Nirmala Sitharaman has announced that the Finance Ministry would kick start the budget exercise from October 14 itself. With a view to getting more stakeholders involved in the budget process, the finance minister has announced that the budget preparation exercise will give the ministry well over 3 months to incorporate all the views. The last budget in July had disappointed markets with controversial moves like FPI surcharge, higher public shareholding, buyback tax etc which were all later withdrawn. The government will be keen to make a much more of a growth splash with it is 2020 budget.
Even in a tight market, some mutual funds managed to get the better of their equity peers by beating the index even on a total returns basis. Some of the equity fund houses that managed to beat benchmarks in August 2019 included AMCs like Axis MF, Motilal MF, Edelweiss MF and DSP MF. Their equity funds managed to beat the Nifty during the month of August. Axis Small Cap Plan was the star performer beating the Nifty with a 6% margin in the month of August. Large AMCs were missing from the list of outperformers and it was probably the blessing of small size that helped in this case.
Brent crude prices were tepid through the weak even as the Indian OMCs cut fuel prices for the fourth day in a row. The weakness in the global oil markets gave the downstream oil sellers the confidence to cut petrol and diesel prices on successive days. Oil prices had corrected globally after Saudi Arabia restored full production much earlier than scheduled and the US manufacturing and services came in weaker than expected. OMCs are now betting on low crude prices sustaining as they don’t see reasons for any structural uptick in prices till the time global growth shows visible signs of picking up.
The European Union has rejected the offer of weekend talks with UK on the BREXIT issue. With Boris Johnson insisting on sticking to the October 31 deadline for BREXIT, the EU has refused to entertain talks over the weekend. Like the Labour party, the EU has also been insisting on putting the BREXIT deal through Parliament even if it meant the postponement of the deadline. Johnson has however reiterated that BREXIT would happen on October 31, even if there was no deal. Johnson has been one of the major proponents of pushing the deal through by October 31st at any cost and getting done with BREXIT.
The month of October began on a disappointing note as FPIs again turned sellers. Not only did the indices correct for five days in a row but the FPIs have also been aggressive sellers to the tune of Rs.3,000 crore in just 3 days. This contrasts with the infusion of Rs.7,850 crore by FPIs in September. Apart from global slowdown cues, the RBI downgrade of GDP has also made FPIs cautious. Banks and Financials were among the big losers in the previous week. The pressure also fell on frontline private banks which lost value heavily during the week. The negative sentiments around banking began with the PMC Bank episode and soon broadened with the real estate crisis. But investors were truly disappointed after the RBI cut rates by just 25 bps and downgraded GDP by 80 bps to 6.1% for FY 2019-20.
China is definitely losing factories but these factories are not shifting to India as the optimists would like to believe. With Trump pushing for US companies to look beyond China for production, the obvious choice is turning out to be Vietnam, not India. A Bloomberg report has pointed out that even China’s outbound investments are focusing on Africa and not on South Asia. Countries like Vietnam and the Philippines have built the business-friendliness with the added benefit of low costs. In addition, their manpower quality, work culture and infrastructure work in their favour.
