SIP collections continued to be the redeeming feature for the mutual fund sector in FY20. In fact, Mutual Funds garnered Rs.49,000 crore via SIPs in first six months of FY-20. Despite the concerns over mutual fund redemptions, the SIP inflows have sustained on an average of Rs.8000 crore per month as most investors have preferred to continue with their SIPs. The number of SIP accounts has also touched a record high of 2.84 crore and MFs are adding nearly 9.2 lakh SIP accounts each month. This is despite the overall AUM down by Rs.1 trillion in September; with heavy redemptions in debt funds.
At a time when the loan defaults are increasing by the day, Essar Group has managed to deleverage its balance sheet to the tune of Rs.1.40 trillion across its various business lines. Prashant Ruia confirmed to Business Standard that the balance 15% debt would be closed out in the next two quarters. Essar monetized marquee assets like Essar Steel and Essar Oil during this period. It may be recollected that Essar Oil was sold to Rosneft of Russia while Essar Steel was sold to the L N Mittal Group for fairly rich valuations. Essar has managed to retain assets even after aggressive monetization.
The trend in the stock markets turned positive in the second half as 8 out of top 10 stocks on Nifty added Rs.81,000 crore in market capitalization during the week. If the markets were in positive mode during the week, the impetus was provided by stocks like Reliance, Infosys and Bharti Airtel. The bounce in the markets came on expectations that the trade deal would reach a stage of fruition and the positive vibes could be the driver for the markets in the coming week. Markets did falter briefly on negative IIP and Moody’s GDP downgrade and that could continue to weigh at higher levels.
IMF hints at likely global slowdown in 2019; 10 years after the 2009 recession which hit the global markets after the implosion of Lehman Brothers. The World Bank and IMF hinted that global growth downgrade may not have been done with yet. World Bank has already downgraded its 2019 world growth rate from 3.2% to 2.2%. Anything below 2% opens up the possibility of a full-fledged recession. World Bank also cut India’s growth target for 2019 to a lower level of 6% on tepid capital investments and consumption worries. Markets are already reconciled to Indian GDP growth at below 6% in FY20.
China was involved in two informal agreements over the weekend. In what could be the first step to a trade truce, the US outlined broad contours of the likely deal that would cover agreements on trade, currency and intellectual property. The US has already suspended the October tariff hike on Chinese goods worth $250 billion. China has also given commitments on US farm purchases and Yuan stability. It may take another 4 weeks to finalize the full agreement. Meanwhile, India and China also agreed to set up a mechanism to trim the trade deficit. India currently runs its largest merchandise trade deficit with China to the tune of $55 billion each year. As part of the meeting between Modi and Xi in Tamil Nadu, a timetable to trim the deficit was agreed upon. China will open up more sectors to Indian participation.
Oil finally found a bounce during the week as Brent Crude closed above $60/bbl on global growth revival hopes combined with geopolitical worries. Brent crude bounced back nearly 239 bps on Friday to close at $60.51/bbl, the highest level for the month of October. The sharp rise in crude was driven by 3 factors. Firstly, the trade deal appears to have taken the first step and that is good news for GDP growth. Second, OPEC expressed willingness to cut supplies if required. Finally, there were attacks on Iranian tankers outside the Saudi coast and that also pushed oil prices into a higher orbit.
