Core sector came in marginally higher at 4.7% for the month of April. The Core sector is also referred to as infrastructure growth as it represents the 8 core sectors of the manufacturing economy. The 8 core sectors include Cement, Steel, Fertilizers, and electricity, Coal, Natural Gas, Crude Oil and Refinery Products. The marginal revival was largely driven by a 16% growth in the cement and coal output during the month of April. Natural Gas was the other major positive contributor. The core sector becomes important as it accounts for more than 40% of the IIP growth each month.
SAIL, the government owned steel major, has reported net profits of Rs.816 crore for the fourth quarter ended March 2018. For the full year, the losses shrunk by almost 90% from the previous year with the steel sector showing signs of tractions on expectations of higher demand and a favourable government policy with respect to global steel imports. SAIL is almost through with its massive expansion program and its quarterly production of 4MT was its best performance ever. Indian steel demand is expected to grow 3-fold by 2030 and that is the story that domestic steel makers are betting on.
The BJP may have had another disappointing outing in the by elections in 11 seats across India. Out of the 4 Lok Sabha seats that went to by poll, BJP could win only 1 seat and in the 7 assembly by polls, the BJP could only muster one seat. Effectively, this has taken the BJP tally in the Lok Sabha to below the half-way mark of 272. The bigger worry for the BJP and for the market’s overall will be the likelihood a medley coalition of disparate parties trying to form a coalition government in 2019. India has seen these experiments in the past and they have been economically a major impediment.
The Commerce Ministry has turned the scanner to the Wal-Mart Flipkart deal where Wal-Mart had agreed to acquire a controlling stake in Flipkart at an overall enterprise valuation in excess of $16 billion. The SJM has alleged that Wal-Mart was using a back door entry into the retail sector in India; something the BJP government has been particular about protecting. Wal-Mart will be acquiring a 77% stake in Flipkart through some key anchor investors and also from the promoters. The deal has to be still approved by the CCI but it now leaves 3 players in India; Wal-Mart, Alibaba and Amazon.
The sudden decision by Trump to impose import tariffs even from allied nations has pushed the US stock markets into a tizzy even as treasury yields softened to the 2.82% mark on the back of higher demand. The sudden move by Trump has obviously angered most of the traditional US allies like Canada, Mexico and the European Union. The steel tariffs of 25% will now be imposed on Canada, Mexico and EU contrary to popular perception that Trump may choose to keep US allies out of such stringent conditions. The decision by Indonesia to hike the rates for a second time in a short span of time underscores the fact that the RBI too may consider rate hikes in its June policy to counter the effects of a weakening rupee. Markets across the US and Europe were sharply down!
Troubles for Deutsche Bank appeared to mount after the US government added Deutsche Bank to the list of troubled lenders that the US was monitoring. The stock closed at €9.16 on the Frankfurt Bourse and this is its lowest price since 1992. The first signs of trouble at Deutsche Bank appeared after the financial crisis when its massive exposure to derivative transactions almost pushed the bank to the brink. The bank has been consistently losing value due to concerns over corporate governance, risk management and compliance standards.
