It looks like the government may finally have its way on the subject of dividends from RBI. The RBI has paid Rs.28,000 crore interim dividend to the government ahead of elections. The government had been looking at sources of funds to finance its Rs.20,000 crore outlay for this year for the assured income scheme to farmers. The government has budgeted total dividends of Rs.74,100 crore from the RBI and other financial institutions for the current fiscal. In fact, this was the major bone of contention which eventually led to the resignation of the former RBI governor, Dr. Urjit Patel.
Sensex sets a dubious record as it logs the longest losing streak since 2013 after 8 consecutive days of correction. The last time the Sensex had a longer corrective streak was in August 2013. Stock prices have corrected on the back of higher crude oil prices and domestic liquidity concerns. The terrorist attack in Pulwama and the likelihood of the border situation worsening is also keeping the markets on tenterhooks. Sensex has lost over 1600 points in 8 days. In term so probability, the markets are worried that the stock markets may find it really difficult to bounce from these levels.
In the midst of all the global uncertainty, the Global stock markets touched a 2½ month high on trade optimism. On the back of hopes of an orderly BREXIT and an early resolution to the Sino-US trade war, the global markets represented by the MSCI Global Index touched the highest level in 2½ months. European stocks have been a little subdued over concerns over the future of the auto industry. The uptrend has been quite sharp across the US and even most of Asia. Indian markets stayed weak and the undertone remained tepid despite the global cues.
Franklin Templeton MF may have some really tough questions to answer in its debt funds as it emerged that the funds had the highest exposure to ADAG promoter Debt. This emanated a day after key creditors of the ADAG group signed a standstill agreement not to sell further pledged shares till September 2019. Under the standstill agreement, none of the pledge shares will be sold and in return, ADAG will pay all interest and principal dues on time. However, it could be a serious problem for the mutual fund if the ADAG group is not able to service its debt during the year.
India was beginning to feel the double whammy of higher crude prices and a weaker rupee. The price of Brent crude continued its upward journey to %66/bbl after a sharp rally on Friday. The Brent crude was trading at $66.41/bbl on OPEC promise to cut supply further if warranted. In addition, the US sanctions on Venezuela and Iran are also putting pressure. Markets are expecting crude demand to pick up if the US-China stand-off gets sorted out. In a related move, the Indian Rupee weakened another 18 bps to Rs.71.356/$ on crude concerns. There was a rush from importers and banks to buy forward cover on the dollar. The higher trade deficit in January also spooked the rupee. In addition, the dollar index (DXY) has been strengthening on trade deal hopes while the FIIs have been consistent sellers.
The Saudi Prince has pledged $20 billion investments to Pakistan. The crown prince’s visit to Pakistan assumes significance in the light of the recent terror attack in Pulwama in Kashmir. The Saudi Prince is visiting Pakistan and India plus other countries in Asia to explore investment opportunities. This will include a $10 billion investment that Saudi Arabia will make in setting up a refinery near the port city of Gwadar in Pakistan. Saudi has invested $53 million in Pakistan in last 3 years and most of its commitments to Pakistan have not really specified a time frame.
