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India

All that glitters is indeed gold, albeit for now: the price of the yellow metal has hit an all-time high in rupee terms - a rally which is igniting both greed as well as fear. The banking crisis in the West and the liquidity infused by central banks, with expectations of lower-to-no rate hikes, is pushing up prices. With gold considered a safe haven in periods of uncertainty, time alone will tell whether this spurt will be sustained or will fizzle out.  

In terms of perceptions as to how well the Indian economy is performing, an article published this week points out that the dealer inventory of unsold cars has touched a four-year high and that the pace of fresh bookings has started to slow, signalling an easing of demand. Unsold stock in the car dealer network is likely to reach some 300,000 units (worth around US$ 2.5 billion) by the end of March - the highest number since September 2019, according to industry estimates.

In addition, the rate of cancellations - which had averaged 10% of total bookings until a few months back - has increased to 15-20%. The softening trend comes as the pent-up demand which had boosted sales over the last two years is dissipating with normalization of production. While some new car launches still entail a hefty premium and long waiting times, the general increase in vehicle prices owing to expensive raw material inputs and high interest rates have started to weaken consumption.

This is a double-whammy for producers of die-casting grade aluminium ingots in India; already hit by tapered demand from export markets like Japan and China, they will now be dealing with similar conditions in respect of domestic consumers. On a relative scale, Zorba prices have remained strong, thus challenging smelters’ margins.

For brass, there is still reasonable demand from valve and sanitary fitting makers domestically. However, exports to other Asian markets of intermediate products - ie, billets and ingots - have slowed considerably. The high levels of price volatility have resulted in lower import volumes for copper/copper alloy scrap, which has allowed prices to remain steadily healthy. Also, imports of grades such as mixed heavies and Talk have been very muted owing to viability gaps, ruling out any undercutting of prices and oversupply scenarios.

Murmurs of economic expansion coming under pressure are doing the rounds as the full impact of the Reserve Bank of India’s 250-basis-point hike in borrowing costs since last May transmits itself to end-consumers. Defying this, the bank has issued a report predicting real GDP growth of a tad under 7% for this year. One of the key aspects of this growth will be the continuous, massive investment in large, government-backed infrastructure projects which provides extra cushioning to handle any hard landing resulting from a temporary drop in personal consumption.