Good news on the trade

There was some good news on the trade front with the trade deficit for March 2019 narrowing to $10.89 billion on the back of robust exports. In fact, the full year trade deficit was around 9% higher than last year at $176.42 billion. The reduction in the trade deficit was driven by an 11% growth in exports to $32.55 billion supported by sectors like pharma, engineering, and chemicals. Oil imports were up by just 5.55% at $11.75 billion. Imports for the full year crossed the $500 billion mark. Gold imports in March were higher by 32% and that being an unproductive import is a worry.

Pressures on inflation are surely building up as represented by the Wholesale inflation (WPI) at 3.18% for March 2019. In line with the sharply higher CPI inflation, the WPI inflation also came in higher for March at 3.18% and has gained close to 50 bps in the last 2 months. Food inflation at 3.89% was the key driver with vegetable inflation contributing more than 20% to the food basket. Apart from food products, fuel inflation was another factor that saw a very rapid rise within the WPI basket. The core inflation, excluding food and fuel, has also been sticky at higher levels.

Markets breathed a sigh of relief as the IMD chipped in with a forecast of a normal monsoon this year. Nifty and Sensex reacted positively to “Normal” monsoon forecast by IMD. Both the Nifty and the Sensex were in positive territory on Monday after the IMD came out with a forecast of a normal monsoon for 2019. This is in contrast to the SKYMET forecast which had projected rainfall this year at just 93% of the long period average (LPA). The market also reacted favorably to positive manufacturing data from the Euro Zone and buoyant exports from China.

With the first quarter GDP growth in China likely to come in lower at 6.3%, the Chinese central bank, PBOC, has called for greater fiscal stimulus to growth. In an interesting statement, the People’s Bank of China (PBOC) reiterated that it was against infusing a deluge of liquidity into the system. What it basically meant was that the PBOC would prefer a more coordinated approach between monetary policy and fiscal policy to stimulate growth. Tax cuts, subsidies, and public spending are the most common forms of fiscal stimulus measures used. A weak China is not good for global demand.

Brent hardened even as the rupee weakened during the day. Brent Crude closed above the $71/bbl mark on a volatile day. The Brent crude market was extremely volatile on Monday with the price of Brent Crude falling from a high of $71.60/bbl to an intraday low of $70.78/bbl. Crude was volatile after Russia and OPEC decided to give up on supply cuts to make the best of rising oil prices. However, the overhang of Libya, Venezuela, and Iran has kept crude above the $71/bbl mark. Indian Rupee weakened Monday for the second successive day. After a 3 day rally till Thursday, the rupee has weakened on Friday and Monday. The weakness in the rupee came after the Supreme Court rejected Arcelor Mittal’s application to infuse $6 billion into its latest NCLT acquisition.

N J Wealth is expected to foray into the asset management (AMC) business. N J Wealth could be the latest entrant into the asset management business if its application for an AMC gets approved by SEBI. N J Wealth is the largest independent distributor of mutual funds and financial products in India with assets under custody (AUC) of Rs.60,000 crore. NJ plans a quant-based approach and may begin with an ETF followed by smart Beta products.  For NJ, this represents a forward integration to its existing product base of commodities futures and worry about the numbers all day.