China Exports Fuel India Disinflation, Lower RBI Rates

Local traders remain on the backfoot as Nifty index extended losses on Tuesday, pressured by a tumbling rupee and persistent foreign-fund outflows. The regional mood is equally downbeat: Asian markets trading in a tight range after sluggish US jobs data overnight did little to to boost bets on further interest-rate cuts from the Federal Reserve. Back home, currency jitters stay front and center, with the rupee under pressure and the RBI appearing less forceful in defending it. On the stock-specific radar, Ola Electric Mobility will be closely watched after its founder offloaded shares to repay a loan and free up pledged holdings.

Spy thriller boosts top cinema chain

The box office success of the Bollywood movie 'Dhurandhar' is setting up India's largest cinema chain PVR Inox for a strong December quarter. Industry-wide collections for the period are likely to cross 30 billion rupees, and whenever that happens, PVR typically delivers solid margins, according to PL Capital. Upcoming 'Avatar' release this week should add more tailwinds, especially since PVR controls over 50% of the Hollywood films' box office market in India. The stock is up about 2% this month, even as the Nifty 50 has slipped more than 1%.

Side-effects of blockbuster IPOs

India's blockbuster IPO run this year has come with a small side effect: block deals and institutional placements have lost some momentum. Equity capital market or ECM activity has crossed $50 billion so far, but that's still short of last year's $68 billion record, according to data compiled by Bloomberg. Equity cash turnover on local exchanges is running at about two-thirds of the peak seen in mid-2024, when both IPOs and ECM activity were running hot. While the IPO pipeline remains healthy despite the usual year-end slowdown, the softer pace of institutional placements suggests investors are keener on new stories than topping up existing holdings.

Pharma sector's local growth

Domestic pharmaceutical sales have been growing in the higher single-digit rates, helped by price hikes and new product launches. Diabetes therapies have been a key driver, with strong uptake following the launch of GLP-1 and SGLT-2 inhibitors. That momentum is expected to continue as semaglutide goes generic locally in March, according to BoB Capital analysts, who retain Sun Pharma, Abbott India and Alkem as their preferred picks locally. Meanwhile, Mounjaro remained the largest brand in November, clocking sales of over 1 billion rupees.

While much of the broader debate after India's hot second-quarter GDP revolved around slowing nominal growth, part of the story may lie in China. Suyash Choudhary, head of fixed income at Bandhan AMC, points out that China's exports of excess domestic capacity is adding to the disinflationary impulse in India — and globally. India sources roughly 15% of its imports from its northern neighbor, with the pharmaceutical and automobile sectors especially reliant on Beijing for intermediate goods. "Given there is no early resolution to China's excess capacity," Choudhary says, this is one reason "we think RBI will be able to keep policy rates lower for longer."

Source: Bloomberg Europe