Monthly core sector numbers finally showed some improvement for March 2019 at 4.7%. This figure represented the best core sector growth in the last 5 months. Core sector captures the growth in 8 core infrastructure sectors and has a weight of over 42% in the IIP basket. Cement and refinery products showed a strong performance in March while oil extraction continued to remain under pressure. The full year core sector growth was stagnant at 4.3%. Core sector growth has strong externalities and has a strong impact on the growth in IIP and also the growth in GDP overall.
After nearly 2 years, the GST collections managed to a record number in April 2019. GST collections of April 2019 at Rs.113,865 crore marked the highest monthly collection since GST was first launched in July 2017. IGST accounted for nearly 50% of the total revenue collections with the balance split between CGST and SGST. The total number of returns filed also stood at a record 72.13 lakhs. The previous fiscal 2018-19 had seen a GST shortfall of nearly Rs.100,000 crore. The GST will have to be maintained around this level each month to meet its full-year targets for fiscal 2019-20.
It was a mix of Trump coaxing oil producers to increase supply and the US producing oil at record levels. Brent Crude prices fell further to $71.67/bbl on oversupply concerns. Effectively, after touching a high of $75.60/bbl last week, oil has slid nearly $4/bbl. US oil production hit a high of 12.7 million bpd even as crude inventories in the US grew at a much faster rate to the tune of 471 millions of barrels. Of course, the chaos in Venezuela and sanctions on Iran will provide some support to oil prices. Iran sanctions waiver has expired on May 02nd and it remains to be seen what China’s reaction is.
Global markets got a boost from a likely dovish Fed stance on Wednesday even as the dollar declined. Global equities saw the fourth straight day of gains on Tuesday, on a day when the Indian markets were shut on account of Maharashtra Day. The dollar had dipped after Trump came out demanding rate cuts. While the trajectory of the Fed will only be known on Wednesday night, any rate cut will be seen as positive for global equities. Meanwhile, Apple announced stellar numbers and has agreed to buy back shares to the tune of $75 bn. Apple is attempting to reclaim the market cap of $1 trillion.
It looks like tightness is returning to the money markets. Short term borrowing rates spike on worries of a fresh NBFC crisis, with two major NBFCs being downgraded to default status in the previous week. In fact, the yields on short term CDs and CPs has already climbed up by 15 bps are there are close to Rs.2 trillion worth of CPs maturing in the month of May with smooth rollovers a worry. In the meanwhile, Bank credit touched a 5-year high in the fiscal year 2019. Gross bank credit grew by 12.2%, largely driven by lending to NBFCs and to retail borrowers as per a report in Bloomberg. Bank credit to NBFCs alone grew by 29% in the last year but even if you were to exclude NBFCs, the loan growth was still fairly healthy at 11.06% for the year. In a nutshell, NBFC liquidity will be a big issue.
IL&FS board seeks punitive action against auditors Deloitte Haskins Sells and BSR (part of KPMG). Both audit firms have been pulled up by the IL&FS board for lapses in highlighting and red-flagging the risks in the IL&S business model. The request for action against auditors has been made in the board’s report to the MCA. In fact, the SFIO had also found that Deloitte had failed to exercise due diligence. One of the reasons was that IFIN had given loans to companies under stress and over the auditors had not red flagged any of the risks despite being aware of how Ravi Parthasarathy had the run the organization.
