It was a day on which the price of Brent Crude shot up by 181 bps to $63.55/bbl on supply cuts by Saudi Arabia. After reporting 800,000 bpd lower in the month of January, Saudi Arabia had gone ahead and committed to further crude output cuts if required. Even as the US inventories came under stress, the global oil markets also felt the stress of US sanctions on Venezuela. There were also hopes of pick-up in oil demand if the trade talks between the US and China were successful. The coming days are likely to be a close contest between oil demand and oil supply.
Rupee rally finally faltered on Wednesday. The Indian Rupee snapped a 6-day rally to close weaker at 70.80/$ on Wednesday. The weakness in the rupee was largely driven by sharply higher crude oil prices and heavy FII selling. There was also demand for dollars from banks and importers looking to cover their downside risk. Markets were also anticipating that any US-China trade deal this week could lead to a sharp strengthening of the dollar; in the process putting pressure on the rupee. A lot will predicate now on how the dollar index (DXY) behaves from here on.
The Parliamentary Standing Committee on Finance submitted its detailed report today. As per the report, the Parliamentary Panel has suggested a detailed enquiry into LIC and rating agencies in IL&FS case. The Parliamentary Panel has called for a re-look into the role of LIC in the IL&FS crisis as the largest shareholder in IL&FS. The panel suggested that the entire trail of rating agencies suddenly downgrading the IL&FS bonds several notches from AAA rated to Junk, also called for a detailed probe. The financial markets had gone into a brief turmoil in August after IL&FS had defaulted on debt repayments.
After the pullout by Liberty House, the NCLT process for Amtek Auto may start all over again. The NCLT process in the case of Amtek Auto had commenced more than 18 months back and Liberty House of UK had emerged as the choice of the COC. However, Liberty House had refused to pay the money citing non-disclosure of material details. Amtek has total debt of Rs.12,300 crore and the current process will have to be completed within a period of 140 days. The Committee of Creditors and the NCLT will also be legally proceeding against Liberty House for reneging on its commitments.
The 13th of February marked the last day of the Budget Session of Parliament and also the closure of the tenure of the 16th Lok Sabha. The Sensex closed the 16th Lok Sabha with gains of 46% over 5 years. The Interim Budget was passed in Parliament without a debate on the last day of the budget session. The biggest chunk of the 46% returns came in 2015 and 2017, with other years hardly contributing in terms of positive returns. On the last day of the Parliament Session, the Indian Markets wiped out Rs.3.37 trillion of value over 5 trading sessions. Banks and autos took the deepest cuts as did metals. There were some concerns in the market over rising crude prices as well as the overhang of pledged shares in the Indian market. Markets also remained tentative ahead of BREXIT talks and Sino-US trade discussions.
As per a report in the ET, there are a total of 2,942 companies on the BSE wherein promoters have pledged shares to banks / financiers. The total pledge value stands at Rs.2.15 trillion and that makes the market vulnerable to any sharp correction in the stock prices, especially in case of mid cap stocks. Analysts believe that pledge is OK, but the real challenge is corporate governance. While the percentage of promoter holdings pledge is well over 90% in many cases, analysts have opined that the real challenge stemmed not from pledging but from larger corporate governance issues.
