SEBI finally announced a move that was long overdue by tightening the framework for listed banks on the subject of bad loan disclosures. In a significant move, SEBI directed all listed banks to disclose any divergence in bad loan provisioning within 24 hours of receiving the RBI risk assessment report. In the case of Axis, ICICI Bank and Yes Bank, the RBI had pulled up these banks for under-reporting their NPAs. This framework comes into effect immediately. Divergences above 10% need to be reported as they will be construed as significant; and this impact can be on NPAs or on the profits of the bank.
US growth continues to be tepid and a day later the US Consumer Spending has shown a marginal increase. However, that rate of inflation remains modest and well below the threshold of 2%. Even as US consumer spending rose marginally, the wages were almost static raising doubts over purchasing power of consumers. The weak inflation data came a day after the Federal Reserve announced a 25 bps rate cut. Consumer spending is critical because it accounts for nearly 67% of the overall US economic activity and a growth rate of 0.2% per month was just too slow. That could mean more rate cuts in future.
Troubles are mounting for Vodafone to the extent that Vodafone UK has started considering plans to exit India completely. Vodafone Idea touched a life-time low after rating downgrade post AGR order Though Vodafone Idea touched its life time low during the day, the stock managed to bounce back later. According to a report in BS, the long term bank facilities of Vodafone Idea were downgraded by CARE Ratings citing the recent Supreme Court order on AGR. As per the order, Vodafone Idea will have to shell out Rs.40,000 crore, although telcos have asked the DOT for waiver of penalty and interest.
Even as mutual funds are struggling to outperform the market, the dark horse may emerge in the form of PSU Funds. These funds are expected to turn attractive on low valuations and divestment hopes. According to a report in the ET, PSU funds offer a combination of very cheap valuations, billions in hidden assets, value re-rating when they are privatized and generally good standards of corporate governance. Most PSU indices are currently trading at a deep discount to even their historical valuations. The ET report also stated that the monopoly rental value was hardly factored into valuations.
The stock markets rallied for the fifth day in succession since the Muhurat trading day taking the Nifty also close to the psychological 12,000 mark. However, September core sector growth recorded worst level in 14 years. The index of 8 core sectors contracted for September by (-5.2%), the worst performance since 2005. Some of the numbers were really weak. For example, coal output contracted by 20% while crude oil and natural gas contracted by over 5%. While refining products contracted 6.7%, steel and cement were flat. Only fertilizers showed positive growth. In what could be good news for the Indian markets, a poll by Reuters has indicated that global fund managers have recommended an increase in equity exposure in the light of the policy easing and the monetary stimulus to boost growth.
Brent crude has edged back to the $60/bbl mark on weak global demand concerns. After crossing the $62/bbl mark just a couple of days back, Brent crude prices trended back to the $60 levels. The big concern for the oil market was the rising US stockpiles of oil as well as weak industrial data coming from China. While a Chinese stimulus could be on the cards, that may still not spur oil demand. Russia playing hard with OPEC on supply cuts has also depressed oil prices. The BREXIT resolution and the US-China trade talks promise to be a lot more complicated than originally envisaged.
