It does look like the FIIs are back with a bang into Indian markets. In fact, Foreign Portfolio Investors infused Rs.19,203 crore in November first half, which bettered the full October month. A total of Rs.14,436 crore was infused into equities while Rs.4,767 crore was infused into bonds in the first 15 days of November. If the trend continues, experts feel that November could see more inflows than September and October put together. A slew of reforms on the tax and realty front, sustained high real rates and a stable rupee helped foreign flows into India. CY2019 is likely to see positive FPI flows.
The world’s biggest IPO by the world’s most profitable company is finally happening. Saudi Aramco announced that it would sell 1.5% stake (3 billion shares) in the company at a price of 30-32 Riyals taking the total issue size to $25.6 billion. This will give the company an overall valuation of around $1.71 trillion, lower than the $2 trillion that KSA had been looking for. The issue will not have any international road-shows and will also come with an in-built 15% greenshoe option. In the aftermath of the announcement, the price of Brent crude shot up sharply by 164 bps to $63.30/bbl.
Fund managers of equity funds have been going a tad slow in infusing fresh investments into Indian equities. In fact, Mutual fund investments in equities halved in the first 10 months of 2019. It could be a case of Indian fund managers becoming more selective at higher levels as the total MF inflows into equities halved in the Jan-Oct period this year. Against a total MF investment of Rs.112,000 crore during Jan-Oct 2018, the flows were just Rs.55,700 crore in Jan-Oct 2019. While SIPs have remained robust, the overall equity inflows into mutual funds slackened in 2019 leading to fund manager caution.
The global slowdown and oil price weakness has had one positive effect for India in that it tapered the trade deficit. Trade deficit for October remained almost flat at $11 billion. The trade deficit of $11 billion was largely driven by imports falling much steeper than exports. While merchandise exports fell by 1.1% to $26.4 billion, the imports fell sharply by 16.3% to $37.4 billion in October. This was driven by weak oil prices leading to a 31% fall in the oil import bill. The weak trade numbers overall are also an outcome of tepid global growth and the ongoing trade war between the US and China over the last two years.
During the last week, 6 out of top-10 Nifty companies added Rs.240,000 crore in market cap. In a week when the Nifty failed to hold above 12,000, the big gainer was TCS. In fact, TCS alone saw an accretion of Rs.193,000 crore in market capitalization during the week while the others chipped in a smaller way. Telecom losses of Rs.1 trillion did raise questions among analysts, but markets are betting on a bailout. However, there was concern over the NCAER pegging India’s full year GDP growth at just 4.9% for fiscal 2019-20. This is the lowest projection by a top think-tank. NCAER has blamed weak consumption trends and a tepid capital cycle for this downgrade. With GDP growth likely at around 4.5% in the first half, an estimate of 4.9% for the full year looks a lot more credible and achievable for the time being.
The US-China trade war appears to be moving towards a deal by default than by design. Global markets breathed easy as China-US trade deal appeared imminent. Top trade officials from the US and China affirmed that the two countries were close to a trade deal and this was underlined when Trump made big concessions for Huawei to continue to operate in the US. China has also been demanding revocation of previously hiked tariffs ahead of the deal. Trump is keen on the deal ahead of 2020 elections, while Xi is looking to revive the Chinese economy, which has been seeing its industrial output contracting.
