The week is likely to be highlighted by the Monetary Policy to be announced on 05th December. The market consensus is that the Monetary Policy Committee may choose to keep rates unchanged. The Fed chief, Jerome Powell, has already hinted at a more dovish policy going ahead while inflation has continued to remain around the 3.31% mark. With GDP disappointing at 7.1% in the second quarter ended September, the RBI is likely to be inclined to keep status quo on rates. That may be good news for the equity markets overall which had been surprised by 2 consecutive rate hikes in June and August.
FPI inflows during November 2018 hit a 10-month high of Rs.12,260 crore. Equities saw inflows of Rs.6,913 crore with the balance coming into debt. This comes on the back of nearly $5 billion worth of selling in the month of October alone when the rupee had dipped to a low of 75/$. FPI sentiments have improved after the Fed dovish statement as well as the toning down of 10-year G-Sec yields in India as well as strength returning to the rupee. But the biggest factor that has led FPIs back was the sharp weakness in oil with Brent dipping below the $60/bbl mark on the back of oversupply concerns.
The biggest take away from the G-20 Summit could be that Trump and Xi have agreed to a temporary truce on the trade war. Trump had imposed tariffs on Chinese imports to the tune of $250 billion and China had retaliated. However, the result was a global slowdown in growth with the World Bank downgrading the growth target by nearly 30 basis points. Trump and Xi have agreed to halt any new tariff imposition for a period of 90 days, which should soothe frayed nerves in global markets. Trump was supposed to raise the tariffs from 10% to 25% on January 01st, which will not happen now.
SBI is likely to sell three major accounts to raise close to Rs.2,111 crore. The 3 NPA accounts include Sona Alloys, MCL Global Steel and Jayaswals Neco (formerly Nagpur Engineering). Once these accounts are placed for sale, the potential bidders will be permitted to conduct due diligence of these accounts. NBFCs and ARCs are expected to participate in this bidding. The bank had returned to profits in the second quarter after almost a year and has been aggressively taking haircuts to reduce its NPA. Its gross NPAs currently stand at 9.95% while the net NPAs are at below the 5% mark.
The month of November was a month of a series of upgrades and downgrades by equity analysts. Among the 278 stocks tracked by analysts, Axis Bank and Marico bagged the maximum upgrades during the month of November. With the corporate governance issues sorted out at Axis Bank and the bank showing a turnaround in performance, it has been the most sought after stock in the month. Axis is also expected to benefit from an improved credit cycle and a pickup in credit growth. Even as HFCs have been getting the stock, LIC Housing got 3 new upgrades as a least risk scenario. Stocks like Cadila Healthcare and Mahanagar Gas also got upgraded on the back of attractive valuations. On the downgrades, Sun Pharma got downgraded in a good month on corporate governance issues.
The pressure on auto stocks continued in the month of November with Tata Motors reporting a 4% fall in sales of commercial and passenger vehicles. The company had reported positive growth continuously for the last 7 months. The liquidity crisis, higher interest rates and the sharply higher fuel prices left a lag effect on auto demand. However, M&M and Escorts reported robust sales growth in tractors and commercial vehicles. The surprise was the 0.7% fall in sales in case of Maruti, largely driven by a 19% fall in cars in the entry-level mini segment. However, compact car sales were strong.
