4. Why high US inflation spooked Indian markets

Indian equity markets were under heavy selling pressure on Friday after a sell-off on Wall Street in response to a hotter-than-expected jump in US inflation that fanned expectations the US Federal Reserve will consider a single-largest rate hike in more than two decades.
The event

• US inflation rate surged to a 40-year high of 7.5 percent in January as strong consumer demand collided with pandemic-related supply disruptions.
• The pace of economic recovery has been much faster in the US than the supply chain recovery, which has worsened the demand-supply mismatch and triggered sustained price rise.

The markets

• The Nasdaq Composite dropped 2.1%. Since, Indian markets are aligned to the US and other global markets, the same was reflected in Indian equities too. The BSE Sensex ended the day with a 1.3% fall, while the NSE Nifty dipped 1.48% to end the day at 17,345.55.

The worry

• Foreign portfolio investors (FPIs) based in the US generally borrow in a country where the interest rates are low and invest in a country (like India) where the interest rates are high. And their profit spread depends on dollar-rupee currency fluctuations.
• If the US Fed increases interest rates to counter inflation, then the spread of US investors will fall; which means they will invest less in a country like India and this could then impact the foreign flows coming to India.
• The US makes up the largest chunk of FPI inflows into India and since October foreign investors have relentlessly been selling Indian stocks.

The relief

• Small investors in India as well as high net worth individuals are continuously pumping money into Indian equities despite monetary tightening by global central banks.
• Shareholding of retail investors in all listed companies on NSE reached an all-time high of 7.32% at the end of the December quarter. In value terms, too, retail holding hit a record high of Rs 18.98 trillion in the December quarter.

A warning

• The Uttar Pradesh government on Friday drew flak from the Supreme Court for acting on the recovery notices issued to the alleged anti-CAA protestors in December 2019 and gave one final opportunity to it to withdraw the proceedings and warned that it will quash the proceedings for being in violation of the law.
• The court said that the UP government has acted like a ‘complainant, adjudicator and prosecutor’ by itself in conducting the proceedings to attach the properties of the accused.

The plea

• The top court was hearing a plea filed by one Parwaiz Arif Titu seeking quashing of notices sent to alleged protestors by the district administration for recovering losses caused by damage to public properties during the anti-Citizenship (Amendment) Act (CAA) agitations.
• The plea has alleged that such notices have been sent in an “arbitrary manner” against a person, who had died six years ago at the age of 94 and also to several others including two people who are aged above 90.

The numbers

• The UP government said that 106 FIRs have been registered against 833 rioters and 274 recovery notices issued against them.
• Out of the 274 notices, recovery orders were passed in 236 while 38 cases were closed.

The problem

• The claim tribunals constituted by the state governments were initially headed by Additional District Magistrates (ADMs).
• The Supreme Court had passed two judgements in 2009 and 2018, which said that judicial officers should be appointed in claim tribunals. The state, instead, appointed ADMs.
• On July 9, last year, the top court had asked the UP government not to take action on earlier notices sent to the alleged protestors.

The Supreme Court (SC) on Friday refused to hear pleas challenging the Karnataka High Court’s (HC) interim order against wearing any religious garments till it delivers a final ruling on the hijab row, asking the petitioners not to ‘take it on a larger level.’

The challenge

• In a special leave petition, a student challenged the HC’s interim order barring the wearing of any headdress or saffron shawl, during the pendency of the case which is being heard on a daily basis.
• The student contended that the order curtailed the fundamental right of Muslim female students to wear a hijab and pursue their education — leaving the careers and fate of Muslim girl students in limbo.
• Terming it a ‘complete suspension’ of fundamental rights, the plea said the interim order had ‘far-reaching consequences for other faiths too and not only Muslims’ and cited the Sikhs’ right to wear a turban.

Court’s reply

• Assuring that it will ‘protect constitutional rights’ of ‘every individual, every community’ and not just the ‘constitutional rights of a section of society’, the apex court said that it will hear the case at an ‘appropriate time.”
• The HC, in its order, restrained ‘all the students regardless of their religion or faith from wearing saffron shawls (Bhagwa), scarfs, hijab, religious flags or the like within the classroom, until further orders’ and added that the order was confined to institutions which ‘have prescribed the student dress code/uniform.’

• When and where? The 15th IPL auction — and fifth mega auction — will be held over two days (today and tomorrow) in Bengaluru. It will commence at 12-00 pm on both days.
• Players retained- While the existing eight franchises have retained 27 players, the two new teams — Lucknow Super Giants and Gujarat Titans — have acquired three each.
• Players available- A total of 590 players (370 Indian and 220 foreign) will go under the hammer. The breakup- 229 capped players, 354 uncapped and seven players from Associate teams.
• Minimum & maximum- By the end of the auction, each team should have a minimum of 18 players in thier squad and a maximum of 25. They also need to spend a minimum of Rs 67.5 crore from their total purse of Rs 90 crore. The maximum number of overseas players a squad can have is eight.
• How they stack up- There’s more than Rs 570 crore to be splurged, going by the balance purses of the franchises. Punjab Kings has the biggest reserves of Rs 72 crore for 31 available players. Delhi Capitals have the smallest, with Rs 47.5 crore.
• Price tags- The cheapest player category is Rs 20 lakh and the highest is Rs 2 crore. Overall, there are 48 players (17 Indian and 31 foreign) with a base price of Rs 2 crore. (There are no right-to-match cards available to teams this time.) Only the first 161 players will be up for bidding today, followed by an accelerated bidding process tomorrow.
• Hot picks- Shreyas Iyer, Ishan Kishan, Shikhar Dhawan (India), Pat Cummins, David Warner (Australia), Quinton de Kock, Kagiso Rabada (South Africa) and Jason Holder (West Indies).

