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Why Gold and Yen are sending important signals to markets?

In the last one month we saw a sharp appreciation in the price of gold and the Yen. A 4% appreciation in these safe haven assets in a month is not regular. But more importantly, it is the mix of Yen and gold that is portentous.

Gold crosses $1300/oz mark

Gold has been…

Government needs to urgently find ways to plug the GST gap

For the month of November the GST collections came in sharply lower at around Rs.92,000 crore. Barring April and October, GST collections never managed to touch the magic figure of Rs.1 trillion. For the full fiscal year 2018- 19, the GST shortfall is expected to be nearly Rs.100,000 crore. That…

What are the options for Jet Airways to get out of the financial crisis?

In the last week, Jet defaulted on loans to banks in the midst of a major liquidity crisis. Out of its total debt burden of Rs.8500 crore, nearly 30% comes up for repayment in the next 1 year. That is where liquidity becomes so important. In a…

If the Fed holds in 2019, it will be good for the world economy

In the last 3 years since the Fed started hiking rates, it has managed to hike rates by a full 225 basis points. The CME Fed Watch is still ambiguous and is assigning just a 2% probability to another rate hike in the January Fed meet. Of…

Nifty will be the real test of the concept of weekly options

During the month of December, SEBI granted the NSE permission to launch weekly options on the Nifty 50. It may be recollected that the weekly options on the Bank Nifty was launched in 2016 and this product has seen very good traction since then. The question is what happens…

Despite a sharp correction, it may still be too early to buy mid caps

The year 2018 has been one of the worst years for mid cap and small cap stocks in the last 7 years. The BSE mid cap index was down by 14.4% for the year while the small cap index was down by nearly 24%. This is the…

Growing Indian market and weaken crude oil demand will strengthen Rupee

After breaching the 8% mark decisively in October, the 10-year benchmark yields in the Indian markets are back to 7.224%, the lowest level of yields since April 2018. The sharp fall in yields was driven by a sharp fall in Brent Crude prices and also the RBI announcement of a…

Exit polls influencing share market but the wait is not over

With the exit polls indicating a strong performance by the Congress in Rajasthan, Chhattisgarh and Madhya Pradesh, the markets are likely to react negatively on 10th December. The markets would prefer a better showing by the BJP as it would hint at a continuation of the reforms process. However, the…

The Monetary Policy Committee (MPC) meeting will conclude and the fifty monetary policy for the year will be announced in the afternoon. The market consensus is that the RBI will maintain status quo on repo rates and leave it at the current level of 6.50%. The inflation level has come down to 3.31% and the immediate risk of currency weakness…

India may grow fastest but there are problems underneath

While announcing the GDP numbers for Q2, Mr. SC Garg boasted that India would still be the fastest growing economy in the world. While that is true on paper, the claim glosses over a lot of larger problems that could manifest in the coming months. Let us look at two sets of…

We may be seeing the first signs of boards coming of age

Directors resigning from the boards of Indian companies with a diplomatic letter to the board are nothing new. But what happened with the JM ARC board recently marked a major shift in the way independent directors have acted. Anil Khandelwal, independent director on the board of JM Financial, ARC…

There is certainly disappointment on the growth front

When the GDP growth numbers for the second quarter were announced on November 30^th, there was certainly a sense of disappointment. At 7.1%, the growth rate was a far cry from the 8.2% growth clocked in the first quarter. One can blame it on the base effect because the first quarter was on…

Brent crude was up 3% on Monday as the combination of a US-China truce and likely supply cuts helped prices higher. Oil had fallen from $86/bbl to $58/bbl over the last 2 months after the Iran sanctions were substantially diluted. In the OPEC meeting on 06th December, Saudi Arabia has the support of Russia for supply cuts. However, there are…

The week is likely to be highlighted by the Monetary Policy to be announced on 05th December. The market consensus is that the Monetary Policy Committee may choose to keep rates unchanged. The Fed chief, Jerome Powell, has already hinted at a more dovish policy going ahead while inflation has continued to remain around the 3.31% mark. With GDP disappointing…

The Nifty and the Sensex celebrated the dovish talks of Jerome Powell with a strong rally as the Nifty settled above the 10,850 mark. The markets also expressed optimism ahead of the G-20 Summit where Xi and Trump are expected to meet and reduce the intensity of the trade war. The rupee has also shown signs of stabilizing better than…

Global markets are celebrating a more dovish stance taken by Jerome Powell, and that means Fed may now be more calibrated on its rate hike moves. The positive effect is likely to rub off on Indian markets too. 

Terminate Call on Yes Bank 

Yesterday we had terminated our call on Yes Bank. It also broke the 165 support level and is now…

How much lower could crude go from current levels?

As the OPEC meets in Vienna on sixth of December, the big item on the agenda would be the falling price of crude oil. In the last 2 months the price of Brent has cracked from $86/bbl to $58/bbl; a little over 32%. Apart from the dilution of Iran sanctions, the fall…

Why Telangana could be the most crucial state election?

