The Stock Markets Take A Pounding On Foreign Investor Selling
It was a tough week for investors who saw wealth vanishing away with the Sensex falling over 4,000 points
On Episode 465 of The Core Report, financial journalist Govindraj Ethiraj talks to Dinesh Kanabar, CEO at tax advisory company Dhruva Advisors as well as Sheetal Sapale, Vice President at Pharmarack.
(00:00) Stories of the Day
(01:19) The stock markets take a pounding on foreign investor selling, the last week has no real good news.
(02:54) Rupee hits fresh low, forex reserves drop sharply
(06:18) India’s direct tax collections are rising, what is driving it?
(13:35) Indians are willing to seek treatment for more disease conditions including depression and that is driving up sales of cures
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Monday, the 23rd of December and this is Govindraj Ethiraj, headquartered and broadcasting and streaming from Mumbai, India’s financial capital.
Before we start, this is our last news podcast for the month and year, from tomorrow we will switch to a feature mode with indepth conversations and interviews on a host of issues ranging from backcasting as opposed to forecasting as business strategy to the state of the economy, outlook for 2024 and creativity in Indian advertising.
And now
Our top stories and themes
The stock markets take a pounding on foreign investor selling, the last week has no real good news.
India’s direct tax collections are rising, what is driving it ?
Indians are willing to seek treatment for more disease conditions including depression and that is driving up sales of cures.
Rupee hits fresh low, forex reserves drop sharply.
A Bruising Week
It was a tough week for investors who saw wealth vanishing away with the Sensex falling over 4,000 points.
And FIIs started the week in the positive and then hit the reverse gear, taking the market down.
This is also a holiday shortened week thanks to Christmas.
So the week in question saw the Sensex falling 4,092 points (5 percent) to close at 78,042, and the Nifty 50 tanked 1,181 points (4.8 percent) to 23,588.
The Nifty Midcap 100 and Smallcap 100 indices were down by 3.53 percent and 3.57 percent, respectively, during the week.
On Wednesday, the Fed cut rates as expected but scaled back its forecast to two reductions in 2025 from four earlier.
There are no real positive cues on the horizon unless some surprises are sprung. In which case the markets could be subdued as best heading into the year end.
On Friday, the 30-share Sensex fell 1,176.46 points, or 1.49 per cent, to end Friday's trading session at 78,041.59.
Similarly, the NSE Nifty50 ended down by 364.20 points, or 1.52 per cent, to settle at 23,587.50.
Elsewhere, oil has not moved much either, with Brent crude is just under $73 at 72.94.
Rupee
The rupee hit a fresh all-time low on Friday before ending slightly higher, overall holding its losing streak for seven weeks now.
The rupee closed at 85.0150 against the U.S. dollar, up from its close at 85.07 in the previous session, after hitting a low of 85.10 earlier in the session, Reuters reported.
On Friday, the dollar index was down slightly at 108.2, down after hitting a two-year high, while other Asian currencies were mixed.
Meanwhile, India's foreign exchange reserves fell by nearly $2 billion to an almost six-month low of $652.87 billion as of Dec. 13, data from the Reserve Bank of India (RBI) showed on Friday, Reuters said, adding the reserves had declined by $3.2 billion in the week of Dec. 6, and have declined by $52 billion from the record high of $704.89 billion hit on Sept. 27.
Steel Imports
India's finished steel imports from China reached an all-time high during the first eight months of the fiscal year to March 2025, provisional government data showed, adding to concerns among domestic mills about cheap shipments from China, Reuters is reporting.
Total imports of finished steel were at an eight-year high with India which is the world's second-largest crude steel producer.
India shipped in 6.5 million metric tons of finished steel, a 26.6% increase year-on-year, the data showed
India became a net steel importer in the financial year that ended in March 2024, and imports have steadily increased since then.
India produced around 138 million tonnes of steel last year so the imports in absolute terms are not so high though they could be price determining.
India is aiming for domestic production crossing 300 million tonnes by 2030.
A GST council meeting on Saturday
Finance Minister Nirmala Sitharaman-led goods and services tax (GST) Council Meeting on Saturday, December 21, is putting an 18 per cent GST on margin value on sale of used electric vehicles (EVs) by businesses and quite importantly, clarified on the taxability of popcorn, saying caramel popcorn will continue to attract tax at the rate of 18 per cent.
