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Weekly wrap-up: Market updates, news and insights for the week ending 28th September
Publish date: 28th September, 2018
News: Nifty fell below the psychological 11,000 mark during the week
Our perspective:
- A combination of liquidity concerns domestically and a hawkish stance by the US Fed contributed to making the markets weaker during the week.
- The higher price of crude, which has settled above the $82/bbl mark, is worrying with global oil analysts already talking about a level of $100/bbl for Brent crude.
Related reads:
Major Milestones – Nifty from 1000 to 11,000
Major Milestones – Sensex from 100 to 38,000
Everything you need to know about the longest US bull market
News: Rupee and the bond yields showed some recovery during the week
Our perspective:
- For the rupee, the 73/$ level acted as a mix of RBI support and some serious dollar selling. With the RBI also set to hike its rates in October, the rupee may have reasons to rejoice.
- Bond yields on the 10 year benchmark, settled closer to the 8% mark as a fresh bout of liquidity infusion by the RBI and CRR and SLR concessions improved bond sentiments.
Related reads:
4 questions you may have about Rupee Depreciation
Rupee at 70 – What should you do?
How does the Turkish currency crisis impact India?
News: Brent crude crosses $82/bbl during the week
Our perspective:
- Brent has continued on its upward journey after the Iran sanctions are likely to take effect in November and the OPEC has refused to cut production.
- This could be a worry for the Indian economy since the trade deficit and the current account deficit are expected to widen due to the impact of crude oil prices.
Related reads:
How high oil prices and Iran dilemma will impact India?
5 indicators to gauge the intensity of the current trade war
6 effects of rising crude oil prices on the Indian economy
News: Fed hiked rates by 25 basis points on 26th Sep and withdrew Accommodation
Our perspective:
- The Fed rate hike was on expected lines as the CME Fed tool was indicating a 95% probability. The RBI may also be forced to follow suit in October.
- The bigger concern was the withdrawal of the word Accommodative from its stance, which could mean the end of a liquidity infusing monetary policy; not great news for EMs.
Related reads:
5 reasons why US Fed policy affects you
RBI hikes borrowing rates by 0.25% - What you should know
To hike or not to hike is the RBI dilemma
News: SEBI asks MFs to furnish details about exposure to NBFCs, housing finance cos
Our perspective:
- This call came to protect investor interest after these stocks and bonds came in for speculative selling in the markets on ILFS concerns.
- This is broadly indicative of the fact that there could be more wide ranging downgrades of NBFCs and HFCs, considering the friction in the bond markets
Related reads:
DHFL and IL&FS horror show on Friday
Four things to know about the housing finance sector
News: Jet Airways virtually admits liquidity troubles at the airline
Our perspective:
- The signs of liquidity crunch at Jet Airways were again out in the open after pilot salaries for August were deferred indefinitely by Jet Airways
- The liquidity condition of Jet is being worsened by the rising price of ATF (including the recent rise in import duty) as well as stiff competition.
Related reads:
Jet Airways deep in the red for second quarter
The curious case of the Indian aviation industry
Jet Airways readies to sell Jet Privilege
News: Supreme Court’s Aadhar verdict could deal a body blow to Fintech companies
Our perspective:
- The verdict is still not clear on the applicability but initial analysis is that Aadhar cannot be mandatory for bank accounts, as was the case earlier
- The e-KYC using Aadhar had come as a boon for Fintech companies and new age banks that could rapidly expand their customer base riding on the Aadhar database.
Related reads:
Why are non-banking financial companies important?
7 changes in India’s banks in 2016
News: India raises tariffs on 19 non-essential items during the week
Our perspective:
- This covers products like ACs, washing machines, refrigerators, ATF, jewellery, diamonds etc which are classified as non-essential. It will impact imports worth $12 billion.
- The rise in import duties is in line with the global trend towards protectionism and is likely to stem the rise in CAD as well as help to defend the INR
Related reads:
5 indicators to gauge the intensity of the trade war
US India trade tariffs: which sectors could get impacted?
US China trade face-off: Why India should be concerned?
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