Day: December 19, 2024

Shares of SpiceJet rallied up to 7.85 per cent at SpiceJet per share on the BSE in Thursday’s intraday deals. SpiceJet share price surged after the company reached an amicable settlement with Genesis, resolving their over $16 million dispute.  

Under the agreement, the commercial aircraft leasing company Genesis will receive $6 million from SpiceJet and  will acquire $4 million in SpiceJet equity at a price of Rs 100 per share, the company said in a statement on Thursday.  

Over the course of time, SpiceJet has reached similar settlements with several lessors, following successful resolutions with companies such as Horizon Aviation, Engine Lease Finance Corporation, Aircastle, Wilmington Trust SP, Shannon Engine Support Limited, and Export Development Canada, among others.  

In September 2024, Carlyle Aviation agreed to convert $30 million of lease arrears into SpiceJet equity at Rs 100 per share, reflecting growing confidence in the airline’s financial and operational recovery.   

“This settlement marks another crucial step in our journey towards financial stability. We are pleased to have resolved this matter amicably with Genesis through constructive negotiations. This agreement, which includes Genesis acquiring an equity stake in SpiceJet, will significantly reduce our financial liabilities and further strengthen our balance sheet,” said Ajay Singh, Chairman and Managing Director, SpiceJet.  

Indian low-cost airline SpiceJet, headquartered in Gurugram, last reported a 20 per cent year-on-year decline in consolidated net profit, which fell to Rs 158.1 crore in the first quarter of FY25. The airline’s total income also decreased by 8.3 per cent year-on-year, reaching Rs 2,077.7 crore in Q1FY25.

Meanwhile, on the equities side, SpiceJet’s stock has underperformed the market, as in the last six months it has surged 12 per cent, while falling 9 per cent in the last one year. In comparison BSE Sensex has risen 2 per cent in the last six months and 10.8 per cent in a year.  

The company has a total market capitalization of Rs 7,692.68 crore. At 11:39 AM; the shares of the company were up 6.97 per cent at Rs 60.20 a piece. By comparison, the BSE Sensex was trading 1.02 per cent lower at 79,364.22 level. 

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For those anticipating a calm end to the year, the US Federal Reserve’s latest monetary policy outlook has delivered a shock by scaling down its projected rate cuts for 2025 from four to just two. Global equities reacted with an across-the-board selloff, and the Dow Jones logged its tenth straight session of loss, the longest losing streak in five decades.

The US Federal Reserve’s decision to cut interest rates while inflation was ‘not clearly decelerating’ was a mistake, Ecognosis Advisory’s CEO Andrew Freris told Moneycontrol, adding that Powell has created ‘confusion and instability’ in the equity markets. Going into 2025, the US Fed might need to wait for inflation to stabilises below 2% before consider to cut rates again, Freris added.

Here is an edited excerpt of his interaction with Moneycontrol.

Are we looking at a prolonged pause before further cuts?

If you examine the Fed’s announcement, it seems they’ve lost the plot. Their decision to opt for only two cuts stems from accelerating inflation, yes inflation has been going up for the last 3 months. This makes it impossible for the Fed to continue slashing rates. The markets reacted accordingly, collapsing after this revelation.

Was the Fed too hasty in its initial 50 basis point rate cut?

Absolutely. Cutting rates while inflation was not clearly decelerating was a mistake. The Fed has an inflation target of 2%, which it hasn’t met. Inflation has remained stubbornly above this threshold. Cutting rates in this scenario only creates confusion and market instability, as we’ve seen with the recent sell-off.

What is your expectation for rate cuts in 2025?

I’m sceptical of a 50 basis point cut in 2025 unless inflation begins to decline significantly. Even then, the Fed might need to wait until inflation stabilises below 2% before cutting rates. Adding to the complexity, the expected tariffs from President Trump will have a one-off inflationary impact, further complicating the inflation outlook.

The tariffs, effectively a tax on imports, will push up prices at stores like Walmart, where many goods are imported from China. While the inflationary impact of tariffs is typically a one-off, markets might overreact, interpreting it as a broader inflationary trend.

Should the Fed consider raising its 2% inflation target?

The Fed could consider revising its inflation target, particularly given the incoming administration’s tariff plans. Tariffs are not inherently inflationary but do have a one-time impact on the Consumer Price Index (CPI). If markets mistake this one-off effect for sustained inflation, it could fuel further instability.

Are US markets vulnerable to more corrections, especially technology stocks?

US markets have had an exceptional year, but the Fed’s stance and Trump’s policies have introduced uncertainty. The tech sector, which has been the primary driver of the rally, is especially vulnerable. With interest rate cuts less likely, tech firms—big beneficiaries of the recent monetary easing—are now facing headwinds.

What does this mean for emerging markets?

The impact on emerging markets varies. China, the largest emerging market, continues to post robust GDP growth despite a weak equity market performance. The US’s policies may not immediately affect China’s domestically driven economy, though Trump’s tariffs could have some impact. However, in my opinion, there is a great degree of misunderstanding how badly the Chinese economy is going to be hit by the tariffs threatened by Trump.

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Shares of Asian Paints Ltd. dropped over 3% in early trade on Thursday, December 19, to hit a 52-week low after the company announced that two of its top executives had resigned.

Asian Paints stock declined as much as 3.4% on the National Stock Exchange of India (NSE) to ₹2,265.35 on Thursday. Notably, this is the fourth straight session of decline for the share price. Meanwhile, the stock is down over 8% so far this month and more than 32% in 2024.

On Wednesday, Asian Paints announced that Shyam Swamy, vice president of home improvement, and Vishu Goel, associate vice president of retail sales, have resigned due to “personal reasons”. The announcements were made through two separate stock exchange notifications.

One of the notifications read, “Vishu Goel – Associate Vice President, Retail Sales, Commercial and Marketing, member of the Senior Management, has resigned from the services of the company. His resignation was accepted on 17th December 2024 and he has ceased to be an employee of the Company and a member of the Senior Management with effect from the close of business hours on 17 December 2024.”

Another notification said, “This is to inform you that Shyam Swamy – Vice President, Home Improvement, Décor, Services and Retailing, member of the Senior Management, has resigned from the services of the Company. His resignation was accepted on 17th December 2024 and he has ceased to be an employee of the company and a member of the Senior Management with effect from the close of business hours on 17th December 2024.”

The company did not give any further details on the reason behind the sudden departure of these executives.

In a separate exchange filing, the company also announced two new changes in the management team.

The company appointed Mr. Ashish Rae, currently Associate Vice President -Project Sales as Associate Vice President – Retail Sales, Marketing & Commercial and as a senior management personnel of the company with effect from 2nd January 2025.

Further, Mr. Gagandeep Singh Kalsi, Associate Vice President – Strategy, Business Development, a senior management personnel, will also handle Décor and Services with effect from 23rd December 2024.

Key triggers behind recent stock fall

Asian Paints shares have seen a selloff in the past couple of months due to increasing competition in the paints industry. The entry of new players like Birla Opus and JSW Paints threatens the dominance of established players like Asian Paints and Berger. Also, increasing inflation in urban areas is adversely affecting the company’s demand outlook.

While announcing earnings for the September 2024 quarter, Asian Paints said that the paint industry faced subdued demand during the period. Domestic Decorative coatings segment volumes declined marginally, while overall domestic coatings revenue declined by 5.5% for the quarter impacted by muted consumer sentiments and extended rains and floods in some parts of the country.

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