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As the Ukraine conflict impacts the global GDP, India is projected to grow by 6.4 per cent in 2022, slower than the last year's 8.8 per cent but still the fastest-growing major economy, with higher inflationary pressures and uneven recovery of the labour market curbing private consumption and investment, according to a UN report.

The UN Department of Economic and Social Affairs said in its World Economic Situation and Prospects (WESP) report released on Wednesday that the war in Ukraine has upended the fragile economic recovery from the pandemic, triggering a devastating humanitarian crisis in Europe, increasing food and commodity prices and globally exacerbating inflationary pressures.

The global economy is now projected to grow by only 3.1 per cent in 2022, down from the 4.0 per cent growth forecast released in January 2022. Global inflation is projected to increase to 6.7 per cent in 2022, twice the average of 2.9 per cent during 20102020, with sharp rises in food and energy prices, it said.

The report said that the outlook in South Asia has deteriorated in recent months, against the backdrop of the ongoing conflict in Ukraine, and higher commodity prices and potential negative spillover effects from monetary tightening in the United States. The regional economic output is projected to expand by 5.5 per cent in 2022, which is 0.4 percentage points lower than the forecast released in January.

India, the largest economy in the region, is expected to grow by 6.4 per cent in 2022, well below the 8.8 per cent growth in 2021, as higher inflationary pressures and uneven recovery of the labour market will curb private consumption and investment, it said. For the fiscal year 2023, India's growth is forecast to be 6 per cent.

Lead Author & Chief, Global Economic Monitoring Branch, Economic Analysis and Policy Division, United Nations Department of Economic and Social Affairs Hamid Rashid told reporters at the UN Headquarters that almost all regions in the world are affected by high inflation except for East Asia and South Asia. He said India in that sense is a little bit in a better position as it did not have to aggressively pursue monetary tightening compared to other countries in Latin America.

Brazil has raised interest rates repeatedly. India's projected growth for 2022 is 6.4 per cent, a downward adjustment of 0.3 per cent from January.

We expect Indian recovery to remain strong in the near term, in the next year and two, but again we cannot completely discount the downside risk that would come from external channels. So that risk is still there, he said. The report added that higher prices and shortages of farming inputs including fertilisers are likely to persist in the region, negatively impacting the agricultural sector in Bangladesh, India, Pakistan, and Sri Lanka.

This will probably result in weaker harvests and exert further upward pressures on food prices in the near term, the report said. It said along with higher energy prices, elevated prices of food will likely increase food insecurity across the region. Consumer price inflation in the region is expected to accelerate to 9.5 per cent in 2022, from 8.9 per cent in 2021.

The report also said that tighter external financial conditions will adversely affect regional growth prospects, especially for countries with high exposure to global capital markets facing debt distress or risks of debt default. The pandemic left many countries with large fiscal deficits and higher and unsustainable levels of public debt. Sri Lanka is currently facing a debt crisis and discussing a new IMF-supported programme to bring its economy out of the crisis, it said.

The downgrades in growth prospects are broad-based, including the world's largest economies the United States, China and the European Union and the majority of other developed and developing economies, it said. The growth prospects are weakening particularly in commodity-importing developing economies, driven by higher energy and food prices. The outlook is compounded by worsening food insecurity, especially in Africa, it added.

Growth forecasts for the United States, European Union and China have been revised downward, with the European Union registering the most significant downward revision.

The European Union economy most directly hit by disruptions in the energy supply from the Russian Federation is now expected to grow by 2.7 per cent in 2022, down from 3.9 per cent expected in January. The United States economy is expected to grow by 2.6 per cent in 2022 and 1.8 per cent next year, while China is expected to grow by 4.5 per cent in 2022 and 5.2 per cent in 2023. The developing countries, as a group, are projected to grow by 4.1 per cent in 2022, down from 6.7 per cent in 2021, the report said.

