Midnight News Update –Jul 04th2017
Trading in corporate bond in the first quarter of the current fiscal year touched a record of Rs.4.34 trillion on the NSE and the BSE combined, a clear sign of the maturing of these markets. This marks a sharp jump from a level of Rs.2.61 trillion in the corresponding period last year. The NSE dominated the quarter with a 70% market share with the balance cornered by the BSE. Of late corporate bonds have become the preferred route for companies to raise funds as the bank route is almost shut due to the mountain of NPAs. Bond markets permit raising funds at highly competitive rates.
SEBI Chairman, Mr. Ashok Tyagi, has once again expressed his disappointment with the functioning of the rating agencies in India. He plans to initiate discussions to regulate rating agencies better and put greater onus of accountability on these agencies. SEBI has already asked the rating agencies to proactively monitory the ratings more closely with public and non-public information. SEBI has also mandated the rating agencies to seek a “No Default” declaration by the company each month. Rating agencies had created market risk in case of defaults by companies like Amtek Auto and RCOM.
The state of Maharashtra is scouting for ways to fund its Rs. 34,000 crore loan waivers to farmers. Under pressure from farmer lobbies and to prevent the opposition from scoring brownie points, the state government had announced plans to write off Rs. 34,000 crore of farm loans to alleviate the plight of farmers who were hit by 2 years of droughts, piling debt and tepid prices of pulses. Agricultural loans to the extent of Rs. 117,000crores have been extended to farmers in Maharashtra and more than half of this has become bad. The waiver has now been restricted to small and marginal farmers only.
Bajaj Auto reported its fourth consecutive month of decline in sales. For the month of June, its domestic sales declined by 34% and exports dipped by 4% leading to an overall fall of 23% in sales. Only twice in the last 13 months has Bajaj reported a positive growth in sales. Normally, exports have managed to bail out the company but June saw pressure on exports due to geopolitical factors in Nigeria and Libya. Even other markets in Latin America and Africa have come under pressure due to weak oil prices. Two wheelers also bore the brunt of an economic slowdown in the aftermath of demonetization.
India’s PMI manufacturing for the month of June 2017 came in at 50.9, slightly lower than the 51.6 recorded in May. A PMI level of above 50 indicates an expanding manufacturing sector while a PMI level of below 50 indicates a contracting manufacturing sector. However, when the PMI falls on a sequential basis it is a signal of manufacturing losing its momentum. The PMI manufacturing has not really recovered after the slowdown in growth and liquidity in the aftermath of the demonetization. According to Markit, this weakness can be explained by the uncertainty surrounding the introduction of GST and hence more manufacturers were playing it safe. The only redeeming feature of the PMI has been that the order flows touched an8-month high, which shows a high level of confidence in the future.
An Indian consortium led by ONGC Videsh is willing to pay as much as $11 billion to build and develop the giant Farzad-B Natural Gas field in Iran. ONGC Videsh, on its own, has agreed to invest up to $6 billion in the Farzad-B gas field. India is already the world’s fourth largest LNG buyer and is locking up supplies to secure its supply funnel. Iran has massive potential and it is also located geographically to benefit India. India was one of the few countries that had purchased Iranian crude even during the sanctions. Over the last few years, the oil relations between the countries had deteriorated.