• Twin fifties from Rishabh Pant and Shreyas Iyer along with another superb display by the bowlers helped India claim the ODI series against the West Indies 3-0. The duo got together in the 10th over, with India at 42/3, and did well to put on a fourth-wicket stand of 110 to lift them to a decent total.
• Choosing to bat, the hosts lost Rohit Sharma and Virat Kohli early — for the second time in the series, Alzarri Joseph managed to dismiss both in the same over. Shikhar Dhawan was then caught at first slip to leave India wobbling in the Powerplay.
• But Pant and Iyer took control of the next 20 overs. Iyer got to his half-century first and Pant completed his in the 29th over off 47 balls. Having started slowly, Pant was picking boundaries at will and looked in good touch. But soon after reaching his fifty, he fell to Hayden Walsh.
• The legspinner struck again in the 38th over to remove Iyer — caught at long-on trying to up the ante — short of a deserved century. But Washington Sundar and Deepak Chahar ensured there was to be no collapse. The former held up one end, allowing the latter to flourish as the aggressor in their 53-run seventh-wicket partnership.
• The visitors were always going to struggle given how their batting had been so far in the series. And the Indian bowlers ran through them to deny them a single score of 200 in the series. While Iyer won Man of the Match, Prasidh Krishna was declared Man of the Series.
• Scorecard- India 265 (Iyer 80, Pant 56, Jason Holder 4/34) beat West Indies 169 (Prasidh 3/27, Siraj 3/29) by 96 runs

• Low & behold– India’s underlying economic problems in the pre-pandemic era, that had appeared to have been glossed over by the pent up demand of an economy shrugging off the lingering after-effects of Covid-19 induced restrictions, appear to be re-surfacing with a vengeance, with the industrial output for December 2021, as measured by the growth in the Index of Industrial Production (IIP), coming in at 0.4% vis-a-vis December 2020.
• Deja vu– Not only is the IIP for December 2021 the lowest in 10 months but it’s exactly the same as that seen in December 2019. It comes on the back of a 1.3% growth seen in the IIP for November 2021. For the nine months ended December 2021, IIP clocked a growth of 15.2% as against a contraction of 13.3% for April-December 2020.
• The drags– Sectorally, it was manufacturing which led to the fall as it contracted 0.1% — among the three IIP constituents of mining, electricity and manufacturing, the last has a weightage of almost 78% in the index. This was the first contraction seen in the manufacturing sector since February last year but wasn’t entirely unexpected as the sector is battling severe supply shortages — such as that of semiconductors.

• The first part of the Budget Session of Parliament concluded on Friday after debates on the Motion of Thanks on the President’s Address and the Budget.
• The session, which began on January 31, will have a month-long recess for members to study the budget proposals of the government. Parliamentary standing committees will examine the budgetary allocations for various ministries and departments and prepare reports during this time.
• Lok Sabha will take up Demands for Grants, Appropriation Bills and Finance Bill, along with other bills, during the second part of the Budget Session which starts on March 14 and is scheduled to conclude on April 8.
• Lok Sabha clocked a 121% productivity rate during the first part of the session. It discussed the President’s Address for 15 hours, 13 minutes and the Budget for 15 hours, 33 minutes instead of the allotted time of 12 hours in both cases.
• In Rajya Sabha, members raised 51 starred questions, 71 Zero Hour submissions and 50 special mentions.

• Ukrainian skeleton athlete Vladyslav Heraskevych flashed a sign that read ‘No War in Ukraine’ to the cameras as he finished a run at the Beijing Olympics on Friday.
• The gesture comes as Russia has amassed over 100,000 troops near Ukraine, stoking fears in the West that Moscow is planning an invasion. Russia insists it has no such plans but doesn’t want Ukraine and other former Soviet countries to be allowed to join the western NATO alliance.
• The International Olympic Committee may consider Heraskevych’s act a violation of Rule 50 of the Olympic Charter. That rule, in part, states that ‘no kind of demonstration or political, religious or racial propaganda is permitted in any Olympic sites, venues or other areas.’
• But it also could fall into a grey area since the sign did not explicitly disrespect an opponent or criticise any political target.
• The IOC relaxed its rule against protests before the Tokyo Games, allowing athletes to express themselves politically before competitions start — but Heraskevych’s action would likely not be covered by that because it happened at the finish line.

Bharti Airtel. The broadband services of the company experienced a mega outage on Friday as millions of students and workers across the country were left without Internet amid ongoing online classes and work meetings for several minutes before it started appearing back for some users, albeit slowly. Airtel, in a statement, said that the disruption was caused by a technical glitch.