Voice Of Capital Market

Association Of National Exchanges Members Of India

President's Message

Dear Members,

Namaskar and Greetings,

 Wishing all ANMI members a Happy Republic Day ! As we celebrate this significant milestone, let us reaffirm our commitment to upholding the core values of unity, integrity, and progress, which are essential for building a brighter and more prosperous future for our nation and our markets.

 The regulatory landscape governing our industry continues to evolve at a rapid pace. While our members have demonstrated commendable resilience in adapting to these changes, it is undeniable that this constant adaptation comes at a cost, both in terms of financial resources and operational complexity. At ANMI, we remain steadfast in our efforts to engage constructively with regulators and market infrastructure institutions. We are committed to voicing the concerns of our members and advocating for a regulatory environment that fosters both stability and growth. However, we acknowledge that these efforts have met with varying degrees of success.

 As we embark on this new calendar year, it is crucial to take stock of the significant developments unfolding on both the national and international fronts, as these events invariably have ripple effects on our markets. The global economic and political environment is in a state of flux. Political shifts and evolving economic policies in major economies around the world can have significant implications for global trade, investment flows, and market sentiment. These international developments have indirect but tangible consequences for our domestic markets, influencing investor behavior and market dynamics.

 On the domestic front, the upcoming Union Budget for 2025, scheduled for presentation on February 1st (a Saturday, breaking with established tradition, with exchanges remaining open), holds immense significance. This annual fiscal roadmap sets the tone for the nation's economic priorities and can have a profound impact on various sectors of the economy, including the financial markets. We have submitted our pre-budget memorandums, which are based on rigorous analysis and compelling arguments. We are hopeful that these submissions will receive careful consideration from policymakers and that the budget will reflect a supportive stance towards the healthy functioning and growth of our markets.

Let's delve into some key economic trends that are shaping the current economic environment:

 ·Forex Reserves: India's forex reserves have seen fluctuations recently. These movements can be attributed to a combination of factors, including revaluation adjustments and interventions by the Reserve Bank of India (RBI) aimed at managing rupee volatility in the foreign exchange market. The dynamics of foreign currency assets and gold reserves, key components of the overall reserves, play a significant role in these changes.

 India's forex reserves dropped by $8.7 billion to $625.87 billion in the week ending January 10, 2025. This follows a previous decline in early January, largely due to revaluation and interventions by the Reserve Bank of India (RBI) to curb rupee volatility. Foreign currency assets, a major component, fell by $9.47 billion, while gold reserves saw a slight increase by $792 million.

·FDI Trends: Foreign Direct Investment (FDI) inflows, a crucial indicator of investor confidence in the Indian economy, have exhibited a changing pattern. While gross FDI inflows have shown positive trends, net FDI inflows have experienced a slowdown. This can be attributed to factors such as increased repatriation of investments and overseas investment activities undertaken by Indian companies. Understanding the sectoral distribution of FDI and the source countries of these investments provides valuable insights into the areas attracting foreign capital.

 Net foreign direct investment (FDI) inflows slowed to just $0.5 billion between April-November 2024, down from $8.5 billion in the same period the previous year. This is primarily due to increased repatriation and overseas investments by Indian firms. Despite this, gross FDI inflows rose to $55.6 billion, with sectors like manufacturing, financial services, and energy receiving the largest shares. Singapore, Mauritius, the UAE, Netherlands, and the US were the top contributors.

·Crude Oil Imports: India's reliance on crude oil imports, a substantial component of the nation's import bill, has been a subject of ongoing attention. The interplay of domestic production, increasing energy demand, and global crude oil prices has a direct bearing on the country's energy security and fiscal health. Recent geopolitical events have also influenced the dynamics of crude oil supply and pricing, adding further complexity to this sector.

 ·India's crude oil import bill increased by 3.7% to $102.5 billion during April-December 2024. The country's reliance on imported crude rose to 88.1%, from 87.5% the previous year, amid stagnant domestic production and rising demand. While Russia remained the largest supplier in December, imports from Russia declined, which could push up costs for Indian refiners, especially with new US sanctions on Russia.

·Fiscal Deficit: The nation's fiscal deficit, a key indicator of government finances, is projected to undergo adjustments due to anticipated growth in tax revenues. These changes are expected to contribute to overall fiscal consolidation. Tracking the debt-to-GDP ratio and government debt servicing costs provides a clearer picture of the nation's fiscal sustainability. In terms of growth, India is forecasted to be the fastest-growing major economy with an expected GDP growth rate of 6.7% in FY2025 and Fy2026.

 · IMF Economic Outlook:  The IMF has projected India's growth at 6.5% for FY2026 and FY2027, in line with its potential. The International Monetary Fund (IMF) provides regular economic assessments and forecasts for various economies, including India. These projections offer valuable insights into the anticipated growth trajectory of the Indian economy and its relative performance compared to other major economies. Understanding the underlying factors driving these forecasts, such as the performance of the services and manufacturing sectors, is essential.

 ·Future Skills: India's preparedness for the evolving demands of the future job market, particularly in areas such as artificial intelligence (AI), digital technologies, and green industries, is a critical factor for long-term economic growth and competitiveness. Assessing India's performance on global indices that measure future skills readiness provides a benchmark for progress and highlights areas requiring further attention. Ranked 25th in the QS World Future Skills Index, India scored highly on metrics like the future of work, positioning itself as a 'contender' in developing future-ready skills.

 ·Mobility Sector Investment: The mobility sector, encompassing transportation and related industries, is undergoing a significant transformation globally. India's efforts to attract investments in this sector, with a focus on green technologies, electric vehicles, and alternative fuels, are aligned with global trends towards sustainable transportation. Government initiatives such as "Make in India" and the Production Linked Incentive (PLI) scheme play a crucial role in driving growth in this sector.

 ·Maritime Security: Maritime security plays a pivotal role in safeguarding India's economic interests, particularly considering the country's extensive coastline and dependence on sea-borne trade. Ensuring the security of territorial waters, freedom of navigation, and protection of sea routes are essential for maintaining the uninterrupted flow of goods and services. The increasing importance of cyber security in the maritime domain adds another layer of complexity to this critical area.

In conclusion, the dynamic interplay of global and domestic economic factors necessitates a prudent and adaptable approach to market operations. The trends outlined above present a blend of opportunities and challenges, underscoring the need for robust risk management strategies and a proactive approach to navigating the evolving market landscape. As we move forward, fostering open communication, collaboration, and knowledge sharing within our community will be essential to ensure we successfully navigate these dynamic times.

With regards,

CA Vinod Kumar Goyal

 National President