The war in Ukraine in all its dimensions is setting in motion a crisis that is also devastating global energy markets, disrupting financial systems and exacerbating extreme vulnerabilities for the developing world, UN Secretary-General Antonio Guterres said.

We need quick and decisive action to ensure a steady flow of food and energy in open markets, by lifting export restrictions, allocating surpluses and reserves to those who need them, and addressing food price increases to calm market volatility, he said.

Q1: The govt has deferred the plan to privatise public sector banks, as the legal amendments have not been made yet. Do you think privatisation of PSBs is an idea whose time has come? Do you think the RBI should relax criterion to allow corporates, especially those with experience in finance business to participate in the privatisation process?
Ans:
>India needs a larger, stronger, Atmanirbhar financial services sector

Prices of petrol and diesel have remained steady for more than 40 days now. Since the end of a four-and-a-half-month-long stop in rate revision on March 22, rates of petrol and diesel have increased by Rs 10 a litre each through 14 revisions. Fuel prices were last hiked on April 6 by 80 paise a litre each.

According to a price notification from fuel retailers, petrol in Delhi costs Rs 105.41 a litre and diesel Rs 96.67 a litre.

In Mumbai, petrol and diesel prices are at Rs 120.51 and Rs 104.77 respectively. In Chennai, petrol costs Rs 110.85 and diesel Rs 100.94 . In Kolkata, petrol is at Rs 115.12 and diesel Rs 99.83.

Oil manufacturing companies (OMCs) began to raise retail prices of the fuel from March 22. In March, the hike was Rs 6.40 a litre each and in April the hike was Rs 3.60 a litre each. In May, there has been no change in prices, so far.

India meets 80 percent of its oil needs through imports. Retail rates are adjusted according to the global movement in crude prices. OMCs adjust the rates of petrol and diesel every day, depending on the average price of benchmark fuel in the global market over the previous 15 days and foreign exchange rates.

It is at 6 am every day that changes in prices, if any, take effect. Check how petrol and diesel prices are calculated in India, and know how much of it is tax.

Oil prices rose more than $1 a barrel in early Asian trade on Wednesday on hopes of demand recovery in China as the country gradually eases some of its strict COVID-19 containment measures.

Brent crude futures were up $1.15, or 1.0 percent, at $113.08 a barrel at 0042 GMT, while United States West Texas Intermediate (WTI) crude futures climbed $1.62, or 1.4 percent, to $114.02 a barrel, paring some losses after oil prices fell by around 2 percent in the previous session.

Domestically, Indian Oil Corporation (IOC) hiked jet fuel prices by 5 percent to Rs 1.23 lakh/kl in Delhi on May 16.

Indraprastha Gas (IGL) hiked the price of Compressed Natural Gas (CNG) by Rs 2 a kg in Delhi-NCR on May 15. With the latest hike, CNG is now priced at Rs 73.61 a  kg in Delhi, Rs 76.17 a kg in Noida, and Rs 81.94 a kg in Gurugram.

The government on Monday disputed reports that the finance ministry had claimed that inflation hurts the rich more than the poor.

“A Tweet with the picture of Union Finance Minister @nsitharaman is being circulated claiming that the Finance Ministry has stated-'Inflation will affect the rich more than the poor in 2022.' The Claim is fake. @FinMinIndia has not given such statement,” the Press Information Bureau (PIB)’s fact check division posted on its Twitter account.

The monthly economic review for April published by the finance ministry last week said: “Seen over a longer time horizon, inflation in India’s economy has not been as much a challenge as is sensed from month-to-month changes. CPI Inflation during FY 2021-22 averaged 5.5 per cent, 50 basis points below the upper limit of the RBI MPC’s inflation band, and lower than 6.2 per cent for FY 2020-21. While inflation is expected to be elevated in 2022-23, mitigating action taken by the Government and RBI may reduce its duration. Evidence on consumption patterns further suggests that inflation in India has a lesser impact on low-income strata than on high-income groups.”

