The controversial data storage rules put out by India has come in for a lot of criticism from the US companies. In response, the Government will review data storage rules after US credit card franchisees like Visa and Master Card objected to data storage restrictions requiring companies to maintain all their local data within India. However, corporates had complained that such a move would amount to duplication of redundancy and be unviable. While the government may offer concessions, it would want to avoid a repeat of data loss embarrassment caused by the likes of Facebook and Yahoo in the past.
After a brief lull for a period of nearly one year, people are back to flying again. Air passenger traffic growth showed a rebound in the month of May 2019. Despite the shutdown of Jet operations on April 17th, the Indian aviation traffic managed to show a growth of 3% in May on a YOY basis. Air traffic has been showing consistent fall since June 2018 and this is the first month when growth has shown a sharp revival; albeit from a negative base. Go Air, Indigo and Vistaara were among the major traffic gainers in the month of May and most of them managed to covet the market share vacated by Jet Airways.
There is a silent Auto Shift happening in India and it is all about consumer preference for used cars.At a time when most auto companies are seeing their sales dipping by nearly 20-30% on a YOY basis, the second hand car market is seeing robust growth of 10-12% annually. However, the ratio of used car sales to new car sales continued to remain at 1.2X. The robust second hand car market is making buyers postpone their new car purchases. Also funding tightness is playing its part in this shift. With organized players getting into the used car space, there has been a lot of efficiency creeping into auto sales.
If you had doubts about the market representation of the Nifty and Sensex, it was all too evident on May 18 in the bourses. On a day when the Nifty and the Sensex were in positive territory, the real damage was seen in companies that had proven to be financially vulnerable in the last few months. Financials with a maturity mismatch and corporates with an overarching problem of debt fell vertically on Tuesday. The A/D ratio of 32:17 did not really tell the story of how these vulnerable stocks had fallen. Stocks like Jet Airways, Yes Bank and DHFL took deep cuts, apart from all stocks in the ADAG group.
In what could be seen as an encouragement for global equity markets, the US and China will restart trade negotiations ahead of the G-20 Summit. Donald Trump indicated that the trade teams of China and the United States would be restarting their trade negotiations with immediate effect. The idea is to prepare the ground before Xi Jinping and Trump meet each other during the G-20 Summit later in July. Markets took this as a clear intent to put an end to the trade war. With the US and China resuming trade talks, the impact was on oil prices. Brent crude jumped to $62.59/bbl on Tuesday after touching a low of $60.25/bbl. From a peak of $75/bbl last month, the Brent crude prices had cracked by nearly 20% after the trade talks had failed. US shale supply could be a resistance at higher levels.
Mario Draghi of European Central Bank (ECB) has now hinted at more stimuli if needed. In what could be seen as a major policy reversal in the last 8 years, ECB chief hinted that they could look at more stimuli if inflation fails to pick up. The ECB had been preparing the markets for a gradual rate tightening. The ECB already holds a portfolio of bonds worth $5.3 trillion and has little room to manoeuvre liquidity further. It could be negative for Euro region bonds but any rate cut or liquidity infusion is normally positive for equity markets which are substantially liquidity sensitive.
