China struck back at the US imposing 25% tariffs on over 106 US import products ranging from pork to soybeans to cars and airplanes. This was in response to the US action to impose higher tariffs on Chinese imports to rectify the massive deficit of $375 billion that the US was running each year with China. Of course, the tariffs will not kick in immediately and will be effective only after public comments have been elicited. Markets across the globe including India crashed after the announcement by China. The US would be also worried about the fact that China holds over $1.4 trillion of US treasuries.
The banks are pushing for the winding up of Alok Industries and Jyoti Structure which jointly owe nearly $5.8 billion to Indian banks. The banks are obviously not happy with the bids that they have been receiving for the debt laden companies and do not see the need to take huge haircuts. As per the NCLT regulations, if a resolution is not reached within 270 days then the company will have to be wound up. Both the companies will complete their deadline by April 14th this year. While Reliance and JM ARC have shown interest in Alok, a group of HNIs led by Sharad Sanghi has shown interest in Jyoti Structures.
Even as China continues to be the world’s largest steel producer with nearly 50% of the global capacity, India has pipped Japan to become the second largest steel producer in the world. India’s crude steel production for the 11 months to Feb 2018 was up by 4.4% at 93.11 million tonnes. India had already overtaken the US to become the third largest producer of steel in 2015. The big story in steel is the domestic demand for Steel expanding three fold by 2030, which is why Indian steel companies are bracing themselves to expand their capacity. India is likely to touch 300 million tonnes by 2030.
Even as the imbroglio over the conflict of interest case in ICICI Bank carries on inconclusively, the big challenge is that shareholders have already seen wealth to the tune of Rs.27,000 crore destroyed since the sell-off started on the counter. It must also be remembered that Indian mutual funds hold nearly Rs.35,000 crore worth of ICICI Bank shares and most of them are held by retail investors largely through the SIP route. The stock is there in most of the equity fund portfolios and also in ETF portfolios as it has a large weightage in the index. The overhang of the case continues to plague the stock.
It now appears that the Fed trajectory of rates will be a key consideration in shaping the RBI’s stance on repo rates. There is an outside possibility of the RBI also hiking rates by 25-50 basis points during the year. However, the key driver for this hike will not just be domestic inflation but Fed outlook. If the Fed eventually hikes the rates 4 times instead of 3 times in 2018, then the RBI may not have much of a choice except to hike rates in India too. That is one the reasons why the bond yields have sharply gone up from 6.4% last year to 7.7% in this year with bond traders expecting the 8% level to be breached by middle of this year. The big challenge for the RBI and the government will be sustaining FII interest in Indian bonds if the bond yield spreads between US and India benchmark narrow beyond a point.
The output of OPEC fell to the lowest level in a year as Venezuela output continued to falter. The March Brent Crude output was lower by 170,000 barrels at around 32 million bpd. This fall becomes all the more relevant because last year Equatorial Guinea was not part of the OPEC. While Iraq has not complied with its output cut targets, Saudi Arabia, Venezuela and Angola have more than delivered on cuts. Some of the key countries that have been seeing sharp output drops include Algeria and Libya, apart from Venezuela. OPEC and Russia have been constraining output since Jan-17 by 1.8 million bpd.
