Brent crude prices eased further on Wednesday after the US Iran stand-off appeared to be mellowing down with neither side interested in an all-out confrontation. Oil can still hope for good news from a positive Phase 1 of the trade deal but the immediate concern is going to be on the US supply front. US liquids output is expected to reach 20.21 million bpd in the fourth quarter of calendar year 2020, almost taking care of the entire US domestic oil demand of 21.35 million bpd. Once the US oil starts hitting the global oil supply, experts believe that oil prices could be headed for a serious downturn.
Blackrock reinforced its position as the largest asset manager in the world as its total AUM touched a record $7.43 trillion. The fund saw massive inflows into its passive ETFs leading to improved profits and a sharp growth in AUM. Just to get to get a sense of perspective, the AUM of Blackrock is equivalent to 3 times the market cap of the Indian market and this is the largest corpus commanded by any one fund at any time in history. Blackrock is followed by Vanguard which manages close to $5 trillion worth of assets, again predominantly in passive asset classes. They represent the big passive shift post 2008.
Exports fell for the fifth month in succession as the weak global trade scenario continued to take its toll. Exports for the month of December fell by 1.8% to $27.36 billion but imports fell by 8.83% to $38.61 billion. As a result, the trade deficit remained subdued at $11.25 billion for the month of December. The global slowdown in demand and the weak oil prices have helped a sharp fall in imports as India relied on oil imports to meet 85% of its daily oil demand. With oil prices low and gold demand weak, trade deficit has been under check. This has also made the forex cover for imports a lot more comfortable.
With a view to attracting foreign investments, the government has prepared a draft of a plan to safeguard foreign investments. Foreign investors had in the past expressed concerns over loose contract laws and lack of intellectual protection that had led to many foreign investors avoiding doing business in India in spite of the size of the market. The draft focuses on more organized and predictable enforcement of contracts as well as a speedy dispute resolution mechanism. India is currently entangled in more than 20 such cases with companies like Vodafone, Nissan, Deutsche Telecom, Cairn etc.
The government has opened the fifth round of oil and gas bidding and has put up a total of 11 blocks for auction on revamped terms and conditions. In the first four rounds, a total of 94 blocks were awarded of which the biggest beneficiary was Vedanta which had won a total of 51 blocks. The total area available for bidding in these 11 blocks is 19,800 square KM. In the last round of bidding around 8 bids had come for the 7 blocks on offer but ONGC had walked away with all the 7 blocks in that case. The 11 blocks that are currently on offer include 8 land blocks, 2 shallow water blocks and 1 ultra deep water block. The pricing formula differs with the categorization of these blocks. The new oil exploration policy comes with better terms for bidders like revenue sharing, lower royalties, no oil cess, pricing freedom etc.
With the AGR (adjusted gross revenue) deadline approaching, Bharti Airtel has gone aggressive on fund raising. The company just completed $3 billion fund raising program through a combination of QIP and FCCB. Post this issue, the holding of the promoter group will come down from 62.70% to 58.98%. The QIP has been priced at Rs.445 per share which represents a 1.6% discount to the stock price. Bharti, Vodafone and other telcos put together need to pay close to Rs.1.47 trillion by way of AGR dues and this includes the actual AGR payable, the interest for the period and also the penalties thereon.