A query sent to the finance ministry spokesperson didn't elicit any response till press time.

Under the current mechanism, the Reserve Bank of India has been mandated by the government to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side.

The claim and counterclaim over inflation come at a time when retail inflation rose to an eight-year high in April to 7.8 per cent, even as industrial growth continued to falter amid rising risks from the ongoing Russia-Ukraine war.

The data released by the National Statistical Office showed the food inflation rate in April spiralled to 8.38 per cent as prices of edible oil and vegetables shot up by 17.3 per cent and 15.4 per cent, respectively. Fuel inflation also breached the double-digit mark at 10.8 per cent in April over rising retail prices of petrol, diesel, and cooking gas even as crude oil prices softened compared to March.

Making a strong case for reduction in taxes on petrol and diesel, CII President Sanjiv Bajaj on Tuesday said it should be done in a collaborative manner between the Centre and states with a view to containing the rising inflation.

In an interview to PTI, he said taxes on petrol and diesel were increased by the government at a time when the price of crude oil in the international market was low and the same needed to be reversed.

"Very clearly one of our prime constituents of inflation is oil. We've seen the rise on the ground of oil prices resulting in petrol prices. We've seen the impact on inflation and this needs to be urgently addressed.

"We know taxation, both Centre and states, is very high and it is something which we have seen when oil prices fell, at that time rates were increased. Now that oil prices have gone up, we believe that there is a case for this to be discussed ...in a collaborative manner, because eventually we are doing this for one country," said Bajaj. The CII president also said the three contentious agri bills that were rolled back earlier "should be reviewed but in proper consultation and then taken forward".

Asked what impact the rollback of certain reforms in the past related to land acquisition and farm laws has on business sentiment in terms of policy stability especially on foreign investors eyeing India, Bajaj termed these as two different issues and said, with respect to foreign investors one should not do anything retrospectively.

"As far as farm laws and labour laws are concerned we believe that for this country to create its rightful position as a manufacturing hub for the world, we need modern labour laws. This requires the right kind of consultation and discussion with all stakeholders and we would at least support for the government to take this up in earnest, do it once more with the right consultations because we do believe it is important," he emphasized.

He argued that for the country's own food security, security of farmers, for ensuring streamlining of the number of steps from farm to fork, unnecessary intermediaries and their costs should be removed, and the agri bills also should be reviewed but in proper consultation and then taken forward.

On reports of High Networth Individuals (HNIs) leaving India, the CII president said, "We have to create over here an environment where India can prosper, Indian business can prosper. We don't then have to worry about a few people leaving".

He observed that people could have left due to many different reasons. "What we can do as a country is to create the right environment and as I said the current government has been doing that. To create the right environment where we attract business, we attract investment and that automatically should attract more and more people not only to not leave but to want to come to India," the CII president said.

India's petrol and diesel consumption jumped in May as pick up in the economic activity as well as the start of the harvesting season aided the return of demand, a preliminary industry data showed on Monday.

Petrol sales grew 14 per cent during the first half of May when compared with the same period in the preceding month, while diesel demand rose 1.8 per cent. Cooking gas LPG, which last month saw consumption declining because of high prices, posted a 2.8 per cent rise in sales during May 1-15.

Petrol sales by state-owned fuel retailers, which control roughly 90 per cent of the market, at 1.28 million tonnes during May 1-15 were 59.7 per cent higher than the same period last year and 16.3 per cent higher than the period in 2019, preliminary industry data showed.

The consumption was 13.9 per cent more than the 1.12 million tonnes of sales in the first half of April 2022.

Diesel, the most-used fuel in the country, saw.

sales jumping 37.8 per cent year-on-year to 3.05 million tonnes in the first half of May. This was, however, 1.5 per cent lower than sales in April 2019. It was 1.8 per cent higher than 2.99 million tonnes of consumption during April 1-15 this year.

