Business Bulletin

For the Week Ending 23rd March

Hello everyone, I am Amruta and welcome to Trading Talkies, your own financial channel. In today's podcast, we will discuss the latest business news, including the impact of the banking crisis in America and Europe on the demand for the IT sector, which sectors are likely to see the highest salary growth, Tata Motors' announcement of an increase in commercial vehicle prices, Adani Airports' plan to expand its capacity, Hero MotoCorp's plan to increase prices of its bikes and scooters, the arrest of cryptocurrency king Do Kwon, and the tax battle between debt funds and term deposits. We will also discuss how the spike in soybean oil prices is increasing food inflation.

Before we begin, let me give you a brief overview. We will be discussing some interesting top news related to business. So, stay tuned and follow us to stay up to date with what's happening in the world of finance.

Let's begin by discussing how the banking crisis in America and Europe has impacted the demand for the IT sector. As we all know, a significant portion of revenue for IT companies comes from North America and Europe. However, these two economies are slowing down, and with inflation on the rise, central banks are increasing interest rates. This was already expected to cause a slowdown for IT companies in 2023-24. However, the crisis in the banking and financial services sector in America and Europe has further increased demand uncertainty, according to analysts.

Just a few weeks ago, at least three lenders in America, including Silvergate Bank, Silicon Valley Bank, and Signature Bank, shut down. This had an impact on other regional banks as well, as worried customers began to withdraw their deposits and shift to larger, more stable banks. The shares of First Republic Bank fell by 90%. If the crisis in America's regional banks was not enough, Switzerland's banking giant Credit Suisse also required a bailout and was acquired by its rival UBS.

The banking and financial services (BFS) sector is a significant vertical for software services companies, whether they are large firms like TCS, Infosys, and Wipro or their smaller mid-cap competitors. According to Kotak Institutional Equities' analysis, TCS's BFS exposure (excluding insurance) is 29%, while Wipro and Infosys have 26% and 27%, respectively. Other IT companies like Cognizant, HCL Tech, and Tech Mahindra also have significant exposure in the BFS sector, ranging from 12% to 19%.

The current banking sector crisis in America and Europe could lead to a further reduction in IT companies' discretionary technology spending, according to Kawaljeet Saluja and Sathishkumar S, analysts at Kotak Institutional Equities.

"BFS firms have spent more on cloud migration and tech upgrades to become cloud-first and data-driven organizations, improve customer experience, reduce inefficiencies, increase productivity, and better compete with digital natives. Banks will now focus on avoiding this crisis and ensuring adequate liquidity and capital adequacy, and they will be prudent in their spending," they said.

"Tech budgets outlined at the start of the calendar year can be toned down to align with increased risks faced by the sector," analysts said.

"Companies expect clients to increase focus on cost optimization projects over long-gestation transformational projects in the near-term, with rising macroeconomic volatility. The recent volatility in the global financial sector could increase demand uncertainty," they added. (shorten this news) 

Do you know which sectors will see the highest salary growth and why? Let's find out. According to EY's 'Future of Pay 2023' report, professionals in India can expect an average salary increase of 10.2% in 2023, which is slightly lower than the 10.4% increase seen last year.

The report indicates that the top three sectors that will experience the highest salary growth are all related to technology. These are e-commerce, professional services, and IT.

The e-commerce segment is expected to see the highest salary growth, up to 12.5%, followed by professional services (11.9%) and IT (11.6%).

Last year, the average salary growth in these sectors was 14.2%, 13%, and 11.6%, respectively.

However, the report also highlights that both the e-commerce (27.7%) and technology (22.1%) sectors had the highest attrition rates, along with financial institutions (28.3%). The average attrition rate was 21.2%.

The report notes a high demand for technology skills such as AI and cloud computing, and 48% of companies offer premium pay for these in-demand skills. According to Abhishek Sen, a professional at EY India, "As the Indian economy grows, competition for top talent with critical skills and a high-performance history is intensifying across various industries. Top talent with critical skills and high-performance history command compensation premiums ranging from 1.7 to 2X of average talent."

About Tata Motors' recent announcement, last week Tata Motors announced that they will increase the prices of their commercial vehicles, which will be effective from April 1st.

The price increase percentage will vary for different models and variants, and it may go up to a maximum of 5%. The company stated that this decision was made due to their efforts to comply with BS6 phase II emission norms.

The company also informed that they are upgrading all their vehicles to comply with BS6 phase II emission norms. Customers and fleet owners can expect cleaner, greener, and technologically superior vehicles, providing them with higher benefits and lower total ownership costs.

After this announcement, Tata Motors' shares also witnessed a growth of 0.43%, and the shares closed at Rs. 412.50.

It seems like Tata Motors took "April Fool's Day" very seriously, as they had already announced the price hike a few days ago! But seriously, it is great that the company is taking steps to comply with emission norms and providing upgraded vehicles to their customers.

Adani Airports' chief Arun Bansal has stated that the cost of running airports should be reduced by 30-50% in the coming years. He also spoke about the growth of the Indian aviation market and his company's desire to become one of the world's largest airport operators.

Currently, Adani Airports operates 7 airports and is building one more. Bansal mentioned that they are investing in digital and physical segments and plan to increase capacity.

