Less than a week after the RBI lowered its GDP estimates for fiscal 2019-20, Moody’s followed suit by cutting its GDP growth forecast for India for fiscal 2020 to 5.8%. The 5.8% projection is one of the lowest estimates seen but was to be expected after the RBI had downgraded India’s GDP growth estimates for FY 2019-20 to 6.1%. Moody’s had blamed weak consumption, tepid capital investment cycle as well as rural distress as key reasons for the GDP growth downgrade. This may be pragmatic considering the 5% growth in the first quarter. RBI expects the Q2 growth to be around 5.3%, at best.
In a twist to the Dewan Housing Finance saga, now Edelweiss MF has approached the Mumbai High Court to recover Rs.70 crore from DHFL. In fresh trouble for Dewan Housing, Edelweiss became the second AMC after Nippon AMC to ask the High Court to appoint a court receiver. The AMC has asked for an injunction from paying any unsecured creditors and asked for the court receiver to take stock of all assets and liabilities of DHFL. Earlier, DHFL had defaulted on debenture redemption to Nippon AMC after its cheque for Rs.200 crore had bounced. DHFL ran into problems after the IL&FS fiasco.
In the last couple of days, a total of 6 public sector banks cut lending rates by 25 bps post the RBI rate cut. RBI exhorting banks to seamlessly transmit rate cuts appears to be working. In the policy statement, the RBI had observed that transmission in the previous year had been less than 30%. With banks moving to external benchmark based pricing of retail and SME loans from October 2019, the pass-through is becoming seamless. That means that deposit rates would also move in tandem. Bank depositors will now have to be prepared for lower deposit rates in tandem with lower lending rates.
The US Chamber of Commerce has hinted at a larger trade and currency deal with China over the weekend. With the US and China keen to go ahead with trade deal coordinates this weekend, the US Chamber has hinted that the deal could include delay in tariff hikes and a currency deal where China would not let the artificially weaken the Yuan to push exports. China had earlier hinted that it was open for a limited deal which could exclude the lifting of sanctions on Huawei and other AI companies. The chamber meeting is a precursor to a full-fledged final meeting between Trump and Xi.
After a sharp bounce on Wednesday, the stock markets resumed its downtrend. Both the Sensex and Nifty closed lower but Wall Street gained on trade deal hopes. The benchmark Indian indices took a hit on Thursday as banks and autos took deep cuts. Most sectors, barring IT were in the negative. The A/D ratio of the Nifty was clearly unfavourable at 15:35. The Moody’s downgrade of GDP only served to heighten the risk in Indian markets leading the indices lower. However, the US markets appear to be celebrating the positive cues coming from the US-China talks. With China expressing its willingness for a partial deal, the markets are hoping that a trade cum currency deal could happen soon. That buoyed markets and global markets were trading in the positive in late Thursday trades.
Brent crude bounced back to the $59/bbl mark after OPEC chief hinted at more supply cuts. With the global trade talks still in limbo and the BREXIT in the zone of uncertainty, the OPEC is already building in weak oil demand by 2020. To balance the gap, OPEC chief has committed to further cut supply if required. Currently, OPEC is cutting supply by 1.2 million barrels per day, but that has hardly made an impact with the weak growth overhang. Oil bounced in late trades. The new OPEC chief is known to be an oil price hawk and has been talking about crude closer to $75-80/bbl to be viable.