Industry sources said consumption in May is higher because of demand returning after high prices in the previous month cut demand. Also aiding the demand was the start of the harvesting season.

Another factor was the low base effect. April saw consumption drop due to a Rs 10 per litre hike in petrol and diesel prices after an over four-month hiatus.

Cooking gas, whose prices were hiked by Rs 50 per cylinder on March 2022 and on May 7 each, too saw a dent in consumption because of the rate increase. Sales of 1.05 million tonnes of LPG during May 1-15 was 5.4 per cent lower when compared to the year-ago period. It was 12 per cent lower than the same period of May 2020 but 9.4 per cent higher than 2019.

Month-on-month LPG demand was up 2.8 per cent when compared with 1.02 million tonnes sales in the first half of April 2022.

Jet fuel (ATF) sales rose 83.5 per cent to 500,400 tonnes in May 1-15 to 251,400 tonnes but was 18.7 per cent less than pre-COVID levels of 2019. They were, however, 7.7 per cent more than the sales in the first half of April 2022.

ATF sales are expected to continue to pick up with the complete opening up of air travel.

India’s largest life cover provider Life Insurance Corporation of India (LIC) made a lacklustre debut on the bourses on May 17, with declining nearly 9.4 percent after its initial public offering was subscribed nearly three times last week.

The stock opened at Rs 867.20, against an issue price of Rs 949 on the BSE and touched a high and a low of Rs 886.80 and Rs 860.10, respectively. At 10.05am, the scrip was trading at Rs 883.40 on BSE, down 7 percent from its issue price of Rs 949 a share. India's benchmark Sensex rose 0.62% to 53224 points.

Corrections in the equity markets globally seem to have hit the listing for the biggest public issue in the history of the Indian capital market. The situation was worsened by mounting inflationary pressure, stricter lockdowns imposed in China to combat Covid outbreak, and an unabated war on Ukraine by Russian forces.

After the debut in the market, LIC has become the fifth most-valued Indian listed firm with a market capital of Rs 5.71 trillion. Reliance Industries Limited is the nation's most valued firm with an MCap of Rs 16.42 trillion followed by TCS, HDFC Bank and Infosys Ltd.

Options are great instruments to dodge the risk. With a capacity to create a pay-off where there is no limit on the amount of money you can make but there is still comfort on the potential loss. It always stays limited to the premium we pay.

However, for getting this kind of comfort we do have to be careful about a few things other than just the price movements. If you are guessing about Time, you are right but that is not it. Yes, we do have to make sure that we execute the entry and exit in a timely fashion so that the decline in premium that certainly happens with the passage of time does not hurt us.

Here we are talking about one more aspect. That aspect is the risk premium. Option premiums do rise or fall with absolutely no change in Price or Time also. This happens when the assumption of risk among option traders, especially option sellers, goes up.

Taking the recent example of Nifty, we saw a down move in Nifty in recent weeks. As a result, the risk of falling rose significantly. This has created a significant impact on the Option Premiums as well. Just to give an approximation, the Nifty Option closest to the current level of index with the same time to expiry a few weeks back was roughly 50 percent cheaper than now.

This rise in premium due to rise in risk level will definitely help Option Buyers. However, after a fall like this one, if Nifty witnesses a comeback and rises the risk premiums will go down pushing the Option Premiums also down. The exact opposite scenario.

To avoid that there is a very simple solution. Convert you Option Buy position into a Vertical Spread position. Vertical Spread here means, Buy and Sell into Options of same Kind (Call/Put), same underlying stock/index and same expiry.

We can create this by Buying a Call/ Put with strike close to current market price and simultaneously Selling Higher Strike Call/ Lower Strike Put.

How to Create a Vertical Spread

Stock X @ 100

Buy Call 100 @ 5

Sell Call 110 @ 3

Net Premium Paid = 2

Max Profit = 110- 100 – 2 = 8 (Difference of Strikes minus the Net Premium Paid)

Max Loss= 2 (Net Premium Paid)

Yes, we are losing out on the unlimited profit potential but at the same time we are bringing down our initial cost significantly. Also, the drop in risk premium will now happen in both the options at the same time so no need to worry about that either.

