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Negative food inflation, the longest continuous falling streaks in oil, and more

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 serious doubts over the efficacy of the current MSP mechanism, which had been fixed at 150% of cost of production for Kharif crops. In fact, after a gap of almost 1 year, food inflation has gone into negative; not great news for farmers.


The longest continuous falling streaks in oil

Both the WTI Crude and the Brent Crude fell for the 11th consecutive day, one of the longest continuous falling streaks in oil in recent memory. The sharp fall in crude by more than 20% was necessitated by the sharp expectations of a surplus in oil in the current and next year. The US had imposed sanctions on Iran effective from 05th November but it had been substantially diluted by exempting some of the major importers of oil like India, China, Japan and Korea. Iranian sanctions were significant as they exported nearly 2.5 million barrels of oil per day.

As part of its asset monetization program under the new board, IL&FS has commenced by placing two its group companies on the block. These include IL&FS Securities and ISS Settlement & Transaction Services. Any final transaction to sell of any business will subject to the approval of the NCLT. This is part of the resolution outlined by the board of IL&FS to the government which includes measures like monetizing assets and repaying loans to reduce the defaults. The company has seen a series of defaults in the last 3 months forcing the company into Junk status in terms of credit ratings.


A marginal increase in revenue and lesser loss in Q2 for Jet Airways

Jet Airways posts a second-quarter loss of Rs.1261 crore. This is marginally lower than the loss of Rs.1323 crore in the June quarter. Revenues of Jet Airways were up by 7% at Rs.6363 crore. The company had taken a massive hit in the last two quarters on the back of a sharp rise in ATF prices and lower ticketing prices. While higher ATF prices were driven by a steep increase in crude oil prices, the lower market price of tickets was due to intense competition. Jet has been in intense negotiations with creditors and financers to help them see through this tough phase.

There could be some serious global and domestic cues as India embarks for trade on Tuesday. With the Dow cracking by over 600 points, the pressure on the markets is likely to remain. The NASDAQ has also continued its longest falling streak since 2011. Both the CPI and the IIP numbers could negatively impact as a combination of slow growth and weak farmer pricing is not good news for markets. It could negatively impact the rural demand that markets have been so aggressively talking about. Most European markets also lost over 1.5% after prospects of a compromise on BREXIT dimmed. The sharp fall in the crude is likely to be seen as an outcome of an expected global slowdown and that is not good news. Most Indian ADRS have been trading lower with TAMO down by over 8% in US markets.

Eicher Motors again missed its profits estimates for the quarter as higher input costs took its toll on the profits of Eicher. Net profits were higher by 5.9% at Rs.549 crore even as total revenues were up by 11% at Rs.2408 crore. The higher inputs costs ensured that the OPM narrowed by 120 basis points at 30.3%. During the quarter, there was a 10% cost in raw material costs with a 21% rise in employee costs. The company had also faced disruption at its Chennai Enfield factory after workers had walked out of work, demanding higher pay. The total output loss was nearly 25,000 units.