The problems for auto company top lines continued for the month of September too. Auto companies failed to step up momentum in September despite the festival season. The festival season demand, government attempts to put more liquidity and the tax cut announcements did little to boost the morale of the auto industry. The big four players of the four-wheeler space viz. Maruti, Hyundai, M&M and Tata Motors revealed deep cuts ranging from 25% to 50% on a YOY basis. Two-wheelers also disappointed with only exports being the saving grace and showing positive growth traction.
If NBFCs are not getting funding from mutual funds, the gap is being made up by the banks. That is what the data on Bank lending to NBFCs shows which is up 40% on a YOY basis at Rs.190,000 crore. Between September 2018 and September 2019, the total bank credit to NBFCs increased sharply as mutual funds cut funding to NBFCs. The NBFC crisis erupted in mid-2018 after IL&FS defaulted on its loans forcing a slew of other NBFCs to also default. This 40% growth in bank lending to NBFCs is on the back of a strong 43% growth in the previous year. MF exposure to NBFCs was down 11% as SEBI tightened rules.
Oil continued to weaken in the international market on Tuesday as Brent crude dipped below $59/bbl after US ISM data. Markets took some support as it awaited oil stockpile data. Brent Crude is now below where the rally started in the middle of September after the drone attacks on Saudi Aramco. The US slowdown in manufacturing took the price of crude well below the $59/bbl mark as it was the last source of big oil demand. With China also reporting weak macros numbers, the only hope for oil is to wait for any drawdown on oil inventories in the US as most macros are favouring lower oil prices.
Flooding at a major coal mine of Coal India Ltd. halted production for a month leading to coal output touching a 6-month low. It was an additional worry for Indian power companies as the production of coal are likely to be stopped for a month at one of the largest open-pit mines belonging to Coal India Ltd. Coal India has already been producing lower due to strikes over FDI in coal mining and hence pressure of coal imports was building up. This could be a major concern for power companies, depending heavily on coal supplies. Power companies have warned about the stress on power sector loans in future.
A day after the Sensex faltered global markets took a hit on weak US data. As Indian stock markets get back to trade on Thursday after a break of one day, it will be reacting to the US Manufacturing tumbling to a 10-year low. The index of factory activity in the US dipped to the lowest since June 2009 as the US-China trade war began to pinch. For global markets, US growth had been the last bright spot and most markets lost more than 1% post this data announcement. Meanwhile, geopolitical risk in East Asia increased after North Korea fires ballistic missiles from a submarine just days ahead of talks with Trump. The US has been calling upon North Korea to refrain from such provocative measures but they have been keen to showcase their nuclear strengths. North Korea remains the key to peace in South Asia.
Boris Johnson has pitched final BREXIT offer to EU but kept “No Deal” open. Even as the UK Supreme Court struck down the parliament suspension, Boris Johnson made his final BREXIT offer to the EU. He has confirmed that BREXIT would go ahead on October 31st even without a deal. Without divulging details, Johnson has underlined that his final offer to the EU contains proposals and compromises for both sides. While Labour has been asking for another postponement, Johnson sees no point in further delays. The EU has been open to the idea of another extension to get parliament approval.
