The major trade disputes between India and the US may have been either fully or substantially sorted out as affirmed by the Commerce Minister, Piyush Goyal. The minister has confirmed that most of the major trade related differences between India and the US have been sorted out amicably. More details are expected over the next few days. This deal is intended to reverse the retaliatory tariffs imposed by both India and the US on each other and also America’s decision to withdraw preferred status given to Indian exports. This is critical coming in the light of the ongoing trade war between China and the US.
Notwithstanding the volatility in the markets, the younger investors are sticking loyally to mutual funds as it continues to attract the tech savvy millennials in India. Young India appears to continue to gravitate towards equity and ELSS funds considering its wealth creating potential and flexibility. In the realm of debt funds, most millennials prefer the instant redemption liquid funds more than long term debt funds. According to CAMS data, millennials in the 20-35 age group accounted for 47% of the new mutual fund investors on-boarded. These data points were released by Deloitte based on CAMS data.
Funding sources for NBFCs from mutual funds may be drying up but NBFCs are falling back upon securitization of receivables to bridge this gap. According to ICRA, securitization volumes could touch record highs during the current year as creation of pass-through certificates and selling securitized receivables could be the best option for NBFCs to raise funds. Banks have been lending to stronger NBFCs but mutual funds are almost absent in the lending market. NBFC securitization volumes touched Rs.236,000 crore in last one year. Banks have been major lenders to the NBFC sector.
Despite the disappointing outcome of the vote on Saturday, Prime Minister Boris Johnson has confirmed that BREXIT will happen on October 31 as scheduled. After the Boris Johnson government narrowly lost the vote in the House of Commons on Saturday, Johnson had sent an unsigned note to the EU requesting for postponement. However, this puts the entire onus on the EU, which they may not be willing to take. Technically, the UK could be on target to leave the EU on October 31, with or without the BREXIT deal. Of course, world economies are worried about a no-deal BRERXIT, which could be chaotic.
Sensex rallied past 38,000 as pre-Diwali rally took the indices 3.5% up during the week giving positive returns for 6 days in succession. The key sentiment driver in the coming week will be the announcement of assembly election results on 24th of October. Exit polls have estimated a decisive victory for the ruling NDA combine predicting a landslide win for NDA in Maharashtra and Haryana. In the all important state of Maharashtra, the consensus of exit polls has given 164 to 192 seats out of the total 288 seats to the ruling NDA with just about 72-90 seats for the Congress / NCP combine. The exit polls have predicted a similar decisive victory for the NDA in the state of Haryana also. The markets are likely to interpret this mandate as a vote for continuation of the government initiated reforms process.
Weakness may be back in oil prices as Brent crude fell by 99 bps to $58.83/bbl on demand concerns. Tepid demand continued to be the major concern for oil as the price of Brent crude again dipped below the $59/bbl mark. In the previous week, the oil prices had made a feeble attempt to cross above the psychological $60/bbl mark but that could not sustain. Limited growth visibility from the US-China trade war and the BREXIT uncertainty appears to be hitting oil demand for now. In addition, Chinese GDP growth for the latest quarter coming in at a 27 year low of 6% has also dented oil demand.
