In a move that was always expected to be on the cards, the RBI rejected the proposed merger between Indiabulls Housing Finance and Lakshmi Vilas Bank. According to The Hindu, the RBI has rejected the proposed merger of IHFL and LVB subsequent to the feedback it got in the last couple of months. As per the report, IHFL had been embroiled in a legal controversy while LVB had been shifted to the prompt corrective action (PCA) segment due to its vulnerable balance sheet. The merger would have also given IHFL a banking license and that was something the regulator may have been wary about.
The problems for Coal India and the power sector may have just gotten compounded. Coal India admitted that it had lost nearly 2.1% of its annual total output as the strike in the Talcher Eastern Coalfields had cut production by 13 million tonnes. Workers of Coal India had gone on strike protesting against the proposal to permit FDI in coal mining. This actually creates a big challenge for Indian power companies, which still depend substantially on coal for their thermal plants. Most power companies are currently importing coal at higher prices due to the shortfall in coal supplied by Coal India.
Mutual fund AUM dips in September on the back of corporate redemptions, but the SIPs continued to be buoyant even in a tough month. After a long time, the AUM of the MF industry actually shrank by Rs.97,000 crore to Rs.24.50 trillion as at the end of September. This redemption was led by corporate selling of debt and liquid funds ahead of the half yearly closing towards statutory obligations. Equity and hybrid funds continued to see net inflows but the momentum was much lower compared to the month of August. September may have been an exception, but next few months will be critical.
There appears to be some progress made on the trade talks front ahead of the crucial meeting over the weekend. China agreed to partial trade deal despite the US blacklisting Chinese AI firms. A day after the Trump administration blacklisted Chinese AI (artificial intelligence) firms, China has agreed to continue with talks if Trump would reduce tariffs. The trade war has now been going on for nearly 18 months with no signs of respite. The high level talks over the weekend will be followed by a one-on-one meeting between Xi and Trump. The trade deal remains the key to global growth, which is under stress.
Indian markets gave a sharp bounce on Wednesday on hopes that the trade truce should work out over the weekend. Apart from the trade truce hopes, Indian markets also celebrated the fact that oil had stabilized around the $58-60/bbl mark, which is a source of comfort for the trade deficit number. The bounce in Indian markets came after 6 consecutive sessions of losses. India, meanwhile, slipped 10 places in the Global Competitiveness Index put out by the WEF to 58th slot. The only other BRICS nation ranked lower than India is Brazil at 71. Singapore replaced the United States in the top slot. India slipped lower due to greater financial sector vulnerability. However, the WEF also lauded India’s track record in corporate governance and also appreciated its bold reforms on banking, GST and corporate tax cuts.
Brent crude managed a positive close above $58.50/bbl on favorable global cues. After a sharp correction in Brent crude prices from $71.90/bbl, oil has managed to stabilize above the $58.50/bbl level. The support for oil prices came after China expressed its willingness for a partial trade deal without touching upon security deals. In addition, Turkey’s attacks on the Kurd Region of Syria also kept oil prices up as it would again disrupt the Middle East region. These attacks came just after the US had entirely withdrawn its troops from Syria due to the prohibitively high costs involved.
