The vagaries of the monsoon appeared to have taken it is toll on the food grain output this year. Government estimates slightly lower Kharif production for 2019-20. According to a statement by the government, India could end up with food grain output of 140.57 MT this year. This will be marginally lower than 141.71 MT recorded last year. While the overall rainfall was sufficient, the delayed onset and the late flooding damaged a good part of the output. However, the government does not expect any significant impact on food inflation due to this Kharif shortfall.
With the pressure of the debt downgrade building up, Reliance Capital will close the stake sale in RNAM to Nippon by the end of September. According to a report in Business Standard, the stake sale of RCAP in Reliance Mutual Fund would be completed in the month of September. As part of the deal, RCAP will hive off its entire stake to Nippon, post which Reliance Mutual Fund will be 75% owned by Nippon. The balance shares will be held by retail investors and a few marquee investors. The name of the AMC is also likely to change to reflect the new owners of the AMC.
One of the world’s largest and oldest travel management companies Thomas Cook UK, filed for bankruptcy leaving lakhs of tourists across the world stranded without airline and hotel bookings. This bankruptcy has resulted in scores of cancellations in the last minute forcing tourists and holidayers to change plans in the last minute. Thomas Cook India also reacted negatively to the news, according to a Bloomberg report, although the management had already clarified that Thomas Cook India was owned by Fairfax of Canada. Investors are still worried about the impact on the branding.
Brent crude falls below $64/bbl on slowdown fears and Saudi output restoration. The sharp rally in oil prices in the previous week almost looks distant as oil settled below the $64/bbl mark. Saudi Arabia has promised to bring production back on track by end of September and that is weighing on the oil prices. In addition, the news of China walking away from the preliminary trade talks with the US has also raised the spectre of a fall in growth weakening oil prices. The talks between the US and China broke off after Trump had tweeted that he was not really keen on settling for a partial deal with China.
The bulls were again back in action on Monday. Bank Nifty gained 4000 points and the Sensex enriched Investors by $150 billion. The auto and FMCG index also gained pushing the Sensex higher by 3000 points and the Nifty by 900 points in 2 days. It was a mix of short covering and some smart buying at lower levels. Sensex is back near the 40,000 mark. The trigger for the rally came from the corporate tax rate cuts with the auto sector to benefit from tax cuts and FDI, as would banks and FMCG. According to a report brought out by ICRA, Indian auto companies imported components worth $17.6 billion in the first six months of the current fiscal in the transitional phase towards stricter safety norms. ICRA is of the view that the new manufacturing tax model of 15% would be a strong case for manufacturing FDI.
Government plans to sell Air India and other entities by end of fiscal 2020. In fact, the government looks to raise an additional sum of Rs.60,000 crore through the sale of Air India and a couple of other PSU names. BPCL and Container Corporation are the likely contenders. The government has foregone nearly Rs.145,000 crore in the form of corporate tax cuts and will look to partially compensate for this loss in revenue. Air India has been in the limbo for a long time and the previous efforts of the government to hive off their stake in Air India did not work out. Now the government is OK with 100% stake sale.
