Inflation not only went up but went up more than anticipated. CPI inflation for September spurted to a 14-month high of 3.99%. This marks a sharp increase from the 3.21% recorded in August and also substantially higher than the Reuters consensus estimates of 3.70%. This brings it really close to the RBI comfort zone of 4%. Although fuel inflation and core inflation remained under check, the sharp rise in inflation came from a spurt in urban food inflation. Rural inflation remained under stress. Surprisingly, this came in a month when the WPI inflation (wholesale) actually trended lower to 0.33%.
Mutual fund SIP collections may be robust, but the stickiness is gradually reducing with closure ratio increasing to 66% during September 2019. In an important disclosure made by AMFI, the momentum of mutual fund SIPs may be waning although the SIP collections continue to be robust. SIP closure ratio, the ratio of closed SIPs to fresh SIPs, was at 66% in September. That means; for every 3 SIPs opened, 2 were discontinued. This could be due to the shorter horizon players exiting MF SIPs. In the last few years, a lot of new investors with shorter perspective had been drawn to invest in equity MF SIPs.
Loan melas used to known for different reasons in the old days but thanks to the finance minister, they are back in a different form. Indian banks disbursed Rs.82,000 crore of loans during 9-day loan mela. Nirmala Sitharaman confirmed that loans worth Rs.82,000 crore had been disbursed during the loan mela planned to coincide with the festival season. Nearly 40% of the loans disbursed were new loans. The FM also added that most banks in India were having surplus liquidity and hence they would also offer MSMEs bill discounting facility where clients were large corporates. The idea is to spur spending.
So US-China trade war is finally pinching China where it hurts them the most; and that is in the economy. China foreign trade took a big hit as higher tariffs begin to pinch. China exports fell by 3.2% while Chinese imports fell by 8.5% for the month of September. The fall in exports and imports was higher than the previous month and also higher than street estimates. Global markets will however, heave a sigh of relief that metal imports by China are up. Trade surplus for September was healthy at $39.65 billion. Markets are expecting another Chinese stimulus soon to prop consumer spending.
It was a day of return to reality for equities and oil as the trade deal euphoria faded. The Sensex gave up nearly 300 points from the top to close 87 points higher as the reality of negative IIP hit the markets. Wall Street also opened weak on Monday after the initial euphoria of the trade deal started to come off. With Trump hinting at hard negotiations before the deal, the street is now appearing to be a lot more sceptical about the workability of the deal. In a related move, Brent crude cracked nearly 300 bps to $58.60/bbl due to waning trade deal optimism. Brent crude traded strong over the weekend but on Monday it corrected from higher levels. Under Phase 1, the US would put off the tariff hike and China would double its farm imports from the US. Markets don’t want this deal to be derailed.
PMC Bank depositors may finally have some room to cheer. RBI raised withdrawal limit at PMC Bank to Rs.40,000 on popular demand. In response to protests from PMC depositors, the RBI has increased the withdrawal limit to Rs.40,000 for the next 6 months. According to the RBI, this will permit nearly 78% of the existing depositors to withdraw their entire money. PMC Bank has been placed under suspension by the RBI after huge irregularities were noticed in its lending deals with the HDIL group. In fact, when the bank operations were suspended, it almost had a 50% exposure to HDIL.
