In a very important and significant cabinet reshuffle, Smriti Irani was moved out of the I&B ministry while Piyush Goyal got the all-important ministry of finance. This is likely to be welcomed by the markets as Goyal has a good rapport in financial circles. Piyush Goyal will continue to hold the railway portfolio. In place of Smriti Irani, her deputy Rajyavardhan Rathore will take charge of I&B. However, the announcement has also made it clear that the Goyal will hold temporary charge of the finace portfolio owning to Jaitley’s indisposition. Insiders believe that the FM shift could be permanent.
In the aftermath of the Nirav Modi fiasco, the CBI has charged a former PNB head and 21 others in the bank fraud case, which ran into $2 billion. The fraud was perpetrated by the issue of fake LCs issued by the PNB Mumbai branch where even the SWIFT password had been compromised. This is just the first round of prosecutions and in the next few days more prosecutions could follow. Former PNB boss Usha Ananthasubramanian, who is currently the chairperson of Allahabad Bank, is the former PNB had who has been named in these dubious transactions with the Nirav Modi group.
CPI inflation was sharply higher at 4.58%, nearly 20 basis points higher than the consensus estimates. This sharp rise in CPI inflation was driven by higher food prices and higher fuel prices. Food prices are likely to go up further once the new government MSP formulat at 150% of the cost of production is factored from this Kharif season. Also, with crude oil at $75/bbl, the pressure on the Indian import bill is already leading to imported inflation. It may be recollected that the WPI inflation announced on Saturday was also at a 4-month high with the pressure from food and fuel.
The prices of global oil moved up further on Monday with the Iranian sanctions likely to impact abut 5 lakh barrels of oil per day. Iran is the second largest producer in the OPEC after Saudi Arabia. However, many countries including India have not yet acted on the proposed sanctions that Trump has spoken about. Indian oil refiners are heavily depending on Iranian crude to meet their through put requirements. If Iranian oil supply actually hits the market then the actual impact could be more pronounced and oil prices could actually get closer to $100/bbl by middle of next year.
At a time when the markets were getting worried about the competitive impact of Patanjali, India’s largest FMCG company, HUVR, has continued to report stellar results. The big story was that the sales volume at HUVR actually grew by 11% for the quarter ending March 2018. The sharp rise in volumes is evidence that the negative impact of demonetization is not only coming back to the new normal but also the base effect is favouring companies like HUVR. The strong volume growth at HUVR was actually driven by the home and personal care segment. The big story for HUVR was that in some segments the rural segment had actually overtaken the urban sector. The EBIT for the quarter was up by 30% at Rs.2148 crore and the OPM moved up from 21.5% to 23.4% during the March quarter.
The trouble is again brewing in the Middle East and West Asia after the recent decision by Trump to shift their embassy to Jerusalem led to violent clashes in the Gaza Strip. The violence left over 50 people dead, most of whom were Palestinians. Previous presidents had refrained from shifting the US assembly in Israel from Tel Aviv to Jerusalem considering that the holy city was also embroiled in a historical controversy. Israel has accused the outlawed Hamas of using these protests as a pretext and front to make a larger attack in the Jewish state of Israel.