As we write, four critical states are going to polls. Each state has its unique set of challenges and thus becomes critical from a larger national point of view. Let us look at why the four key states could really matter.

Retaining Rajasthan…

The immediately challenge for the BJP will be to retain Rajasthan.…

On a trading day when banking and clearing operations were largely shut, the Nifty fell below the 10,600 mark. Even the Sensex lost over 250 points as the markets were a little jittery over the sharp fall in crude prices as an indicator of a global slowdown. FPIs were also aggressive sellers on Wednesday. The lower crude oil prices also…

RBI relaxation is likely to provide relief of Rs.35,000 crore to the government of India. In the meeting with the finance ministry on 19th November, the RBI decided to defer the full implementation of the “Capital Conservation Buffer” prescribed under the Basel-III rules. It will free up capital to the tune of Rs.37,000 crore and allow additional credit creation to…

The marathon meeting between the RBI and the Finance Ministry lasted for over 9 hours and the good news for the market was that the meeting ended on a cordial note. The RBI has now agreed to make more finance available to NBFCs to address the liquidity crunch even as there could be some relaxation in lending for PCA banks.…

Dalmia Bharat makes it complicated but also significant

Among the various companies under resolution at the NCLT, the case of Binani Cements has been one of the most complicated. It has not only raised some serious questions about the role of the Committee of Creditors but also about how the bidding process should be actually conducted at the NCLT. But, first…

Will it really improve the Tata aviation franchise?

In many ways it is a reversal of history. It was JRD Tata who pioneered the concept of Air India, which despite the brilliance of Bobby Kooka ended up in an awful financial mess. Tatas came back into the airlines business via a stake in budget airline, Air Asia. Later, the Tatas also…

The all-important board meeting of the RBI is today, Monday 19th November. Autonomy of the RBI has been a significant bone of contention, and two decision points will be keenly awaited. The RBI has been asked by the government to loosen up credit purse strings to NBFCs and to allow PCA banks to lend, is pending an RBI response. Also,…

Fitch has maintained India’s sovereign rating unchanged at BBB-. This is the lowest investment grade with a stable outlook. While Fitch expects 7.8% GDP growth in 2018-19, it expects the growth to taper after that due to a combination of weak financial sector, high oil prices and tight monetary conditions. While Moody’s had raised India’s sovereign rating last year, both…

It was a day on which IDBI Bank reported losses of Rs.3602 crore for the second quarter. Over the last one year, IDBI Banks’ gross NPAs have shot up from 24.98% to 31.78%. Despite doubling provisioning for this quarter, the net NPAs are still at above 17% in the current quarter. The bank’s CEO is, however confident about returning to…

Tata Steel consolidated net profits for the second quarter jumped three-fold to Rs.3116 crore. Its EBITDA per tonne at Rs.19,000 was the highest level in 6 years. The company’s sales for the quarter were up by 34% at Rs.42,946 crore, largely driven up by the consolidation of Bhushan Steel into its operations. As a matter of strategy, Tata Steel plans…

CPI inflation for October came in sharply lower at 3.31% while the IIP growth for September was marginally lower at 4.5%. The lower IIP was driven by weak growth in mining and manufacturing of capital goods. The flood situation had also hit the growth in September. Inflation was driven lower by a clear fall in food inflation, which raises some…

Foreign portfolio investors have infused Rs.4800 crore into the Indian markets in the first five days. However, nearly 95% of the money came into debt and only 5% of the inflows came into equity markets. This is still a relief after the massive selling to the tune of Rs.39,000 crore in the previous month. The FPIs have become a little…

Why the Iran sanctions are unlikely to be effective this time around

Source: Trading Economics

The US sanctions on Iran became effective from 05^th November but the markets hardly reacted. On the contrary the price of Brent Crude dipped below the $70/bbl mark. What went wrong?

Too many exemptions

The US has granted exemptions to 8 countries from the ban on oil imports from…

Why Dr. Raghuram Rajan is wrong about note ban and GST

In many ways Dr. Raghuram Rajan has been the equivalent of an Elvis Presley of central banking. With him around, there was never a shortage of spoken words or decisive action. To his credit he did manage the near external crisis in 2013 appreciably. However, he may have gotten his…

Why equity MFs continue to see inflows despite FPI selling?

Two pieces of data stood out in stark contrast in the month of October 2018. On the one hand FPIs were compulsive sellers in the Indian markets. The FPIs sold equity to the tune of Rs.29,000 crore and debt to the tune of Rs.10,000 crore taking the total FPI selling for…

Why the NBFC squeeze matters to real estate developers

Source: Ambit / Knight Frank
When the NBFCs started feeling the squeeze, the first sector to take a hit was the realty sector. Most realty stocks have seen violent correction. What is this correlation all about?

Why realty got hit?

If you look at the chart above, one thing clearly emerges that NBFCs have…