In one of the worst series of sessions, the Dow Jones Index lost nearly 2200 points in a span of just 6 trading sessions as the worries of an inverted yield curve and a prolonged trade war spooked the US markets. The coming week is also likely to see pressure in India after the market gave away more than 50% of its retracement during the last week. With an F&O expiry coming up this week, the Indian markets are likely to stay volatile. Most global investors have also turned risk off with equity volatility rising sharply in the last few days. FAANG stocks have lost over 30% since their peaks.

With general elections coming up in 2019, a resurgent Congress party has promised a totally revamped GST structure in its election manifesto. Congress has promised to undertake a drastic revamp of the GST if elected to power. GST has come under a lot of fire for being too stringent on small traders and MSMEs, which has impacted their businesses. In fact, the Congress economic manifesto will be predicated on a simple and single rate of GST across the board to reduce confusion. However, Congress has assured in its manifesto that there will be no scrapping of the GST, like Mahathir did in Malaysia.

One of the world’s largest bond investors, PIMCO, has turned bullish on Indian debt. PIMCO is betting heavily on the RBI cutting rates during the coming year in line with lower inflation that has sustained over the last few months. With the rupee stabilizing after touching a low of 75/$, Indian bonds have sharply outperformed bonds issued by other Asian emerging markets. PIMCO feels that the combination of high real rates on bonds and stable to strong rupee should work in favour of Indian bonds in dollar adjusted terms. PIMCO manages close to $1.8 trillion in debt globally.

Vedanta, one of the world’s largest commodity companies, will be setting up a 4.5 million ton steel plant in the state of Jharkhand. The total investment entailed will be $4 billion and this expansion will be under Electrosteel, which Vedanta acquired under the NCLT process. To begin with, Vedanta will invest $300 million to enhance the capacity of the plant from 1.5 million TPA to 2.5 million TPA. Once the new facility is commissioned, the total steel capacity of Electrosteel will go up to 7 million TPA. The location in Jharkhand will also offer proximity to mines and minerals in the region.

In the midst of all the global turmoil, Brent crude fell to $50/bbl even as WTI crude fell to $42/bbl. This is the lowest level for oil in the last 18 months. From the peak, Brent crude has slipped 41% with a correction of nearly 18% coming in the month of December itself. Last month, the OPEC and Russia had agreed to cut total oil output by 1.2 million bpd but that had little impact as the price fall continued. The price damage to oil started after the US agreed to dilute sanction on Iran which ensured that the supply to global markets continued. With shale at record levels of production and global demand likely to weaken in the light of the trade war, the oil prices are almost into a free fall. This is the sharpest correction in oil in percentage terms in a short span of time in the last 3 years.

In what could be good news for the PSU banking sector in India, the NCLT recoveries for the year 2019 could cross Rs.1 trillion for the full year. This will be on top of the Rs.80,000 crore that were recovered during 2018. The coming year is likely to finalize the corporate bankruptcies of Essar Steel, Videocon Industries, Monnet Ispat, Ruchi Soya, Amtek Auto, Lanco Infratech and Jaypee Infratech. Some of the biggest corporate names are in the fray to take over these troubled assets. There are also a plethora of legal cases pending with NCLAT and that is also a drag. But PSU banks should benefit in 2019.