Midnight News Update – Jul 06th 2017
The MSEI decision to extend trading timings till 5 pm started with a bang but ended with a whimper. Obviously, with near zero volumes on most days, there was very little bargaining power or shock value that the MSEI had. In the past, NSE and BSE had agreed to extend timings by one hour in the morning but extending evening hours was kept off due to logistical reasons on the retail and the institutional front. However, with longer trading hours in commodities and Dubai and SGX offering longer trading hours on equities, India may not want to be left behind. The efficacy of the move remains to be seen.
With North Korea officially firing its Inter Continental Ballistic Missile (ICBM), the battle lines are clearly drawn with the US confirming that they are prepared for a full-fledged war with North Korea. The US has been constantly accusing China of complicity and supporting North Korea’s nuclear program. The nuclear ambitions post a serious threat to neighbouring South Korea, which is a US ally. Additionally, the South China Sea is already a troubled spot with China’s growing maritime ambitions and any provocation by North Korea will only make the entire region more volatile.
The Fed minutes later today may give a clear picture of the stance of the Fed with respect to tapering its bonds portfolio. Fed is already clear about its rates trajectory which is likely to be limited to 1 hike in this year and another 3 rate hikes in 2018. But the taper continues to be a big question mark. While the Fed has assured that the taper will be calibrated, any rapid tapering of the $4.5 trillion bond portfolio could suck liquidity out of the global financial system. ECB and BOJ also have a combined bond portfolio of around $7 trillion and if they join in the taper, the repercussions could be much larger.
After moving steadily upwards for over 7 trading sessions, the price of crude has finally shown signs of fatigue after Russia refused to accede to sharper supply cuts. The OPEC nations and Russia had pledged to jointly cut 1.8 million bpd, of which OPEC was to cut 1.2 million bpd. But, with the US infusing supply into the market, the impact on oil prices was hardly visible. In fact, the Brent Crude price fell decisively below the $50/bbl mark in recent weeks. Apart from US oversupply, Libya and Nigeria have also been flooding the oil market with supply, as they have OPEC concessions on output.
The India Israel meeting is proving to be a major thrust to closer cooperation between the two nations. In fact, Mr. Modi became the first Indian prime minister to undertake a full-fledged official visit to Israel as part of his diplomatic visits. India and Israel have signed 7 agreements in key sectors like space, agriculture and water conservation. There will also be a joint India-Israeli Research & Development Fund to create a favourable climate for start-ups. Of course, the use of technology to combat terrorism was a major area for discussion and cooperation between the two leaders. Israel has been one of the pioneering nations in use of superior technology in agriculture and water conservation and India will be looking to use this expertise in meetings its drought challenges. The meet also covered cyber security.
New project announcements have fallen in India to the lowest level in the last three years for the quarter ending June 2017. A total of 448 projects valued at Rs.144,000 crore were announced during this quarter. While the private sector managed to maintain its momentum, it was the government sector that lost steam. Sectors like power, steel, cement and telecom are saddled with bad debts and are therefore not in a position to undertake any capital expansion at this point of time. But the bigger worry for the government will be that the value of stalled projects touched a high of Rs.2.4 trillion.
