The outlook on the monsoons does not appear to be too bright this year with SKYMET projecting a bad June with very little rainfall across India. In fact, private sector SKYMET was the first to warn about below average rainfall in India this year, which was later affirmed by the IMD. Now SKYMET has projected June to be a month of very little rainfall. Rains in June are critical as they constitute the sowing season. While the average pre-monsoon deficit has been 23%, SKYMET points out that in key regions it is as high as 70%. El Nino has been unrelenting in the current year causing the delay in rains.
Brent crude prices took a sharp hit on Wednesday as recession fears pushed Brent Crude prices lower by 250 bps to $68.40/bbl. Oil looked extremely weak in the Brent Crude market with the weak bond yields triggering a rally in bonds but hitting oil prices on demand fears. The US stock piles combined with the sanctions on Iran and OPEC supply cuts could not outweigh the likely impact of a slowdown in trade and GDP. Economists have blamed the prolonged trade war between the US and China for these fears. Brent had recently touched a high of $75.60/bbl and has lost over 10% since then.
Korean major, Samsung Electronics, is making big plans for India as it plans to double its smart phone sales in India this year to $1 billion. Samsung expects the growth in smart phone sales to be largely driven by the surge in budget phone sales. Smart phones have been among the most demanded items in the Indian ecommerce market place. The budget range of Samsung ranges between Rs.8,000 and Rs,18,000 and Samsung has sold 2 million units since launch. The rise of cheap bandwidth has largely expanded hardware demand and Samsung is focusing on the price conscious customer.
A day ahead of the F&O expiry, the Nifty and Sensex slipped on global slowdown worries and bond rally. The bond prices rallied across the world as US bond yields eased closer to 2.2% on Wednesday. The US has seen its yield curve most inverted since 2007 and that has typically been a forewarning of a recession in the US. Combined with a trade slowdown due to the trade war and the uncertainty over BREXIT, there was selling in banking, auto and metal shares. The A/D ratio remained weak although the VIX for the market remained more subdued at 16.4%. The cabinet could be the next trigger.
A day ahead of the oath taking by the Modi government scheduled on May 30th for a five year term, former finance minister Arun Jaitley wrote to Modi not to be allotted any ministerial responsibilities citing health reasons. Jaitley presented five budgets before the interim budget was presented by Piyush Goyal. The choice of Finance Minister will be something the stock markets will be awaiting eagerly. With Jaitley out of the race, the spotlight will now be back on who takes charge of the all important ministry as it could set the tone for the next five years of reforms. Piyush Goyal represents a more market friendly face of the government and the stock markets in particular and industry in general will be pleased to have Goyal at the helm of the Finance Ministry. It could be a stamp on reforms process.
Trump continued his relentless attack on Indian IT firms as part of his “America First” policy. The US starts the process of banning work permits for spouses of H1-B visa holders and the process itself could take close to a year. This move is likely to impact thousands of families in the US as spouses now will not be able to take up employment in the US. The EAD H4 system was launched by the Obama administration to leverage where spouses were also skilled. Trump’s argument is that local Americans will benefit with more jobs available to them. This is one more step in tightening of immigration rules.
