Nifty continues to be driven by negative global cues

With an eventful week coming up, the Nifty continues to be driven by negative global cues as it closed perilously near to the 10,000 mark on Friday. DJIA and the NASDAQ correcting sharply on Friday and European markets like the FTSE, DAX and the CAC lost over 1.5% on Friday. The global slowdown fears have come back to haunt the markets after the trade war showed no signs of abating. Italy continues to be a question mark. Quarterly results and PMI data will drive the markets during the week. PMI Manufacturing, core sector output and monthly auto numbers could also come under pressure.

In a move that was anticipated, Iran has starts selling oil to private exporters ahead of US sanctions. With the US sanctions on Iran kicking in on November 04th, Iran is already looking at tapping private exporters to find a market for its oil. India, one of Iran’s largest customers, continues to place orders even ahead of the sanctions. Iran relies heavily on oil exports to fund its budgets and can ill afford to stay without exporting oil. As of now China, Russia and India continue to trade with Iran. Iran sanctions could actually be an acid test of how US hegemony pans out in the future.

There could be some good news for pharma stocks finally. CRISIL expects big pharma companies to return to double-digit growth. According to CRISIL, this recovery in pharma sales is likely to come on the back of pick-up in demand in the US and a weaker rupee. In the last 2 years, big pharma was growing in single digits. US markets account for nearly 35% of the pharma market for Indian companies and the US demand for pharma is coming back into positive territory after 5 years of negative growth. Most pharma stocks have shown a sharp recovery in the last couple of months, even as Nifty has faltered.

The good news may be that India could contribute more than the US to world GDP in 2018-19 as per a study conducted by Bloomberg. India is likely to contribute 12.9% to global GDP growth in 2018-19 as compared to 12.6% by the US, albeit in purchasing power parity (PPP) terms. China will remain the largest contributor with 27.2% share. This gap between India and the US could widen much further by the year 2022-23 by as much as 7.4%. Even through 2023, China will maintain its big led over India in terms of contribution to world GDP in PPP terms.

Ruias of Essar have been making one bizarre offer after another. After their offer to buy back Essar Steel at Rs.54,389 crore was rejected by the COC, Ruias have now offered to deleverage Rs.125,000 crore of debt if their Essar Steel offer is accepted. Ruias have offered to deleverage the entire debt of Rs.1.25 trillion so that banks can get back money without haircuts. Essar plans to legally challenge the COC decision. It may be recollected that the COC had preferred Arcelor offer over Ruia’s offer. For the government it is all about the success of its IBC program and hopes to raise nearly Rs.180,000 crore from the IBC in FY-2019. With nearly Rs.37,000 crore recovered in the first quarter, the government is confident that it is on track to reach its target of recovering Rs.1.80 trillion in the fiscal year.

Supertech now wants to make a statement that all is well with the company. After a sharp rating downgrade, Supertech proposes to raise close to Rs.1,200 crore from asset monetization of 1 million square feet of retail space in Noida. The company would be looking to substantially reduce its debt by monetizing its Supernova project. Its total debt is around Rs.2500 crore and the downgrade of its debt had created panic in the debt markets. Supertech has delivered 40,000 units in the last 30 years. Rapid reduction of debt will be favourable for the company’s public image.

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