With crude prices firmly below the $60/bbl mark, the Brent crude took support around the $56/bbl on anticipation of OPEC action. Oil prices in the Brent market held in positive territory on Thursday after a sharp 4% crack on Wednesday on global slowdown fears. Oil prices saw some bullish activity on expectations that a weak dollar and further supply cuts by OPEC and friendly countries may offer support to oil prices. Oil had recently peaked at $75/bbl but has been on a consistent downtrend since. When oil prices started falling in March this year, it touched a low of $51/bbl.
In continuation of tighter regulation of mutual funds (especially debt funds), SEBI has asked mutual funds to shift all investments to listed securities. As part of the new set of prudential norms announced by SEBI, mutual funds will be allowed to only invest in listed or to-be-listed equity and debt securities. This was necessitated after mutual funds had faced redemption problems due to investments in illiquid investments. Debt funds will have to reduce their exposure to unrated debt instruments from 25% to just 5%. However, mutual funds will now be allowed to charge upfront fees with disclosures.
With two of the user industries (construction and automobiles) in trouble, paint manufacturers turned out to be surprised outperformers in June quarter. The markets have been wondering how paints have done so well at a time when the construction and automobile industries are in the doldrums. But Indian paint manufacturers benefited substantially from weak crude prices which helped them build volumes on lower prices. It was the domestic decorative paints segment that recorded high teen growth during the June quarter. This has been instrumental in driving paints demand this quarter.
Market strategies have warned that aggressive Fed rate cuts could weaken dollar dominance and may defeat the core purpose of what Trump wants to achieve. According to a poll of market strategists conducted by Reuters, the Fed must not give in to pressure from Donald Trump and the US government to cut rates aggressively. The poll suggested that any such move to aggressively cut rates by 50 basis points could substantially weaken the dollar and also lead to a loss of dollar dominance; especially its exorbitant privilege as the world trade currency. That has what has held the dollar all these years.
The government may bite the bullet in exempting the foreign portfolio investors from the ambit of higher taxation. This was applied to FPIs which had adopted a trust/AOP structure. The markets cheered the report with a sharp 550 points bounce in the Sensex as the BSE benchmark ended the day with an overall gain of nearly 637 points on Thursday. Meanwhile, global markets found support after China data came in positive on Thursday. The markets were enthused after China reported a 60% growth in its trade surplus for July on a YOY basis. While China’s exports to the US had fallen, its imports from the US fell 3 times faster. This reassured the markets that the risks of a Chinese slowdown were not imminent. China also allowed the Yuan to strengthen marginally vis-à-vis the dollar and that kept markets pleased.
Jamna Auto may be representative of the larger problems facing the auto components sector in India. According to a report in Business Standard, the recent news about Jamna Auto bracing for major plant shutdowns across its facilities may be representative of the woes of the auto industry overall. The auto components industry has been hit by a massive slowdown in the auto industry, which has led to plant shutdowns and huge layoffs. BS reports that Jamna may just be the tip of the iceberg. The report has expressed apprehensions that the real situation could be a lot grimmer at the grassroots level.
