There was disappointment in the quarterly GDP numbers announced on 28th Feb. India’s annualized GDP growth for December quarter came in at 6.6%, sharply lower than the consensus estimates of 6.9%. Economists are of the view that the data was indicative of loss of growth momentum from the second quarter onwards. The full year forecast has been pegged lower at 7% and that is factoring in just 6.4% in Q4. Pressure was seen in manufacturing and services. Even agriculture did not show any positive impact despite higher prices assured during the Kharif cropping season last year.
After a long gap, the Indian Rupee closed 52 paisa stronger at 70.72/$ on easing of border tensions. There was a sharp rally in the Indian Rupee in the second half after Pakistan agreed to release the IAF pilot from Pakistani custody. This is seen as a first step towards de-escalating tensions on the border, which had spooked the rupee and the VIX. With FPIs pumping money aggressively into India in the last week, the INR has received a leg up from portfolio flows. There was also aggressive dollar selling by exporters leading to an oversupply of dollars in the currency markets.
There seems to be some genuine progress as far as loan recovery by banks is concerned. State run PSU banks recover Rs.98,000 crore in Apr-Dec 2018 period. According to the Banking Secretary, this adds up to nearly Rs.287,000 crore worth of loans recovered since the exercise began in right earnest in 2015. In fact, with the NCLT process already in full swing, the coming year is expected to see a much larger recovery for the beleaguered PSU banks. The provision coverage ratio for bad loans is also up sharply from 46% to above 70%, giving hints of the NPA cycle gradually bottoming out.
Cement sector valuations in India have been largely contingent on the pricing power and that seems to have come back in the last two months. On a day when the overall GDP numbers for the December quarter and the core sector numbers for January disappointed, there was good news for the cement sector. The industry has seen higher prices for the second straight month in succession with the maximum traction coming from the South, West and North markets. Pricing power has been the key to cement profitability and infrastructure demand has also been robust in 2019.
Markets did not flatter on Thursday but there was a sharp fall in the VIX by over 5%. The markets saw some relief after Imran Khan agreed to release the IAF pilot in their custody. The reaction was visible as the VIX (fear index) fell by over 5% and got closer to the 17 mark. The advance / decline ratio remained almost flat on F&O expiry day at 26:24. Support also came from Brent Crude which traded below $66/bbl. On the day of F&O expiry, oil companies in the upstream and downstream space saw short covering. Traders were cautious about rolling their positions in the light of the uncertainty on the geopolitical front. While upstream oil companies benefited from the recent oil price rally, downstream companies are now hopeful that subsidies should not be an issue.
In a strange turn of events, SEBI has requested the government to do away with RBI representation on SEBI board. Alternatively, SEBI has asked to be allotted a representation in the RBI board. While RBI regulates bank, debt markets and forex markets, SEBI is responsible for the capital markets and all traded securities. In the case of sensitive regulatory issues like NCLT, the RBI and SEBI had worked in close conjunction. However, SEBI’s contention was that its regulatory mechanisms had matured over the last 25 years and was already represented by the government of India.
