Along expected lines Indian mutual funds will now give more time to Essel Group to settle its debts. Mutual funds gave the Essel Group additional time of 6 months to fully settle the dues of group companies. Last month, Chandra had sold a stake in Zee and had repaid 50% of the loans to MFs. However, the standstill agreement concludes on September 30th and a court order in the Delhi HC had just barred Chandra from selling his personal stake in Zee till October 16th. The case had been filed by Indiabulls Housing over a loan default but it has given Zee 6 more months in the process.
State Bank of India withdrew its repo rate linked home loans 10 days ahead of the effective date of October 01st 2019. In a surprising move, SBI withdrew its repo rate linked home loans and asked all customers to shift to MCLR based formula. Ironically, SBI was the pioneer in launching this product after RBI had asked all banks to peg their retail and SME loans to an external floating rate benchmark. Most banks had been averse to using external benchmarks as it did not have any relation to their cost of funds. One needs to wait for October 01st to see how external benchmarking actually pans out.
Brent crude rises to $64.44/bbl on Saudi Arabia supply concerns. In fact, oil prices rallied on Thursday after a Reuters report expressed concerns that the real crunch of oil supply constriction by Saudi Arabia could only be felt in the next few days as currently the Kingdom may be using its reserves to keep the markets supplied. Oil had rallied 15% on Monday after the drone attacks but had retreated sharply on Tuesday and Wednesday on supply restoration hopes. Meanwhile, there is also selling pressure on oil from traders at higher levels as the issue of a slowing global economy still weighs on oil prices.
The second big fall in a single week saw Nifty and Sensex experience value erosion to the tune of Rs.165,000 crore in a single day. It was the second hardest fall of the week after Tuesday with the indices touching a 7-month low. More than 116 stocks on the BSE touched a one-year low. The negative sentiments were due to a tepid outlook provided by the Fed despite a 25 bps rate cut. The real trigger for the fall came after Moody’s issued a credit negative warning to Yes Bank due to its large real estate exposure. This raised a big question mark over all banks with large real estate exposures.
The RBI governor has cautioned the markets that the scope for monetary and fiscal measures to revive growth was substantially limited and most of these measures were largely exhausted. According to a report in BS, Das was referring to measure like liquidity infusion, rate cuts, tax cuts and public expenditure. Das underlined that deep structural reforms would be the only way of boosting growth for the Indian economy. Meanwhile, in further pressure on banks, the finance minister declared that no stressed loans of MSMEs to be labelled as NPAs till end of fiscal 2020. Nirmala Sitharaman also hinted at a special dispensation for farmers and MSMEs as well as a loan fair for quick and easy disbursal of loans to rural and semi urban customers. However, this again raises the spectre of bad loans mounting.
The US and China will resume trade talks amid deep differences. The trade talks between the US and China will start on the back of deep policy differences between the two countries. The trade deputies of the two countries will meet in Washington over the week end which will set the stage and the agenda for Trump and Xi to talk in October. US demands include a sharp increase in Chinese purchase of soybeans and other farm products with minimal focus on IPR. In fact, the US has also agreed to leave discussions on Huawei aside and quid pro quo may be largely on tariffs and agricultural products access.
