The debate at the US Fed seems to have shifted from “how much higher to how much lower”. While the US Fed may not be hinting at a rate cut; indications are coming from the CME FEDWATCH tool. The CME FEDWATCH tool, which calculates implied probabilities of a rate cut based on Fed futures prices, is assigning a probability of 33% to a rate cut when the Fed meets on 18th and 19th of June. Global markets have been making a strong case for rate cuts by the Fed of at least 25 basis points to neutralize the effects of the trade war and also to reduce the deficit. That should be good news for Indian markets.
The rainfall deficiency this year is not only steep but also displays a high degree of dispersion. Overall rainfall deficiency for current year stands at 43%. In what could impact the sowing schedules of Kharif crops, the 10-days delayed onset of monsoons in Kerala has resulted in an all-India deficiency. According to the IMD, by now the monsoons should have been above central India but it is still around the coastal areas of Mangalore. Specific states like Madhya Pradesh and Chhattisgarh are facing rainfall deficiency of over 75% currently. In fact, Vidarbha has a shortfall of nearly 87% rainfall as of now.
Foreign investors have shown greater confidence after a majority government came to power at the centre. FPIs pumped in Rs.11,132 crore in the first half of June 2019. Despite the domestic and the global worries, the FPIs continue to be excited about India. According to a report in the Economic Times, the bulk of inflows of Rs.9,615 crore came into debt and only Rs.1,517 crore came into equities during June. Debt flows were positive post the decisive NDA victory in the elections as well as the stable rupee, which is the key to protecting dollar returns. Second half may depend on the Fed action.
It looks like the tentacles of SEBI are spreading wider at IL&FS with the probe covering more related parties under the SEBI scanner. SEBI has widened the scope of its probe and has brought independent directors, auditors, rating agencies and top management personnel under the scanner. SEBI is investigating alleged violation of disclosure and corporate governance norms. SEBI is also looking into the connivance of some listed borrowers who were given multiple loan top-ups despite a record of previous defaults. The situation appears to be a lot more convoluted than first impressions.
Trade deficit for the month of May 2019 widened to $15.36 billion, wider than the previous month. This takes it potentially closer to the $200 billion mark for the full year. The export growth stagnated at around 3.93%. Import of non-oil products grew at just 2.9% but oil imports grew at nearly 8.4% for May. The all important current account deficit number for 2018-19 will be announced on 17th of May. In the meanwhile, in a surprise move India decided to impose retaliatory tariffs on 28 items of US imports into India. The Indian government was not too happy with the unilateral Trump decision to withdraw the $5.7 billion General System of Preferences (GSP) benefit for India. Effective 16th June, India has imposed steeply higher tariffs on a range of US imports ranging from almonds, apples, walnuts and chickpeas.
Saudi Crown Prince expects the Aramco IPO in year 2020 or 2021 and he would be obviously expecting the oil prices to be buoyant till that time. Prince Salman of Saudi Arabia hinted that the Kingdom could look at an IPO for Saudi Aramco in late 2020 or early 2021. The Kingdom is planning to sell a 10% stake in Saudi Aramco at an overall valuation of $2 trillion. It is slated to be the biggest IPO in history. Last year, the IPO was put off due to unfavourable market conditions and lack of stability in global crude oil prices. Aramco had reported full year profits of $111 billion for calendar year 2018.