Else The GST Council in its 55th meeting conducted in Jaisalmer, Rajasthan, on Saturday, deferred much-awaited decisions on reducing tax rate over life and health insurance premiums as also on levying tax over food delivery by app-based platforms such as Swiggy, Zepto, and Zomato.
The panel, and comprises representatives of all states and union territories, also clarified that pre-packed and spiced popcorn will attract a 12 per cent tax rate, while five per cent will be levied on unpacked and unlabeled ones.
The GST Council cut the tax rate on fortified rice kernels used for public distribution to five per cent from 18 per cent.
It also said put a 18% tax on the sale of second hand cars by companies which could dent the businesses of used car sales companies.
Why have Direct Tax Collections Risen?
The government’s net direct tax collections for 2024-25 rose 16.5% to Rs 15.82 lakh crore till December 17, 2024, thanks to strong personal income tax collections though growth in corporate taxes remained moderate.
The gross collection during the period rose 20.32% to Rs 19.21 lakh crore.
Refunds by the tax department for FY25 till December 17, 2024 rose by 42.5% to Rs 3.4 lakh crore.
For FY25, the government has a target of collecting Rs 22 lakh crore through direct taxes.
Net corporate tax collections grew by 8.5% to Rs 7.42 lakh crore.
The corporate tax mop-up mirrors muted profit growth by Indian Inc in the first half of FY25 and we will come to that shortly.
The growth rate so far in corporate tax collection is lower than the budgeted growth of 10.5%.
Net personal income tax collection surged by 22.5% to Rs 7.97 lakh crore in 2024-25 till December 17.
Collection from securities transaction tax (STT) almost doubled to Rs 40,114 crore during the period.
I reached out to Dinesh Kanabar, CEO of leading tax advisory company Dhruva Advisors and began by asking him how he was seeing the rising tax collections and also what he was looking out for from the coming year, including from the proposed new direct tax code.
INTERVIEW TRANSCRIPT
Dinesh Kanabar: Two broad things which come up for 2024. One is we have seen a record number of IPOs and when you see record number of IPOs, not all of them are primary, many of them are also secondary and therefore, if I may say so, the record collections, direct tax collections are primarily as a result of some of those restructuring which has happened, money coming to the company, investors or other promoters selling their shares. Another is of course, the stock market boom and the money which people have made there.
As you rightly observed, if one looks at basically corporate tax, the profits have been quite muted and they themselves do not warrant a 20% increase, which is what we are seeing, but it's largely capital gains, it's largely everything happening on capital market side IPOs. So that's one part. If I look at 2024 and directionally, I think two, three things stood out.
First and foremost, whole thing in the budget where they scrapped the angel tax and I think that was one of the biggest, best moves that the government could do. It took number of years for that to happen, fair enough. You don't know and I can't tell you how many transactions which otherwise were getting stalled only because of this perception that will your valuation be accepted, not accepted and finally the government said, okay, it doesn't matter.
So that has been one very significant thing. The other thing which has happened in 2024 is that the Supreme Court has passed judgments in favour of the revenue and ostensibly some of them otherwise do not seem to make logical or legal sense, but it is only, so for example, there was this whole issue as to when could or up to what period of time could the government reopen assessments when the period was brought down. So when was the past law applicable, when is the current law applicable and if you would have gone to any legal counsel, not necessarily taking a view only for the SSEs, but the general really seemed to suggest that old matters can be revived etc.
etc. and the government issued some 19,000 notices and the Supreme Court came back to say that we cannot pass an order which negates all of this, all of this is legal. So what is seeing a trend where the Supreme Court is going on to say that we cannot frustrate the revenue and it's the first to try and collect taxes.
So that's been one very, very important change.
Govindraj Ethiraj: Okay, so let's look at 2025. We've got a dramatic rehaul of the tax code that has been promised for which feedback is being solicited or has been solicited and will go on till the budget. So thematically, what are you looking out for and what do you expect?
Dinesh Kanabar: The number of versions that I have heard from the government sources on what is likely to happen is not funny. I don't think they have made up their mind. There are different people at fairly senior levels giving different messages.
So whether it's going to be a new code itself or are they going to simply rewrite the Income Tax Act, question number one. Question number two, if they are rewriting the Income Tax Act, it is only to simplify the law or are they going to make some drastic changes, question number two. And as many people as you ask, you get different answers.
