Bank of America has estimates that the recent accretion to supply cuts by OPEC and Russia could push the price of Brent Crude closer to $70/bbl by the second quarter of next year. At its last OPEC meeting in Vienna last week, the OPEC and Russia agreed to increase the supply cut from 1.2 million bpd to 1.7 million bpd. This is likely to put upside pressure on oil price and the impact is already visible. However, the markets are also sceptical that Donald Trump could end up playing spoilsport by delaying the trade deal with China. Saudi Arabia will be looking at strong oil prices to buoy valuations of Aramco.
The much talked Bharat Bond ETF will open for subscription on December 12. Investors will be allowed to invest in the offer till the 20th of December. A total of 12 PSUs are expected to borrow money using the Bharat Bond ETF route. These PSUs include NABARD, HUDCO, NHAI, PFC, REC, MRPL, GAIL, PGCIL and IRFC. The Bharat Bond ETF will also be an ETF on the lines of the CPSE ETF, the only difference being that the Bond ETF will have debt as its underlying. The NSE will subsequently create an index with the underlying portfolio and use that index to track the ETF. This could emerge as a unique asset class.
Jefferies has downgraded the life insurance sector in India expressing cyclical concerns. Over the last one year, the life insurance stocks like HDFC Life, ICICI Pru Life and SBI Life have been among the top performers in the Indian markets. Apart from low insurance penetration, the growing share of private players is also beginning to attract investors. Jefferies has pointed out that these life insurers could be vulnerable to downside risks on margins. Also, rich valuations could be a concern for most of these insurers. Jefferies has downgraded SBI Life Insurance precisely for this reason.
For the first half of fiscal 2019-20, Indian public sector banks (PSBs) reported net profit of Rs.3221 crore. This is a far cry from huge losses in the previous two fiscal years. For example, PSBs made overall net losses of Rs.85,370 crore in 2017-18 and net loss of Rs.81,752 crore in 2018-19. In fiscal 2017-18 and fiscal 2018-19 the PSBs made bad loan provisions to the tune of Rs.240,973 crore and Rs.235,623 crore respectively. PSBs have managed to make provisions for most of their existing losses in their books although the worry does remain that new cases like DHFL and Jet may still crop up in India.
Mutual fund flows in November showed some tapering but the overall AUM managed to cross the Rs.27 trillion mark. Net inflows into equity funds fell by nearly 78% to just about Rs.1311 crore with sector funds and contra funds seeing outflows in November. The good news was that SIP flows for November touched an all time high of Rs.8272 crore in November. At the same time, the total number of SIP accounts climbed to 2.94 crore while the total AUM under SIPs jumped to Rs.312,000 crore. From an overall perspective, the liquid funds and overnight funds saw inflows to the tune of Rs.27,500 crore between them. The fall in equity fund flows is understandable considering that the markets at near all-time highs and the GDP and other high frequency growth indicators have been under pressure.
Former ICICI Bank CEO, Chanda Kochhar has challenged the decision by RBI to terminate her services at ICICI Bank. ICICI Bank had terminated her services on January 31st 2019 and the decision had been approved by the RBI on March 13th. Ms. Kochhar’s contention has been that there was no legal basis to the RBI approving her termination when she had already resigned. Kochhar had moved the High Court against ICICI Bank but has now made RBI also party to the dispute. Chanda Kochhar had spent over 34 years in ICICI Bank before she was embroiled in the conflict of interest issue with Videocon.
