The power sector could be staring at a crisis of sorts as coal shortage could put Rs.500,000 crore power investments at risk. Power Secretary, S C Garg, reiterated that the shortage of coal could pose a major risk for the Rs.5 trillion worth of investments in the power sector in India. Garg also pointed out that allowing foreign players in coal mining may be the answer as importing 20% of the coal requirement may not be a tenable solution. Most coal mines in India operate way below their capacity and power companies are forced to import coal at higher prices making their projects unviable.
If you are regretting that you missed the rally of the last two days, even the mutual funds missed out on it. In fact, a total of 63 mutual fund schemes held over 10% cash as on September 20th. Most mutual fund houses may have missed out on the 3000 points rally in the Sensex between Friday and Monday. With over 63 funds holding on to a record 10% of their corpus in cash, they may have missed out on opportunities to ride the massive rally. Actually, most investors were taken by surprise as frenetic short-covering created an unprecedented rally in the markets. The entire rally happened in 2 days flat.
Sensex closed flat on Tuesday but Wall Street gained on positive signals from Washington. The Sensex closed flat on a day that saw mixed trends with banks and autos losing ground but IT and FMCG making some smart gains on defensive buying. However, there was positive news for Wall Street after comments coming from Mnuchin confirmed that the trade talks between the US and China would resume in 2 weeks. There was some uncertainty post the cancelled US farm visits. However, Washington has clarified that detailed trade talks between the US and China would go ahead as scheduled.
Oil gets back into the zone of uncertainty as Brent crude eased below $64/bbl on weak global data and quick restoration of Saudi supply. Oil prices in the Brent market weakened below the $64/bbl mark almost substantially rewinding the gains of the previous week. Weak economic data from two of the largest oil-consuming markets of the EU and Japan weakened the outlook for oil prices. Oil prices also faltered after Saudi Arabia promised to restore full production ahead of schedule. Trade war cues could now hold the key and that is one data point that has been extremely volatile.
Farm issues are back to haunt the government as Onions and cotton are proving the latest challenge. Even as onion prices spurted and edged closer to Rs.80/kg in Delhi, the agricultural minister assured that the onion crisis would be controlled in the next few days. The heavy rainfall in the last two weeks had resulted in major spoilage of the onion crop and tons of onions destroyed in storage. Onion prices have been politically sensitive in the past. Indian cotton exporters have a different dilemma. Indian cotton exporters have been struggling to sign export contracts as local cotton prices have been ruling higher than international prices. This is due to the government hiking minimum support prices (MSP) for the cotton farmers. It may now have to provide subsidy for cotton exports.
The uncertainty surrounding the BREXIT process got enhanced after the UK Supreme Court struck down Boris Johnson’s plan for suspending parliament in the run-up to BREXIT. The ruling virtually means that the BREXIT plan will have to pass muster on the floor of the house. BREXIT on October 31st is no longer feasible and they may have to negotiate with the EU for an extension. While EU has agreed to extend the date for getting parliament approval, they have clarified that further concessions for the UK may be virtually ruled out as most member nations have raised objections pampering the UK.
