The first warning to prepare for a weak monsoon has come from SKYMET. According to privately owned weather forecaster, SKYMET, there was 70% probability of sub-par rainfall this year which includes a 15% probability of outright drought conditions. According to SKYMET, the monsoon could arrive off the coast of Kerala after June 04th rather than around June 01st as is the norm. Delay in rains impacts sowing, agricultural output and rural demand. This could have larger implications for input costs, food inflation and also for overall GDP growth.
The trade war may be one but the trade talks are likely to continue too. China and the US agree to resume trade talks in June 2019. Even as China retaliated and stood its ground, Trump has agreed to resume trade talks with China starting with a one-on-one meeting with Xi during the G-20 Summit in June. Meanwhile, the US trade representative has threatened to extent the punitive tariffs to goods worth $300 billion of Chinese imports. In the last 6 months, the trade war has hit the US and the Chinese economies and both have suffered in terms of trade and economic growth.
There is confirmation from CRISIL that the NCLAT appears to have done its job pretty well. CRISIL confirmed that IBC related loan recoveries were at Rs.70,000 crore for fiscal 2018-19, representing a recovery rate of over 43%. That was extremely good by global standards. This is more than twice the amount recovered through previous mechanisms like the Debt Recovery Tribunal (DRT) and the Lok Adalat. The IBC is expected to collect another Rs.90,000 crore this year which includes Essar Steel, Bhushan Power, Amtek Auto and a host of other smaller companies.
A minor divergence appeared between CPI and WPI inflation. Wholesale Price Inflation (WPI) for April came in lower at 3.07%. A day after the retail CPI inflation came in slightly higher, the wholesale inflation came in slightly lower than the previous month. While the food basket did see a sharp rise in inflation, there was a sharp fall in fuel inflation while manufacturing inflation was flat at 0.2%. The CPI inflation and the WPI inflation, along with IIP growth, are key inputs as the MPC meets in June for monetary policy. The market consensus appears to be veering towards a likely 25 bps rate cut.
After a continuous downtrend for 9 days in succession, Indian stock markets recover sharply to close higher. After a 2000 point correction, the Sensex finally showed signs of a bounce. However, the VIX continued to remain elevated at close to the 27 levels. The A/D ratio was extremely strong and all sectors, other than IT, gave positive returns. The bounce was triggered by China and the US agreeing to resume trade talks in June this year. Meanwhile, geopolitical risk escalated after Saudi Arabia reported more attacks on its oil facilities as the Middle East. Earlier, the UAE reported attacks on Saudi vessels close to the UAE port of Al Fujairah. The bone of contention is the Strait of Hormuz which is under the control of Iran and moves 30% of the oil cargo. Brent was above $71/bbl in late trades.
Japan drags India to WTO over duties on mobile phone imports, albeit being a minor player in the Indian smart phone market compared to Samsung and China. Japan has specifically pointed to the way India had tweaked customs duties ever since it embarked on the ambitious “Make in India” program. Japan has complained that the effective tariffs on many products like mobile phones, base stations, routers and circuit boards were well above the WTO approved rates. In the last few months, the US, EU and even Japan have objected to some of the protectionist policies adopted by the Indian government.