Then are all these changes going to come one shot or are they going to come at different points of time and again you get different answers. The latest which I have heard, and I don't know whether this will stack up or not, is that in the budget there will not be too many changes, but in the budget session, a new bill will be introduced to make the changes and then depending on whether it's going to be a code or not, it will be referred to select committee and then things will happen from there. So that's one part.
So I don't know directionally where this is going and the reason I am saying getting so many different things seems to suggest that the government itself is still to make up its mind on how far to go. The fact that Sanjay Malhotra has now moved off from revenue secretary to RBI, how much impact it was, he was driving the whole process. And sure, this is a good team, big team, we have interacted.
But there is that discrepancy. So let's see where all of this goes. I am looking hopefully to see one very important change which is with regard to dispute resolution.
So the point today is that once a dispute starts, it takes whatever 15, 17, 20 years before a Supreme Court decides. And by and large, the government has enhanced the limit or the monetary amount which should be involved for the government to appeal. Still, almost everything passes that threshold before everything ends up with the Supreme Court.
And the question is, is there a way in which a resolution can be found on tax litigation without it having to go through all the rounds of the court? And a number of suggestions have been made in this direction. Government has invited so many people, India, overseas, looked at what is happening globally, one will wait to see where does this go, but a number of changes expected there.
Govindraj Ethiraj: And any one area apart from dispute resolution that you would hope to see which may not have otherwise been on the horizon or something a little, let's say, leap of faith kind of thing?
Dinesh Kanabar: Yeah, I think one other thing is on restructuring. So what has happened is that in terms of mergers, amalgamations, restructuring, there are provisions in the Act which are very poorly worded. So when you go and ask a tax officer or the legislator that, is this what you intended?
The answer is no. Is the way the law you have drafted capable? Yes.
But it is lying there for years and years and years. Everyone is hoping that some of those cobwebs will be removed.
Govindraj Ethiraj: That's a good note to end on. Thank you very much, Mr. Kanabar. Wish you a very happy new year ahead as well.
Dinesh Kanabar: Thank you and all the very best to you also.
A Year For Anxiety
There are more Indians now getting treated for neurological conditions including depression, mostly because they are willing to talk about it.
Overall, the pharma industry has grown on the back of several rapid growth categories like weight loss, apart from cardiac which has now become the number one category and more on that shortly.
Overall, the industry has grown 8% to Rs 2.2 lakh crore or Rs 220,000 crore, a number which is considered good by industry analysts.
Non communicable diseases continue to grow in India, reflecting several factors including of course changing lifestyles and our response to them.
I spoke with Sheetal Sapale, Vice President, Pharmarack, who has analysed the year’s data and began by asking her what were the big trends in pharma company sales and drugs this year ?
INTERVIEW TRANSCRIPT
Sheetal Sapale: The pharma market has been an attractive market for so many years and even this year has been a blockbuster year for the market. Though the market has grown by just 8% for the year, but then if you look at the base, the base is a huge base. Okay, so on this huge base of 2.2 lakh crore, 8% growth is a significant growth that the market has shown. Over a period of time, you see the cardiac category has moved to the number one position. Earlier it used to be the gastro, anti-infectives which were more of the acute conditions which were topping the chart, but today cardiac conditions have become the number one category. This is also indicating that non-communicable diseases are fast catching up.
Cardiac diabetes is proving to be a very important market this year or you know in the last few years. In case of diabetes, we have seen that good amount of molecules went off patent. We have seen good amount of combinations of DAPA which have come in the market and these DAPA combinations, branded generics, they have pushed the growth of the market to a good extent.
Also, if you look at the semi-glutide, which is the anti-obesity drug launched by Novo Nordisk, it has done wonders in terms of changing the dynamics or the sales trends of the anti-obesity segment. In the last five years, the anti-obesity segment has actually quadrupled. In fact, this one brand from Novo Nordisk, it has become almost 350 crore brand or almost touching 400 crores in just in less than two years.
This is the amount of pickup that is there in the market for this type of product. Though expensive, people have the disposable income to buy it, use it. While gastro and other anti-infective segment, they continue to grow in terms of their normal trends, but lifestyle diseases in terms of cardiac and diabetes have picked up well.
One more segment which is really doing well is the derma segment. In derma segment, again, we have seen a good amount of growth in the cosmoderma segment. It's not just the pickup of cosmoderma products like Botox or other demelanizing agents which have picked up well, but we see a good number of speciality companies entering the market focussing only on the high-end cosmoderma segment.
