Oil flattered with a rally on Monday but lost more than the gains on Tuesday as growth reality came back to haunt oil. In fact, just a day after the OPEC and Russia decided jointly to sustain the 1.2 million bpd of crude output cut till March 2020, the uptrend did not last. On Tuesday, Brent cracked by 400 bps to $62.46/bbl as weak demand concerns returned to the markets. While the truce was agreed between China and the US, the US has now threatened EU with tariffs, dampening the macro sentiments. The big worry for the oil markets is whether oil demand will get impacted by the growth slowdown.
It may be time for some big mergers and acquisitions in the IT Sector; and L&T’s hostile bid for Mindtree may just be the beginning of a trend. According to CRISIL, consolidation could gather steam in the Information Technology sector with the need to scale up digital revenues rapidly. That was likely to lead to a greater consolidation in the IT space in the next few years. CRISIL underlined that legacy businesses had become commoditized and it was hardly surprising that mid-sized IT firms were seeing promoters exiting. CRISIL feels that consolidation may offer cost rationalization and synergies for tier-2 firms.
Nifty and Sensex may be close to their historic highs but the turnover ratio is sharply down in the last 10 years, according to a report prepared by World Bank. According to the report, Indian equity markets saw the sharpest fall in turnover ratio (total turnover / market cap) of over 60% since 2008. According to the World Bank, the cost of trading, including transaction and statutory costs, is one of the highest in India and that has been the key reason for this sharp fall in the turnover ratio. China turnover ratio dipped less than 6% in 10 years and most other EMs were much better off than India on this count.
SBI may have had a disproportionately large share of wilful defaults by Indian borrowers. Overall, Indian PSU banks saw wilful defaults to the tune of $21 billion in fiscal 2018-19 as disclosed by the finance minister, Nirmala Sitharaman, in the Parliament. Out of this $21 billion classified as wilful defaults in their books, nearly 1/3rd comes from SBI alone. Wilful defaulters are the large borrowers who deliberately avoid paying back. In the last few months, the government has started chasing such wilful defaulters including high profile cases like Mallya, Nirav Modi and Choksi; who have absconded.
If all things go through smoothly then the former IMF chief may take over as the head of the European Central Bank (ECB). Christine Lagarde of IMF may replace Mario Draghi as head of the ECB. According to a Reuters report, leaders of EU nations have agreed that the current chief of IMF, Christine Lagarde, should succeed Mario Draghi as the chief of European Central Bank. Draghi saw the ECB through the tumultuous period when many EU members (PIIGS) had come to the brink of default. This included vulnerable nations like Italy, Spain, Portugal, Greece and Ireland. To Draghi’s credit, a default was avoided in all the cases. Lagarde will have the immediate challenge of managing the impact of BREXIT where a no-deal exit by the UK looks the most likely option at this point of time with time running out.
Indian gold imports up by 12.6% in June on a Year-on-Year basis. The steep YOY increase in gold imports in June 2019 was led by sharply higher gold prices. Gold prices have rallied to a 6-year high on the back of rising geopolitical pressures in the global economy as well as in Middle East and West Asia. Weak dollar is also playing its part in higher gold prices. However, gold imports in June are nearly 44% lower than in the month of May 2019. It remains to be seen if this sharp rise in gold prices leads to a fall in the demand for gold this time around; as has been the experience in the past.
