capital spending is counted on to support the recovery, he said in an interview earlier this month.
Private investment in physical assets, including infrastructure, holds the key to sustaining India’s world-beating growth as fiscal room to boost spending remains limited. Investment has been on a decline for more than a decade as companies waited for durable demand and policy stability.
Businesses ramping up capacity as domestic demand recovers indicates early signs of a turnaround.
“A recovery in private capex is underway” as investments in infrastructure, manufacturing and technology services have picked up, Morgan Stanley economists led by Chetan Ahya wrote in a recent report, noting the growth in private projects under implementation has risen to a 10-year high of 9.2% at the end of June.
At the same time, capacity utilization of manufacturing firms has risen to a three-year high of 75% in three months to March, surpassing the pre-pandemic levels of 69.9% recorded during the January-March quarter two years ago, suggesting plans are being drawn for fresh investment.
The share of private sector proposal for new investments jumped to nearly 91% in April-June quarter, up from 78% during the previous quarter, data from the Centre for Monitoring Indian Economy Pvt. cited by rating company CareEdge showed.
Gross domestic product data due Aug. 31 will show how gross fixed capital formation — a proxy for investment — grew in April-June.
Output of capital goods — physical assets used by businesses to produce goods and services — has risen by double digits for three straight months after a slump in most part of the last two years. The strongest performance among the components of factory output helped the overall index perform better than expectations in June.
“We will get back to pre-pandemic level,” said Kamal Nandi, business head and executive vice president at Godrej Appliances. “Demand for appliances will go up and I think all brands have accordingly planned their expansions on capacity.”
Still, some companies are waiting for clear signs of lasting demand and the easing of supply chains impacted by the war in Ukraine and Covid-19 lockdowns in China. “The industry is yet to solve the disrupted supply chain challenges leading to shortages of key inputs,” said Shankar Raman, chief financial officer at Larsen & Toubro Ltd., India’s engineering conglomerate.
Bank credit increased 14.5% from a year earlier as of July 29, more than double the growth it saw a year ago. Some of it may have been fueled by higher working capital requirement, but “it is also a reflection of improved investment demand,” CareEdge said in a note.
Businesses in Asia’s third largest economy want to see price pressures ease some more to spur demand. Retail inflation cooled to a five-month low in July and further moderation is seen ahead. Car sales rose for a second straight month in July, indicating improving demand.
“Ultimately it is strength of demand conditions and its long-term stability which matter,” said Gaurav Kapur, Chief Economist of IndusInd Bank Ltd.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