Govindraj Ethiraj: When you say cosmoderma, you mentioned Botox, so that defines it, but is there something else that people are using or buying?
Sheetal Sapale: I mean, Botox would be a general thing, but everything that comes under the anti-ageing category has picked up well. Some products which are for having a very even skin tone like hyaluronic acid and all, those products have done well. I would actually classify it more into the anti-ageing, anti-wrinkle category which have picked up well.
Govindraj Ethiraj: Right, so this is about looking young, but there's nothing, I mean, I'm assuming there's not really anything which actually tries to make you young, for which research is, a lot of people are spending time and effort in other markets like the US.
Sheetal Sapale: Yeah, that's why we're saying cosmoderma. It's a cosmetic derma category which has picked up well.
Govindraj Ethiraj: Got it. Cardiac specifically, so the market's also growing because younger people are experiencing cardiac issues, is that correct?
Sheetal Sapale: Yes, if you see the rate at which our population is growing, it's growing with less than, the rate of growth is less than 1% every year for the last 4-5 years. However, the population dynamics has changed or the demographics of the population. More than 50% of the population today is in the age group of 20 to 60 years.
It's more of a working population and today's lifestyle or professional lifestyle, if you see, it is good amount of stress, lot of sedentary life and a good amount of consumption of not so healthy food. So, there is, you know, this lifestyle diseases are actually picking up on the younger population and that is also leading to this type of growth dynamics that we see in the cardiac.
Govindraj Ethiraj: Right, and the other area, as I understand, where you're seeing a market growing because either younger people are, let's say, getting treated or the fact that they're aware of their conditions and are therefore getting treated, which is depression and neurology.
Sheetal Sapale: Yes, in the last 5 years post-COVID, in fact, we have seen Neurosegment doing well in terms of growth. It's not that all of a sudden people have started suffering lot of depression, that may not be the case. While Neurosegment or anti-depression is one of the conditions which falls in the lifestyle diseases, but getting treated for depression is no longer considered to be a taboo.
So, people are open about the condition, people are willing to get treated and it gets discussed as a normal disease condition and not as, you know, something which should be hidden from the society. So, it's like, you know, if you're suffering from depression, the treatment for depression gets discussed in the same way as I would discuss treatment for hypertension or diabetes with my family or friends.
Govindraj Ethiraj: Right and, you know, like you pointed out how sematotide has become a big drug and phenomenon and that's quite visible and is there something that is where you feel, you know, it's very small today but is growing and could grow the next year, which also reflects maybe changing health conditions or disease conditions?
Sheetal Sapale: Actually, today it is doing well. It has picked up in the market. In fact, obesity and obesity conditions which lead to further complications, a lot of awareness has been created even by the company and that's the reason why the pickup is there.
Good amount of research is available or studies are available online. Though the product is a little expensive, people are willing to consume this product because it's like a ready-made solution for reducing your fats but the product may actually go off patent also in a few years from now. So, probably this type of growth curve may not be seen for a longer period of time but at the same time, there will be newer products which will enter the market.
There will be Wegovy, there will be Ozempic that will be entering the market in the near future. So, even that we keep on pushing the growth of the markets but at the same time, like the way we have seen in the diabetes segment, once a blockbuster molecule goes off patent, a lot of generics enter the market and they ensure that the product is available to the less affording population. So, the volume consumption would actually increase.
Govindraj Ethiraj: Right. Okay. I think in your report, you've talked about combination drugs and that was let's say a phenomenon that picked up pace last year or rather in 2024.
So, do you see that accelerating, steadying?
Sheetal Sapale: Combination drugs in the sense, DAPA plus Metformin. So, it's like earlier but traditionally, we had SU-MET which was the base combination for treating diabetes. Then DPP-4 inhibitors came into picture and then SGLT-2 came into the picture.
So, each type of molecule had its own USP for treating diabetes by controlling different aspects, physiological aspects for this diabetes. But now in India, we are allowed to have different types of combinations and they have picked up pretty well. So, I think whatever combinations could be hit in the country have already been launched.
No more new combinations in diabetes would come unless and until a new blockbuster molecule enters the segment. Specifically for OAD, we don't see any new entrant as of now.
Govindraj Ethiraj: Got it. Sheetal, it was a pleasure speaking with you. Thank you so much for joining me.
Sheetal Sapale: Okay, thank you so much.
