Listless Gains for Indian Indices

Fri, 22 Jul 11:30 am

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After opening the day on a flat note, the Indian stock markets have continued to trade near the dotted line. Sectoral indices are trading on a positive note with stocks from the power and telecom sectors leading the gains.

The BSE Sensex is trading up by 29 points (up 0.1%), while the NSE Nifty is trading up by 5 points (up 0.1%). The BSE Mid Cap index and the BSE Small Cap index are trading in the green, up by 0.7% and 0.6% respectively. The rupee is trading at 67.13 to the US$.

Stocks in the IT space are trading on a mixed note with Info Edge and HCL Infosys leading the gains. As per an article in the Economic Times, campus recruitment of graduates may fall across engineering colleges for the first time since 2009. This is said as companies are resorting to automation of entry-level coding jobs and looking at optimising their bench strength.

Going by the data, India gets around 16 lakh graduate engineers every year. Of this, nearly 2 lakh are absorbed by the IT industry. However, there is a declining trend seen in this space. The industry had around 2 lakh net additions in 2015-16, lower than 2.2 lakh additions in 2014-15.

Reportedly, Infosys recently announced that it will focus on a zero-bench strategy to increase utilisation levels. TCS, which announced its first quarter results recently, reported a fall in 1QFY17 attrition rate with the company taking steps to control loss of employees. The company also reported a dip in net additions on a sequential basis.

A report by NASSCOM, the organisation that sets the tone for public policy for the Indian software industry, said that with rapidly changing technologies and demand for skilled workforce, around 5-10% of existing jobs could be automated in the next 10 years. The report further stated that nearly 60-70% of the current workforce will be need to be re-skilled in technology, social and design thinking.

While the above trend bodes well for the IT industry that has been trying to protect profit margins, it raises concerns for engineering jobs in a sector that employs over three million people.

We have been writing about the rising penetration of automation and how it can pose a threat to the rising demand for jobs in India. As one of our recent editions of The 5 Minute WrapUp states: 'Part of the jobs slowdown can be attributed to inflexible labour laws and the rise of automation. Since it is not easy to fire employees in India, companies increasingly prefer to hire less and ramp up automation instead. The automation trend is accelerating not just in manufacturing but in services sectors such as IT too.'

Moving on to the news from the banking space, the country's largest lender State Bank of India (SBI) has inked an agreement with Brookfield Asset Management Inc to form a joint venture (JV). The joint venture will be in the nature of an alternative investment fund and is formed with the intention to invest in stressed assets.

Under the proposed JV, Brookfield will commit about Rs 70 billion and SBI up to 5% of total investments into stressed assets. The proposed JV will independently evaluate and invest in various stressed assets and will rely upon Brookfield's operational expertise.

Brookfield is a global alternative asset manager with US$ 240 billion in assets under management. The JV can offer some relief to the sorry state of SBI that has been stacked with non-performing assets (NPAs).

Presently the stock of SBI is trading down by 0.7%.

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