The European Central Bank has chosen to play it safe and stick to its dovish and cheap money policy. The ECB has rejected rate hikes and decided to infuse more cash into the system. For liquidity starved global markets, the good news could be that at least the ECB is not winding down its liquidity any time soon, nor it is likely to raise rates. ECB downgraded the EU region GDP growth target as well as an inflation target. Global markets like the US welcomed the move with a rise in the indices. ECB is now likely to be back to giving cheap loans to banks to revive the economies. It will be positive for EMs like India.
Foreign institutional investors are back with a bang as is evident in a surge in investments in equities. FIIs infused nearly $2.8 billion in the last 10 trading sessions between February and March. A mix of global cues, domestic triggers, and relative undervaluation has made FIIs keen on India once again as is evident from the sudden inflow of FII money into equities in the last 10 sessions. Global fund managers feel that the reasons to be underweight on India no longer exist. With macros stable, inflation under check and manufacturing picking up; FIIs are seeing a real case for India.
With the stringent asset classification norms for power companies likely to spur NPAs by $25 billion, the government has swung into action to give sops to the power generating sector. How does India plan to revive the ailing power sector and help out the banks? The government has approved suggestions of a Group of Ministers (GOM) for fresh power supply and also easier power sale norms. Power producers had challenged the RBI circular which was struck down by SC. Greater stability and reliability in the state signed Power Purchase Agreements (PPAs) should itself go a long way in improving the situation.
As the Iranian concessions were given to India, China, Japan, and South Korea are about to expire, India wants to maintain Iran oil import quota at 300,000 bpd post-May. The sanction concessions offered by the US on Iran oil imports expire on May 04th and the US has already ruled out any extension of these sanctions. India has been negotiating with the US for holding the concessional limit at 300,000 bpd as Iran oil is cheaper and also logistically fits in and most Indian refiners have been heavily depending on Iranian for their refineries, especially on the West Coast of India.
Markets action appears to have shifted to the mid-caps. Since the beginning of March, the BSE mid-cap index and the BSE Small Cap Index have outperformed the Sensex by a huge margin. Investors are beginning to bet on these smaller names after the sharp correction had made their valuations relatively attractive. The rolling 1-year return difference between mid caps and large caps is down to (-22%) from an average of +4%. Markets were also supported by the Indian rupee gaining for the 3rd day to close at the 70/$ mark. The rupee gained sharply after Chinese Soybean orders to the US indicated that the trade war may be close to an end. That does away with the immediate threat of any currency attack on the rupee. FII flows have also been consistently positive in the last 10 days.
The mutual fund AUM may be expanding but the gender parity may still be some time away. According to a Morningstar report, Mutual funds industry in India is still low on women fund managers. According to a report brought out by Morningstar, women represent only 8% of the fund management industry in India. On a comparable basis, this is much lower than the global standard. Interestingly, 75% of the funds managed by women happen to be debt funds. According to Morningstar, more than 55% of the women fund managers in India outperformed the indices over a five year period.
