There finally seems to be some respite for the beleaguered ADAG group as Anil Ambani manages to reach a Standstill Agreement with creditors. ADAG has reached an in-principle agreement with nearly 90% of its lenders not to enforce security and not to sell any pledged promoters’ stake till September 30th, 2019. This standstill agreement will be despite the recent margin calls that the group faced. ADAG group has committed to meet all interest and principal obligations in the meantime. RCOM has already filed for NCLT reference and had come under bear attack in the last 2 weeks.
Disinvestment revenues of the government got a big boost as the Bharat 22 ETF helped India get closer to its full-year disinvestment target. The Rs.10,000 crore Bharat 22 ETF was successfully completed and the Indian government has managed to raise Rs.53,558 crore by way of disinvestment of PSUs, as against its full-year target of Rs.80,000 crore. There was an additional Rs.5380 crore that came in from the sale of SUUTI shares. It may be recalled that disinvestment target for 2019-20 has been set at Rs.90,000 crore in the interim budget presented on February 01st by Piyush Goyal.
Trade deficit now is getting hit by weak trade figures as India’s January 2019 trade deficit widened to $14.73 billion. Even as exports in January rose by 3.74% to $26.3 billion, imports were virtually flat at $41.09 billion. The trade deficit is higher than the $13.08 billion reported in the month of December 2018, despite lower Brent crude price levels. At an overall trade level, the volumes were impacted by the ongoing trade war between the US and China. China’s exports had risen by 9% in January 2019. A rising trade deficit is normally negative for the valuation of the Indian rupee.
Foreign portfolio investors infused Rs.5300 crore into Indian equities in February. This followed the withdrawal of an equivalent amount in the month of January. However, the FPI buying was concentrated in the first week of February after a booster Union Budget and a 25 bps cut in rates in the monetary policy. FPIs have been consistent sellers in the second week of February. FPIs are still cautious on Indian debt after the liquidity crisis late last year. However, the recent leeway given to FPIs to take up concentrated exposures in corporate debt may be a boost for debt market flows.
Some interesting trade news emanated from oil and cement front. India emerged as the largest importer of crude oil from Venezuela. The 66% rise in crude imports from Venezuela in the month of February was driven by the US sanctions on Venezuela. Actually, Venezuela is the 3rd largest crude supplier to Indian refineries. The OPEC deal, meanwhile, ran into trouble after Russia failed to live up to the promised cuts. On steel, India turned a net importer of finished steel in the Apr-Jan 10 month period. India’s steel exports fell by 37% in the first 10 months to 5.15 MT compared to exports of 8.22 MT of finished steel in the corresponding period last fiscal year. Imports grew by 1.5% to 6.55 MT. This is explained by higher domestic consumption of steel. India’s steel capacity will triple to 300 MT by 2030.
NBFC problems have taken a toll on microlending or last mile lending as it is called. NBFC micro lending dipped 15% in the third quarter ended December 2018. Even as NBFCs are trying to emerge from the liquidity crisis, the sharp fall in microlending by NBFCs was driven by two key factors. Firstly, most NBFCs were strapped for low-cost liquidity and that constrained their capacity to lend to microenterprises. Secondly, the ban on the use of Aadhar data for financial transactions also proved to be a dampener for the rapid growth of NBFCs. Surely for thought for the RBI!