Adani Airports is optimistic about the Indian aviation market and "wants to operate more airports," he said. The Navi Mumbai airport will be operational by December 2024 under the first phase, with a passenger handling capacity of 20 million. Adani Airports also operates Mumbai airport.

Bansal also mentioned that they plan to start an aviation institute.

It is clear that Adani Airports' chief Arun Bansal is optimistic about the Indian aviation market and wants his company to become one of the world's largest airport operators, given the rapid growth of the Indian aviation market and the fact that several Indian airlines have placed orders for planes.

Let me tell you about an old email from Mark Zuckerberg. This email was written in 2010 when Zuckerberg was only 26 years old and had very little experience as the CEO of Facebook.

So, what happened? TechCrunch had reported that Facebook was making a secret phone, to which Zuckerberg had said that this news was completely false and Facebook was not making a phone. However, someone had leaked this news to an outsider from within the company. And Zuckerberg was very upset about it.

He sent an email in which he told whoever had leaked the news to resign themselves. And if they didn't resign on their own, the company would find and fire them. Zuckerberg said that if you think it's okay to leak confidential information outside, then you should leave the company.

Zuckerberg took this matter very seriously and had to personally spend a lot of time on damage control after the leak. But now it's been several years since this happened and this email has recently been leaked on the internet.

So that was the juicy news about an old email from Mark Zuckerberg. This email showed that Zuckerberg is quite strict when it comes to his company's confidential information. What do you think? Is this right or wrong?

Hero MotoCorp has announced that it will increase the prices of its bikes and scooters by up to 2% from next month. The reason behind this is the increase in production costs due to the implementation of the BSVI norms.

Following this announcement, Hero will increase the ex-showroom prices of its bikes and scooters, which will come into effect from April 1, 2023. The exact percentage of the price revision may vary for different models and markets.

However, Hero MotoCorp provides innovative financing solutions to support its customers, so there is no need to worry.

Currently, the automobile industry is working on the second phase of BSVI implementation. From April 1, vehicles must have an on-board self-diagnostic device to monitor real-time driving emission levels.

It is worth noting that this announcement is not only for Hero MotoCorp, but other manufacturers in the automobile industry may also follow suit.

In other news, the fugitive cryptocurrency king Do Kwon has been arrested in Montenegro. Do Kwon is known for being behind the TerraUSD and Luna tokens, which caused a $40 billion loss in the crypto market last May.

Kwon had been wanted since September and had been on the run. However, he has now been apprehended in Montenegro. Kwon and his company, Terraform Labs, were accused by US regulators of "multi-billion dollar crypto asset securities fraud."

According to the US Securities and Exchange Commission, Kwon misrepresented the stability of TerraUSD, which was one of the top cryptocurrencies in terms of market value at one point. The SEC stated that "we allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors."

At the time of this arrest, there is a lot of turmoil in the cryptocurrency market. In November, FTX cryptoexchange went bankrupt, and its founder, Sam Bankman-Fried, was accused of fraud.

And now the most shocking news from last week's news, IT company Accenture announced that they will be laying off 2.5% of their global workforce, which means saying goodbye to about 19,000 employees from the company.

And this announcement came when the company reduced its annual revenue growth and profit forecasts. This is amazing! Their stock price also went up by 4%.

But they say they will continue hiring to support their strategic growth priorities. And now they have also initiated steps to streamline operations and transform non-billable corporate functions.

So what will happen to Accenture's employees now? Only time will tell!

And now the tax battle between debt funds and term deposits

So far, long-term capital gains were subject to a 20% tax with indexation benefits, but now the government has decided to end this benefit. Now, for mutual funds with less than 35% investment in equity shares, tax will be levied on investors' income tax slab rate. As a result, there will be no difference in taxation between debt funds and term deposits.

But investors did not like this decision. They benefited from investing in debt funds, but now that benefit is ending. Some experts are calling this decision overdue and it will bring uniformity to taxation in bond investments.

But one thing is clear that mutual fund investors will now have to invest for extra returns only, there will be no tax benefit. And this is an interesting challenge for investors.

So far, this decision will not affect mutual funds much, as their major profit comes from equity funds. But this decision can help banks due to the decline in deposit growth.

Soybean oil may bring inflation in India

Now let's talk about the latest news which is that of Argentina. Yes, you heard it right, the fate of Argentina's farmers is bad and as a result, the world's largest importer of soybean oil and soymeal, India, may also suffer losses.

So, due to the lack of rainfall and extended heat waves in Argentina for several days, agriculture output is being affected. The Buenos Aires Grains Exchange estimates that soybean production this year could be around 25 million tonnes, which is almost 44% lower than the average of the last five seasons.

This will also significantly impact soybean oil and soymeal exports from Argentina. And for India, a major soybean oil importer, this news will be quite worrying.

And this news is fresh, just last year when Russia invaded Ukraine, edible oil prices skyrocketed. Due to Argentina's difficulty, there are chances that edible oil markets may be disrupted again.

Now, if soybean oil prices spike, it could also increase food inflation. So, let's hope that soybean oil imports come from another country, but yes, prices will not fall like that.