Two months ahead of the onset of the South West Monsoon, there seems to be good news from the weather office. The Med department has predicted robust monsoon in 2019 subject to El Nino effect The IMD is predicting a very low probability of an El Nino effect. The IMD expects the rainfall to be above normal, which is good news for the Kharif cropping and also for food inflation in the economy. While farming contributes just 14% of GDP, it employs nearly 50% of the workforce. The sector still depends on monsoons and it becomes the key to consumer demand and that is what really matters.
If analyst trends are anything to go by, the coming year is unlikely to be very encouraging. Analysts downgrade 8 out of 10 sectors in terms of earnings expectations for next year. Barring the industrials and the technology sector, analysts tracking India have downgraded their earnings view for all other sectors overall. While industrials have an earnings upgrade of 11%, technology has an upgrade of 3%. Among the downgrades, sectors like telecom, materials, healthcare, energy and consumer discretionary have been downgraded between 13% and 24%, with the telecom sector being the worst of the lot.
With less than a week to go for the new financial year to commence, SEBI has decided to put off implementation of amended norms for payment of royalties. The postponement is for a period of 3 months and will go live from July 01st instead of the originally scheduled April 01st. Under the new norms, the company paying royalty will require shareholder approval if the royalty is more than 2% of turnover. However, related parties will not have a say in such a vote. This provision had attracted criticism from blue-chip companies, and this gives SEBI more time to take an internal opinion.
With burgeoning dues to sugarcane farmers, the Government has decided to come down heavily on sugar sales below the floor price. With the year-end approaching most sugar mills are trying to push their stock even at below the floor price fixed. The price has been fixed by the government at Rs.31/kg plus GST. Most sugar mills are either selling at Rs.31 inclusive of GST or are selling below the price. With huge farmer cane dues, the government is coming down heavily and has sounded out regional cane commissioners. The government would not want cane dues ahead of critical elections.
The one-day global affair with bulls appears to have ended as global stocks fell on Wednesday. Treasury yields hardened on economic worries and it was back to reality on Wednesday. The markets have been worried about economic growth and the US yield curve is only exacerbating matters by inverting. Even the Indian markets had started off on a robust note in early trades but fell vertically in the second half to close well in the red. Sensex lost nearly 450 points from the peak. BREXIT vote could cost Theresa May her job if the vote does not get through. The BREXIT uncertainty is only worsening matters for the global markets. The UK Parliament is already working out alternative arrangements to be made if the Brexit Deal vote does not go through for the 3rd time. UK has a choice to force BREXIT or even forget about it.
In a surprising move, SEBI has barred over 600 FPIs from trading in the Indian markets. The decision was taken by SEBI after these FPIs did not disclose their beneficial ownership details. SEBI KYC norms have insisted on FPIs disclosing full details of beneficial ownership in line with global practices. However, many FPIs have complained that they do not have beneficial ownership details in most cases. The KYC was intended to prevent round-tripping of funds since it has long been suspected that black money gets generated and routed through such anonymous front entities in tax havens abroad.
