Foreign flows into equities may have returned in September after a gap as FPIs infused Rs.7715 crore ($1.1 billion) into Indian markets in September. The FPIs turned net buyers in the Indian markets after 2 months of being consistent net sellers. Interestingly, the FPIs infused nearly Rs.7849 crore into equities even as they withdrew Rs.135 crore from debt. This sharp inflow from FPIs was in the aftermath of the corporate tax cuts announced by the government more than a week ago as well as on the back of a stronger rupee. Rupee carry trade has been quite strong in the last few weeks.
With auto stocks driving the rally in the markets in the previous week, a lot could predicate on the auto sales numbers according to a report in the Economic Times. With the auto stocks having rallied nearly 9.5% during the week, the onus shifts to the monthly auto numbers for September. In August, passenger car sales had fallen by 41% on a YOY basis and even HCVs, two wheelers and tractors had seen weakness in off-take. Considering that the auto sector outperformed the Nifty post the tax cut, the monthly numbers will be the deciding factor, although the tax breaks may take time to translate into numbers.
SEBI is likely to be unhappy with some leading mutual funds which had gone ahead with renewing their standstill arrangements with the Essel Group, despite warnings from the SEBI chief. According to a report in the ET, leading mutual funds with exposure to the Essel Group could have an issue with SEBI, which has underlined that standstill agreements with borrowers were outside the purview of SEBI MF regulations. Major funds that have agreed to give the Essel promoters an additional 6 months to repay the loan include the HDFC Mutual Fund and Aditya Birla MF although Kotak MF sold pledges shares.
It was a roaring party for the equity markets during the week as the Sensex added $18 billion in market cap during the week. The markets reacted positively to the major corporate tax cuts announced by the government. The auto stocks and banks were the key gainers and their substantial weight in the indices helped the markets trend higher. RIL and HDFC were among the major gainers during the week and also contributed substantially to the index movement. Technology stocks were relatively subdued due to the strong rupee. Now the key macros and the RBI rate decision could hold the key to markets.
Brent crude closed weak at $61.91/bbl after Saudi Aramco restored full supply. In the aftermath of the drone attacks on Saudi Aramco, oil prices touched $71.90/bbl but have since corrected $10/bbl. Saudi Arabia managed to restore its full production of 11.3 million bpd nearly five days ahead of schedule. Last week, Aramco had cut down its output to a level of just 6.2 million bpd. In addition, global growth worries are also playing on crude oil. To add the confusion, geopolitical risk built up in the Middle East after Houthis attacked Saudi border. The Houthi rebels in Yemen claimed attacks on the Saudi border and even announced the capture of Saudi tanks and soldiers. There is yet to be a Saudi confirmation. Saudi Arabia and the US have long accused Iran of tacitly supporting the Houthi rebels.
The US House Speaker underlined that after the release of the phone transcripts between Trump and the Ukrainian president, the pressure was building up to start impeachment proceedings against Trump. The impeachment is a prolonged process running into several months and even in the event of impeachment it is not necessary that Trump will resign. Impeachment orders have been passed against 3 Presidents in the past but Richard Nixon was the only US president who had to resign. The last president to be impeached, Bill Clinton, was allowed to continue. Market volatility will remain elevated.
