The crisis in the auto sector appears to be getting deeper by the day. Auto companies in India have started cutting more jobs as the slowdown begins to hurt. The impact of the slowdown in the auto sector may be much more widespread than originally anticipated. Even as Toyota and Hyundai halted production, auto parts makers like Denso, Jamna and Bellsonica are laying off workers in a big way. Passenger vehicle sales in the month of July had fallen by 31%, the steepest fall in the last 18 years. The axe has already fallen on temporary hands in a big way across the auto and ancillary sector.
There may be some relief for the beleaguered 63 Moons, formerly owned by Jignesh Shah. Mumbai High Court ruled out attachment of 63 Moons assets in NSEL default. In a significant judgement, the Mumbai High Court ruled that the assets of 63 Moons (formerly Financial Technologies) cannot be attached against the default on the NSEL, despite both the companies belonging to the same group. The attachment was made as part of the Mumbai Police’s probe into the NSEL Spot Exchange default case in 2013, which had led to losses to the tune of Rs.5600 crore to investors across India.
After a brief rally on Wednesday, the rupee returned to its weakening ways. The Indian Rupee touched an 8-month low as it scaled closer to the Rs.72/$ mark. The INR has been weak since the beginning of August losing nearly 6% in the process. However, the correction became acute on Thursday after the Chinese Yuan dropped its mid-point for the second time in the last two weeks to boost its exports. The Yuan immediately weakened close to the CNY7.10/$ mark, pulling most EM currencies, including the Indian Rupee, along with it. Markets fear that this may be akin to a currency war.
Brent Crude hovered around the $60/bbl mark but the real big news was the OPEC share had fallen to an all-time low. Even as Brent Crude continues to hover around the $60/bbl mark, the OPEC has seen its market share fall to a low of 30% for the first time since its inception. Saudi Arabia has already been relegated to being the third largest oil producer after the US and Russia. The crisis in Venezuela and the sanctions on Iran have further squeezed the market share of OPEC in the world oil market. Since November 2014, there has been a major wealth transfer from oil producers to oil consumers.
The 587 points correction in the Sensex may be merely representative as the real pain was in the non-index companies with over 144 companies at 5-year lows. In addition, 70% of the companies listed on the NSE have corrected more than 40% from their peaks. Even as Nomura downgraded its Nifty target, the real damage may be actually happening in non-index stocks due to the fear factor. Meanwhile, Wall Street and other global markets were also tentative ahead of the annual Jackson Hole symposium. As central bankers of some of the world’s most powerful economies prepare to meet at Jackson Hole in the US, this year is likely to beyond a normal retreat. The world economy is slowing and the world markets are looking forward to a more accommodative language and synchronized monetary stance.
France’s Macron has ruled out new BREXIT deal due to time constraints. At a time when even Angela Merkel has been willing to go the extra mile to accommodate a new BREXIT deal, Macron has ruled out any such deal due to the limited time at their disposal. Macron has now made it clear to Boris Johnson that either UK will have to pass the existing deal through the British parliament or get ready for a no-deal BREXIT, which could have larger repercussions. Bank of England has already warned that a no-deal BREXIT could lead to the UK GDP contracting by nearly 7% in the first full year.
