In a move to improve the income levels of farmers, the cabinet has approved hike in Minimum Support Price (MSP) for all Kharif crops for the fiscal year 2019-20. The actual Kharif output for the current season is awaited as the delayed onset of rains normally impacts the sowing season. This led to a reduction in output as we are seeing in the case of sugarcane in Maharashtra. Last year, the government had also extended the assured MSP at 150% of cost to the Rabi crops. This increase in MSP for this year is in line with the government target of doubling of farm incomes by the year 2022.
Despite the protests by the founding management of Mindtree, Larsen & Toubro has now been officially classified as the Promoter Group of Mindtree. With L&T buying a controlling stake of 60.06% in Mindtree, they are now the officials promotes of Mindtree. The acquisition was triggered when L&T made an open offer to shareholders of Mindtree after VG Siddhartha had sold his 20% stake in Mindtree to L&T. A recent CRISIL report had pointed out that the IT sector (mid-sized IT companies) could see a major consolidation as the global IT market shifts from traditional BFSI to digital businesses.
The real story in the markets today was way beyond what happened in the Nifty and the Sensex. Indian markets closed flat even as 214 stocks hit lower circuit on the BSE as the Nifty and the Sensex gave up most of their gains in the last hour and closed flat. The enthusiasm over lower oil prices did not last as the US announced weak growth and consumption data. This raised concerns of a slowdown once again. A total of 214 stocks on the BSE hit lower circuit even as 176 stocks touched 52-week lows. A total of 40 stocks touched 52-week highs on Wednesday indicating a clear bias towards market weakness.
With the systemic risk of defaulting NBFCs rising, the RBI has decided to regulate Housing Finance Companies (HFCs). In the aftermath of the current NBFC crisis and the series of payment defaults, Reuters reports that HFC regulation may come under the direct purview of the RBI. This will mean stringent asset quality reviews of HFCs by the RBI and the regulator may also subject them to capital adequacy and asset recognition norms. This gives RBI a better grip on the risk of shadow banking in India. However, too much regulation has the potential to kill a nascent industry as we saw back in 1998.
In the US markets, it was a case of weak growth outlook and rising trade deficit driving benchmark 10-year bond yields to the lowest level since 2016. It breached the 2% mark after several tentative attempts. The US-10 year bond yields touched a low of 1.94% during the day. Lower yields were driven by dovish Fed expectations and a dovish shift across global central banks. Meanwhile, the US trade deficit touched 5-month high despite punitive tariffs on imports from China. Despite rise in US exports, the imports rose sharply in the month of May as businesses restocked ahead of the next round of punitive tariffs on Chinese imports. Weak trade data comes on top of weak housing and manufacturing data. Trade deficit for May was up 8.4% at $55.5 billion with China deficit up 12.2% at $30.2 billion.
FMCG companies have informed the stock exchanges about tepid demand for FMCG products in Q1. In fact, FMCG companies like Marico and Godrej Consumer Products have informed the stock exchanges that the demand for consumer products had remained tepid in the quarter to June 2019. In the March quarter, the consumer goods companies had seen their slowest growth in 7 quarters. They also warned that delayed monsoons could dent demand this year since rural demand for consumer products has been the mainstay of Indian consumer goods companies in the last few years.
