The Nifty level of 11,000 continued to be the big resistance. The redeeming sector of the day was upstream and downstream oil companies even as base metal and industrial metal stocks took deep price cuts in Wednesday trading. US Fed Chief’s statement on strong US growth has raised the spectre of a stronger dollar. Not surprisingly the rupee weakened 24 basis points to 68.62/$ on dollar strength fears
Although Brent Crude stayed closer to $70/$, the Fed Chairman’s confidence in US growth is likely to spur the US Dollar and that may not be good news for the Indian rupee.
Notwithstanding the engine related issues faced on its Pratt & Whitney engines, Indigo managed to grow passenger traffic by 22% in June against industry average of 18.4%. Indigo consolidated its leadership (already a leader by a margin) by pushing its market share up from 40% to 41% in June. Air India, Jet Airways and Spice Jet saw fall in market share while Go Air was a key market share gainer. Newer airlines also saw traction in the form of improved market shares. Aviation companies are stuck between higher ATF fuel costs and margins being squeezed by competition on the other side.
It sure appears to be a pointless No Confidence motion with the opposition nowhere close to the required numbers in the Lok Sabha. However, the Lok Sabha speaker has accepted TDP’s “No Confidence” motion against NDA government. The no-confidence motion moved by TDP MPs assumed significance after TDP had withdrawn support to the NDA government due to AP not getting special status. It is very unlikely that either the ruling party or the opposition will want anything to do with political uncertainty at this point of time. Opposition may also be wary of BJP getting the sympathy vote.
India’s new addition to the listed banks category, Bandhan Bank, reported a 47% rise in net profits to Rs.482 core in first quarter ended June 2018. In fact, Bandhan Bank saw good traction on all fronts including business growth and profitability. The growth in profits has been led by a 57% growth in advances and a 40% growth in net interest income (NII). Gross NPAS were higher by 33 basis points at 1.26%. The stock has rallied sharply since listing and the big challenge for Bandhan Bank is to sustain its profitable business model at a time when the small ticket banking business is already under strain.
If you have seen the sharp correction in metal stocks in India and around the world, the reasons are just as far as China. Metal index touched 52-week low led by Tata Steel and JSPL. The sharp correction in metals has been driven by fears that the trade war could result in a slowdown in China. That fear gets compounded as China puts the brakes on credit growth. China has a unique positioning in the global commodity market. In most of the industrial commodities, China accounts for 50% of the total consumption; be it steel, aluminium, copper or zinc. A slowdown in Chinese demand in the aftermath of the trade war could have pernicious implications for commodity miners across Asia, Africa and Latin America. Obviously, China is trying to put pressure on the US by creating a forced slowdown.
The EU is back on the heels of Google and this time around it is not just the quantum of penalty but the timing of the penalty that is interesting. EU slapped a record €4.34 billion ($5.04 billion) penalty on Google. The penalty pertains to Google using its Android operating system to strengthen the dominance of its Google search engine. This appears to be timed to put pressure on the US for its trade war. Google had to go through similar investigations a couple of years back when the proposed penalty was half of what was announced by the EU today. It could be a case of trade war retaliation by proxy!
