MF flows in October showed a clear return of the debt funds but Mutual Funds flows into equity and ELSS funds were 50% lower than last year. Overall inflows into active equity funds and ELSS in October 2019 stood at Rs.6,489 crore, down 50% on a YOY basis. The highlight of the month was the inflow of Rs.5,966 crore into index ETFs. Monthly SIPs continued to hold above the Rs.8,200 crore mark. The good news was that debt fund inflows were once again robust at Rs.1.21 trillion with liquid and overnight funds leading the way with net collections of over Rs.120,000 crore; including short duration funds.
The onion crisis is back and the government is moving ahead with the plan to import 100,000 tonnes of onions to control prices. With onion prices crossing Rs.100/KG, the government is working on a war footing to check prices by importing 1 lakh tonnes of onions. Onion prices have rallied sharply by almost 60% in the last one month due to supply / demand mismatch. Ironically, farmers are still getting just Rs.8 per KG with most of the remaining money going to middlemen, brokers, agents and transporters. In the past also, onion prices have been extremely politically and economically sensitive.
The Aramco IPO finally has a date set for it, although the actual size of the IPO is not clear as of now. The Saudi government has announced that the Aramco IPO would open on November 17, although the size of the IPO was yet to be finalized. The IPO will close on December 04th for institutional investors and on November 28th for retail investors. Aramco plans to allocate 0.5% of the total shares outstanding to retail investors. Final pricing will be determined on December 05th. Crude prices are expected to remain buoyant till the time the Saudi Aramco IPO is completed in the second week of December.
Could stagflation be coming to China; at least that looks like a distinct possibility in the current scenario. China is currently up against slowing factory sales and rising inflation. The producer price index (PPI), a barometer of corporate profitability in China, was down by 1.6% while the consumer inflation touched an 8-year high. The sharp rise in food inflation was driven by pork prices after African swine flu ravaged the Chinese hog population. The weak PPI forms a strong base argument for a Chinese stimulus although the higher inflation level may be a concern. China continues to drive global supply.
On Friday, the stock markets closed sharply lower on the back of Moody’s downgrading India’s outlook from stable to negative. While IIP data will be announced on 11th, the CPI Inflation and the WPI inflation will be announced on 12th and 14th respectively. Analysts expect markets to react positively to the Ayodhya verdict. It will be a truncated week with a trading holiday on Tuesday. Meanwhile, the good news was that Foreign Portfolio Investors infused Rs.12,108 crore in the first week of November. The positive trend of flows from FPIs continued into November. In the first week, FPIs infused Rs.6,474 crore into equities and Rs.5,674 crore into debt. This comes on top of Rs.16,500 crore infused in October. FPIs are finding Indian bonds attractive as lower forward premiums have reduced currency hedging costs.
Maharashtra governor invites Shiv Sena to form the state government. After the BJP met the governor and expressed their inability to form a government on their own, the second largest party (Shiv Sena) was invited to prove their majority. The Sena will have to prove their majority on the floor of the assembly before 7.30 pm on 11th November. The Shiv Sena will require the support of the NCP and the Congress to reach the magic mark of 145 seats. While the NCP is willing to support the Shiv Sena and also join the government, they are insisting that Sena exit the ruling NDA in all respects.
