It was the second day of free fall in the indices. The Nifty and Sensex fall sharply on the multi-billion dollar farm relief package. Indices lost over 1% after there were reports of the government announcing an Rs.2.3 trillion farm revival package. The advance/decline ratio was extremely negative at 8:42. Auto and metal sectors were the big losers once again. Markets are apprehensive that this farm revival package could lead to a spiralling of the fiscal deficit beyond the 3.3% mark. The 10-year bond yields hardened 100 bps to 7.43% as the pressure of a higher fiscal deficit was apparent.

The carnage in the Dow and the NASDAQ continued after a big 22% loss in the previous year. Wall Street lost over 2% on Thursday on the back weak Apple outlook and tepid factory data. The US markets reacted sharply after Apple hinted at slowing top line for the first time. Apple has already lost nearly 30% of its peak valuation. The Dow and the NASDAQ indices are at their lowest level since mid-2017. Even the US National Factory Activity came in at 54.1 for December as against street expectations of 57.9%. China slowdown has only added to stock market worries in the US.

When the going tough for the world economy; it is the time for gold to take centre state. Gold prices hit a 6-month high on the back of rising global uncertainty. For years gold has been the best hedge against uncertainty and that seems to be showing up with gold touching a 6-month high. The current price of $1292/oz was last seen on June 15th last year. Apart from the weak dollar, there is also a visible shift into gold as an investment considering the natural hedge that it offers against market volatility. Even in the past, gold has been a preferred investment source in times of economic and political turbulence.

The National Highways Authority of India (NHAI) proposes to raise Rs.10,000 crore through the issue of Bharatmala Bonds. This fund raising will be part of the government approved Rs.62,000 crore fund raising plan for NHAI in the fiscal year 2018-19. The NHAI has already filed the draft prospectus with SEBI. Till date, NHAI has raised close to Rs.41,200 crore in the current fiscal. Under the Bharatmala 1, nearly 25,000 KM of highways will be completed by 2022, and it is happening at a record KM per day. The Modi government also has a major infrastructure investment plan.

What could be the relationship between strengthening of the Japanese Yen and global markets. Actually, this relationship has repeated every 10 years. Global markets have now got to worry about the 10-year Yen cycle. The sharp gains in the Yen may be reminiscent of two previous occasions when the Yen rally was a precursor to a global financial crisis. In 1998 the world markets came to the brink of a crisis after the Russian default led to the sinking of LTCM. Yen also rallied ahead of the sub-prime crisis in 2008. Yen is the natural safe haven currency due to its perpetual current account surplus. When crisis peaks and investors lose faith in my most asset classes, they turn risk-off. That is when the demand for the Japanese Yen comes back as it is still considered the safest bet to park your money.

Arun Jaitley expects banks to recover Rs.70,000 crore before March 2019. This expectation is based on the speedy resolution of nearly 12 big ticket cases that are currently under discussion at the NCLT. Some of the big problem assets like Bhushan Steel Essar Steel are likely to be resolved in the fourth quarter. Lenders have already recovered close to Rs.80,000 crore from a total of 66 problem cases. It is also expected to be a boost to bank resources. Banks have been constrained due to low capital and huge funds stuck up in bad loans. This should provide some relief in a difficult year for banks.