The Indian Meteorological Department (IMD) released its preliminary monsoon estimates for the year 2018 at 97% of the long term average (LTA). Normally, rainfall in the range of 96% to 104% of LTA is considered to be normal rainfall. April is the first estimate and the second estimate comes around June after factoring in the El Nino effect also into the estimates. Apart from the quantum of rainfall it is also the spread of the rainfall that makes a huge difference to the Kharif output. This year is the first year after the 150% MSP announcement and hence the impact on CPI inflation will be closely watched.
The fiscal year 2017-18 has been a bumper year for the mutual funds with MF collections rising by 53% to Rs.67,200 crore on a YOY basis through SIPs alone. Systematic investment plans (SIPs) are reflective of the retail appetite for equity funds. Equity funds have done very well in the last 2 years due to a robust performance by equities in the last 2 years. In addition, the drop in mutual fund expense ratio suggested by SEBI should go further in building an appetite for mutual funds. There are currently a total of 2.2 crore folios which approximate indicate the retail spread of mutual fund appetite.
The RBI is likely to give a freer rein to the Indian rupee in the coming months. This announcement came after the INR was added to the US Watchlist for currency manipulation. China’s Yuan is already in the US watch list. Effectively, the RB may allow the rupee to strengthen against the dollar and the RBI will not make an attempt to artificially weaken the INR to boost exports. India’s forex reserves at $430 billion are already among the strongest in the region at par with Hong Kong and Taiwan. However, considering that India runs a trade deficit and a CAD, it is hard to classify it as a manipulator.
The Supreme Court has stayed the NCLAT order permitting the sale of RCOM’s tower assets to Reliance Jio. The stay had been sought by Ericsson for dues outstanding from RCOM. The NCLAT order effectively permits RCOM to sell assets that are mortgaged, something to which the creditors had opposed. RCOM’s entire asset monetization program is worth Rs.25,000 crore and was scheduled to be completed in the next few weeks. Earlier this year, RCOM cancelled its proposed deal with Aircel and decided to sell all its assets to Reliance Jio, owned by Mukesh Ambani’s RDAG group.
Crude oil prices retreated after it became clear that the US intervention in Syria may just be a temporary one. Oil had touched a 3-year high in early trades with Brent Crude scaling $72/bbl. However, with the tensions between the US and Russia tempering down, it looks unlikely that the US may undertake more attacks on Syria at this point of time. While Russia and China have condemned the attacks on Syria, there has not been any concerted action from Russia. In the meanwhile, the US rig count also rose to a 3-year high amid record output creating the road for further downside in oil prices due to excess supply. Apart from the US attacks on Syria, there have also been tensions between Saudi Arabia and Iran over involvement in Yemen. Brent Crude finally settled closer to the $71/bbl mark in late trades.
Even as the Fed embarked on rate hikes, Donald Trump has come down heavily on Russia and China for their attempts at forex devaluation. Trump has been alleging that both these nations have been weakening their currencies to benefit vis-à-vis the US dollar. The US has already imposed stringent sanctions on a plethora of Russian companies while China has been at the receiving end of targeted tariffs to discourage Chinese imports. Ironically, short dollar has been one of the most successful trades in the last one year so Trump’s accusations may be largely unwarranted and baseless.
