The role of rating agencies in exacerbating the IL&FS crisis has come under the lens as SEBI takes a dim view of the role of rating agencies role in the case. SEBI has come down heavily on rating agencies for their role in the IL&FS crisis. IL&FS enjoyed AAA rating just before it imploded. In fact, the SFIO had detected cases of quid pro quo between rating agency officials and IL&FS. Despite rejecting the consent plea applications of these rating agencies, SEBI can only impose a maximum penalty of Rs.1 crore on rating agencies under Section 15HB. Two agencies have already sent their CEOs on indefinite leave.
The agency representing telecom operators has ruled out any participation by the legacy telecom companies in India in the forthcoming 5G auctions to be launched by the government. Rajan Matthews of the Cellular Operators Association of India (COAI) has affirmed that in the light of the recent AGR judgement by the Supreme Court, older telecom players may not have the financial capacity to bid for 5G spectrum auctions. Once the auction bids are closed, telecom players will be required to pay Rs.142,000 crore to the government within a period of 3 months; which currently looks Herculean.
Questions over growth are back as two financial institutions, SBI and Nomura, peg Q2 GDP growth at 4.2%. This was after the sharp fall in IIP and core sector growth for September into negative territory. In fact, SBI has identified a clear slowdown in a number of high frequency indicators like auto sales, aviation numbers, consumer demand and infrastructure spending. Q2 GDP will be officially announced on November 30th. A growth rate of just 4.2% in the September quarter will mean that the economy will have to see a sharp revival in the last two quarters to even cross the 5.5% for the full year.
Oil remains volatile but has cross the $62/bbl mark with some effort. Brent Crude on Tuesday was up 71 bps at $62.62/bbl on Trump trade deal hopes. Brent crude continued its upward journey on Tuesday ahead of Trump’s statement. Oil demand has been a key factor in the last few months and the markets are hoping that post the Phase-1 of the trade deal, oil demand should pick up sharply. However, the OPEC Plus group is unlikely to cut supplies beyond the current 1.20 million bpd and experts anticipate pressure on oil prices. Some experts are begging oil closer to $50/bbl if supply is not cut further by OPEC.
Even as the Indian markets were shut on Tuesday on account of Guru Parab, the US markets advanced ahead of Trump’s statement. Donald Trump is expected to make a detailed statement on the progress of the trade talks and even announce a mini-trade deal. The deal had almost reached finality but was stuck on the issue of revocation of older tariff hikes by the US. Meanwhile, Moody’s has cut global sovereign rating outlook to “Negative” for 2020. Moody’s has opined that unpredictable world politics could slow growth and increase the risk of financial and economic shocks. Moody’s has pointed out that the weakness in the US and China could negatively impact commodity driven economies. Till date, Moody’s has already issued downgrade warnings to India, the UK, South Africa, Mexico, Turkey and Hong Kong.
The Governor, Mr. Bhagat Sngh Koshyari, has recommended President’s rule in Maharashtra and kept the house in suspended animation. The Maharashtra Governor recommended president’s rule after neither the Shiv Sena nor the NCP could cobble up the required numbers before the deadline given to them. Since the house will be in suspended animation, a government can still be formed if any party can approach the governor with the requisite numbers. The election results were announced on October 24th but despite 20 days elapsing, no political party has been able to stake a claim.
