Even as Indian manufacturing stayed expansionary, there was
Ironically, the Indian manufacturing PMI weakened even as China saw a boost to its March PMI. However, Indian PMI still holds above 50, indicating manufacturing expansion although the momentum may be lagging. The PMI was sharply lower than the 54.3 recorded in February. There was some softness in new orders flows, output and raw material purchases.
A day after the struck down by the RBI circular announcing stringent regulations for IBC reference and for NPA recognition, Moody’s has declared the SC order on the RBI Circular as credit-negative for Indian banks. The Supreme Court had passed an order striking down the February 12th circular of RBI tightening stressed loan recognition and resolution for large borrowers. SC had ruled the circular as ultra vires the powers of the RBI, although the central bank refuses to accept the argument. The RBI circular had also presented IBC as the only resolution for stressed assets, which was the bone of contention.
Congress has a different vision of a substantially simplified GST 2.0. As part of its detailed manifesto ahead of the General Elections, the Congress party promised a much friendlier GST regime. This would include bringing oil, tobacco and liquor into the GST ambit, zero GST on all essential goods and life saving medicines, zero GST on all exported goods, abolition of e-way bill and a simplified quarterly GST returns. Today GST is facing some teething issues like seamless availability of credit, payment of refunds on time, delays in filing, lack of resources in departments to manually track etc.
The Sensex officially became a 390-bagger on the occasion of the 40th anniversary of the index. The index was driven higher by positive growth cues from China and hopes of a rate cut by the RBI on 04th April when the MPC meet concludes. With a new financial year beginning, some serious portfolio reallocation was also seen, with beaten down sectors attracting buying interest. The Sensex has given an average annual CAGR return of over 17% which is an amazingly consistent return over such a long term period. The Sensex represented a diversified approach to investing in equities.
It has been a volatile few weeks for Brent prices but since Monday oil appears to be on a tear. Brent Crude stopped just short of the psychological $70/bbl mark before retreating. After a sharp 2%+ rally on Monday, the strength in Brent Crude prices continued on Friday. However, there was tempering at higher levels. The surge in price has been led by Iran sanctions and the oil muddle in Venezuela. Chinese PMI has also rekindled hopes of a revival and that has also had a salutary effect on crude oil prices. Saudi Arabia has been targeting $70/bbl to balance its budget. It is well known that Saudi Arabia is an economy that is dependent on monetizing its oil reserves and that also at consistently above average prices. It looks like all the 3 principal producers of oil are now comfortable with higher prices. The European Union (EU) has warned of liquidity risks in the event of a no-deal BREXIT. With the BREXIT deal rejected by the British Parliament for the third time, EU has warned that a no-deal BREXIT could create volatility in global financial markets. EU already has a contingency plan to deal with no-deal but UK based clearing houses process trillions of dollars of derivatives transactions and that could be a systemic risk. April 12th is the day UK is scheduled to leave the EU and if there is no deal before that then the UK will have to be forcibly walked out of the EU without any back up plan in place.
