Mark Mobius of Templeton is of the view that there was being too much ado about fiscal slippage and it was unlikely to hurt foreign outflows. Mobius is of the view that a fiscal spillage due to growth push may not exactly scare the FPIs from investing in India. According to Mobius, interest rates must be kept low to spur investments and growth. FPIs may not mind a higher fiscal deficit if that is supported by higher real growth in GDP. This kind of a countercyclical approach to slow growth is what is required and most countries have allowed for temporary spillage of fiscal deficit to address growth concerns.
The NCLT Appellate Tribunal has set a precedent of sorts in the Essar case as it stripped the all-powerful Committee of Creditors (COC) of absolute powers in the Essar Steel case. The NCLAT struck down the request of the Ruias and accepted the Arcelor Mittal offer for buying out Essar Steel for Rs.42,000 crore. However, in the first of its kind initiative, the NCLAT decided that the break-up of the distribution between the financial creditors and operational creditors will be decided by the company. Many operational creditors of Essar had protested to the NCLT of unfair treatment in bankruptcy cases.
The diverse pulls on oil were clearly visible in the last few days. Brent crude corrected by 81 bps as global slowdown fears continued to haunt oil prices. Despite the good tidings of a trade rapprochement between the US and China, oil prices headed down as the falling bond yields and the negative US yield curve kept fears of a global slowdown topmost in the minds of investors. These slowdown worries have even managed to outweigh the impact of the OPEC supply cut extension and the Iran sanctions as oil touched $63/bbl. Oil prices have typically moved positively with GDP growth.
Volatility is down in India and so is the Fear Index (also called VIX). In fact, the India VIX fell sharply ahead of Union Budget on market stability hopes. In the last 3 trading sessions, the Volatility Index (VIX) has fallen by over 9% from 14.95 to 13.69 indicating increased market stability ahead of the Union Budget announcement. The VIX had touched a high of 30 ahead of the election results and has been falling vertically from that point over the last one month. Normally, VIX tends to be inversely related to the index returns and sharp falls in the Nifty are normally accompanied by a sharp rally in the VIX.
The Economic Survey tabled in parliament on Thursday made some interesting observations. India had emerged as a $2.75 trillion economy and had shown positive growth weak growth in 2018-19 at just 6.8% in the last year. This puts India among the top 5 economies in the world. According to the Economic Survey, the expected growth rate for 2019-20 was 7% and that is the lowest estimate in the last five years. The Survey also observed that core inflation had come down, along with overall inflation, during the year. The Economic Survey also underlined that the government plans $330 billion renewable energy push by year 2030. However, coal (thermal energy) at 60% share in 2030 will remain central to electricity generation. Renewable at 500GW will contribute to the balance 40%.
Government orders probe into mismanagement of funds at Jet Airways. In fact, the Ministry of Company Affairs (MCA) has ordered a detailed probe into whether funds were mismanaged at Jet Airways to the detriment of stakeholders and the investigations will be conducted by the SFIO. Former Chairman, Naresh Goyal, has been prevented from travelling out of India till the probe is completed. The banks had alleged that due diligence was not exercised by the company in the administration of funds raised, which actually precipitated the decline of the company in the last few years.
