Now the Ministry of Agriculture has also admitted that the erratic rains could impact Kharif output.
The Ministry admitted that the summer crop planting was down by 27% this year on a YOY basis with paddy and cotton taking a hit in June. The seeding begins in late May and early June but got inordinately delayed due to the late onset of monsoons. When the onset of rainfall is late, it impacts the sowing pattern and reduces the final Kharif output. This could be inflationary and could have larger implications for the way the RBI goes about setting its rate policy for the full year.
Debenture redemption reserve may not be required any longer according to the latest Union Budget presented by Nirmala Sitharaman. This way, the budget has given a boost to NBFC fund raising via the debt route. With NBFCs slated to raise more than Rs.10,000 crore in the Jul-Sep quarter, by scrapping the need to maintain a Debenture Redemption Reserve (DRR) for bond obligations comes as a major positive. In the past, this was the stumbling block. Now, at least the stronger NBFCs with a credible balance sheet will be attracted to fund their business via bond issues in the absence of DRR.
Bond markets saw a sharp fall in the bond yields on Monday as benchmark bond yields cracked to 6.56% on bond prices rally. It may be recollected that the bond yields have fallen quite rapidly after it breached the 7% mark decisively. The budget announced that the government would raise $10 billion via its maiden sovereign bond issue. This would reduce the pressure on the domestic bond markets and that was welcomed by Indian bonds as prices rallied pulling the yield down. Yields have fallen 175 bps since October 2018 when the bond yields had shot up on globally hawkish expectations.
End of quarter redemptions came back to hit debt and liquid funds in June 2019. Net mutual fund outflows were at Rs.160,000 crore in the month of June 2018. According to data put out by AMFI, the net outflows in debt funds surged to Rs.171,000 crore in the month of June after seeing net inflows of Rs.70,000 crore in May. Corporates and institutions are getting wary about debt funds as the credit risk issue is now visible in a lot of funds. But, equity funds saw positive inflows with SIP contribution at comfortable levels of Rs.8122 crore in June. Retail demand continues to be buoyant.
Stock markets are up against negative cues; globally and domestically. On the domestic front; apart from the proposed increase in public shareholding and the imposition of buyback tax, the enhanced surcharge on high-income groups could hit certain categories of FPIs. In the aftermath of the fall, the government has promised to issue a clarification on tax applicability to FPIs. There are also concerns at a global level as Morgan Stanley turned bearish on global equities. Morgan Stanley has cut its global equity exposure to the lowest level in 5 years. According to Morgan Stanley, most central banks are likely to follow loose monetary policies leaving little room for any equity market appreciation. Morgan underlined that apart from weakening PMI, the inverted US yield curve also posed a major risk.
Iran claims that it is business as usual for the Iranian oil industry, which is the mainstay of the economy.
In fact, Iranian oil minister, Bijan Zanganeh, claimed that exports of crude oil from Iran were improving even as the US tightened sanctions on Iran in the light of Iran’s recent decision to enrich uranium. While sanctions technically made it impossible for countries to do business with Iran, the recently seized Iranian oil tanker near Gibraltar is an indication that Iranian exports of oil are still up and running. This tanker was apparently headed for Syria from where the oil normally gets exported to other nations.