When do we do this?

One of the easiest to access indicators of Risk Premium is India VIX. An index that gives you a number representation of riskiness in the market. If India VIX goes up by more than 20-30 percent from the recent low, convert your Option Buy Trades into Vertical Spreads. India VIX is computed by NSE and is available for free over the internet.

Finally, Vertical Spread is just the tip of the iceberg. There are a lot of combinations of options like this that can help us with such problems that could potentially ruin our profit potential.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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Britain’s billionaire Issa brothers and Indian tycoon Mukesh Ambani are preparing to face off in the final battle for the Boots drugstore chain, one of the UK high street’s most recognizable names.

The Issas are seen as the party to beat ahead of next week’s deadline for proposals, after they submitted the highest offer in the first round, people with knowledge of the matter said. The duo are going up against Ambani, who’s been working on a bid together with buyout firm Apollo Global Management Inc.

Bidders are now sizing up Boots’ billions in pension guarantees -- which they’ll have to take on -- as they figure out how much they can pay for the business, the people said. They’re also working around the clock to arrange financing in a difficult market, which has gotten that much tougher due to the war in Ukraine, soaring inflation and rising interest rates, according to the people.

That’s a lot to sort through, and suitors are getting a few extra days to firm their bids up after the chain’s owner Walgreens Boots Alliance Inc. pushed back the May 16 deadline to later in the week, the people said.

Empire Builders

A deal would fit in well with the Issas’ empire-building ambitions. In recent years, they’ve gone on an acquisition spree that’s turned their main company EG Group into a global gas station and convenience store colossus. They’ve snapped up UK supermarket operator Asda Group Ltd. and the Leon chain of fast casual restaurants.

The brothers, who are pursuing Boots together with TDR Capital, seem to have found a neat solution to the financing issue: they’re considering piling more debt onto Asda and selling some of the supermarket chain’s assets to help fund the acquisition, people with knowledge of the matter said this month.

The emergence of Ambani, first revealed by Bloomberg News in April, promises to keep the race competitive. Apollo is known to be wary of overpaying on deals, which has led it to lose auctions for British companies like Asda and packaging firm RPC Group Plc. Teaming up with India’s second-richest person could give it more firepower: Ambani is an experienced operator who’s keen to expand the retail arm of his conglomerate Reliance Industries Ltd.

One outstanding question is how close Walgreens will be able to get to its asking price of 7 billion pounds ($8.5 billion). Bidders had pegged its worth around 5 billion pounds, though it’s possible they will boost their proposals following due diligence, the people said. The international drugstore unit being sold by Walgreens -- which has the Boots chain in the UK at its core -- also includes a smattering of retail operations elsewhere, plus attractive private-label brands like No7 Beauty Co.

Litmus Test

Retail-focused private equity firm Sycamore Partners has also been touted as one of the suitors still remaining. Representatives for Walgreens and the bidders declined to comment.

The Boots sale has emerged a litmus test for dealmaking in the UK as credit markets become increasingly fragile. The easy financing conditions that supported a series of debt-fueled takeovers of British companies last year have mostly come to an end. Indeed, banks that funded the private-equity buyout of Wm Morrison Supermarkets Plc had to sell some of the debt at a steep discount and are now facing losses, Bloomberg News has reported.

Whoever comes out on top, the hard work will just be getting started. Boots has a sprawling network of more than 2,200 stores across the UK, many of which need sprucing up. The high street has been hit by slowing demand in recent years, and they’ll need to refocus Boots’ business to adapt to these changing consumer habits.

There’s also the cost of living crisis to contend with. UK retailers have warned of “clouds on the horizon” after recording a sharp slowdown in sales as higher prices cut into spending power.