The indications of a rally were already there in SGX Nifty but nobody expected such a frantic response by the bulls. In fact, the markets gave an Rs.5.33 trillion boost to the market cap on the back of exit polls. The BSE Sensex surged by 1422 points driven by a mix of buying and aggressive short covering. Exit polls on Sunday had predicted a clear majority for the ruling NDA in the 2019 elections and there was a literal rush to cut shorts as stop losses got triggered. The market rise was supported by PSU banks, private banks, NBFCs, autos, and metals. VIX also eased by nearly 17% in a single day giving some relief.
A few days after former Britannia CEO, Vinita Bali, clearly hinted at a consumption slowdown, there has been a view to the contrary. Suresh Narayanan, CEO of Nestle, has ruled out concerns over consumption slowdown in India. The CEO of one of the world’s largest food and nutrition companies, Nestle, has ruled out worries about consumption slowdown in India. The CEO underscored that most of Nestle products had seen double-digit growth over the last 6 quarters. However, there were hints that prices could be hiked if the company could not absorb the higher costs, according to a report in Bloomberg
The warnings could not have been more direct and more intimidating for Iran. In fact, Trump and Saudi Arabia have warned Iran clearly against escalating Middle East conflict. Trump even warned Iran that any escalation of the conflict would be the official end of Iran. Saudi and the US have blamed Iran for the attacks on Saudi vessels and the firing of a rocket close to the American embassy in Iraq. However, Saudi Arabia is keen to avoid any war in the Middle East as it would create a challenge for the Saudi economy, which has already suffered from volatile oil prices. Geopolitical risk is at a high!
We could finally see the resolution to the Essar Steel case. Arcelor Mittal has agreed to pay Rs.42,000 crore for Essar Steel. As per a report in Bloomberg, Arcelor has agreed to pay Rs.42,000 crore to Essar Steel and an additional amount of Rs.2500 crore as minimum guarantee working capital. Arcelor Mittal’s counsel, Harish Salve, also criticized the Ruias for putting unnecessary roadblocks in the acquisition process, which was in line with NCLT rules. The issue has been all about equitable distribution among operational and financial creditors, which the NCLAT will not adjudicate upon.
The trade deal between the US and China still looked elusive as both traded charges about the other having unrealistic expectations. China underlined that the blacklisting of Huawei by the US had almost become an impediment to the trade deal. China refuses to come under pressure. Trump, meanwhile, is insisting on a trade deal weighted in favour of the US. In this midst, the World Trade Organization (WTO) has warned of continued trade weakness in the June quarter too. According to the WTO, the global trade indicator still remains at a 9-year low and the trade war may have worsened it. The World Trade Outlook Indicator (WTOI) is stuck at 96.3 and represents a weak outlook for trade with pressure on trade in automobiles and agricultural inputs. Reading of 100 shows growth in line with medium-term trends.
RBI is expected to offer additional credit lines for beleaguered NBFCs in India to help them tide over the liquidity shortfall in the market. The purpose of this line of credit will be to help the NBFCs tide over the liquidity crisis. Most NBFCs were in caught in a liquidity bind after IL&FS defaulted on its loans leading to lending aversion and higher cost of funds. This credit line from the RBI should surely help the NBFCs and HFCs to tide over the liquidity gap. NBFCs and HFCs were among the top gainers in the markets on Monday and it remains to be seen if the enthusiasm can be sustained in the markets.
