Two telecom companies recorded the largest loss in Indian history. Bharti Airtel reported an Rs.23,045 crore loss for September quarter, even as Vodafone Idea reported net loss of Rs.50,922 crore in Q2. In a record for the Indian corporate sector, Bharti Airtel net loss was driven by a provision of Rs.28,450 crore towards license fees as directed by the Supreme Court in its order on AGR last month. DOT has asked Bharti and Vodafone to pay the amount within a period of 3 months. Revenues for the Bharti were slightly up at above Rs.21,000 crore in Q2. Vodafone Idea took a hit of Rs.26,755 crore on AGR.
The impact of two of the most powerful export engines of the world slowing led to global markets falling sharply as China and Germany slowed down. With Germany narrowly avoiding a recession, the markets globally were scared of a distinct slowdown in global growth. This comes on top of the continued trade war between the US and China, with a trade deal looking increasingly elusive. Germany grew by just about 0.1% while China’s factory output for October slowed significantly more than was originally anticipated. China and Germany are the two largest exporters of goods in the world.
Wholesale inflation (WPI) diverged from retail inflation to touch a low of 0.16%. Despite the sharp rise in retail inflation to 4.62%, the wholesale producer inflation remained extremely tepid at 0.16% for October 2019. CPI inflation has the food basket as the major component while manufacturing is the largest component in WPI. With manufacturing prices remaining almost static, the WPI was almost tepid. Low oil prices also weakened the WPI. Although food WPI was up by over 2% for the month of October, the WPI was influenced the most by a flat performance by the manufacturing sector.
It looks like the Indian mutual funds are getting selective of stocks and valuations. Mutual funds churned out high flyers and picked up laggards in October 2019. Mutual funds were seen heavily lapping up beaten down shares like Infosys during the month even as some of the high flyers of the last few months like ICICI Bank and HDFC saw heavy selling by mutual funds. This was more of a churn where MFs were using the profits of richly valued stocks to fund the purchase of quality stocks that had corrected sharply. L&T was another favourite for MFs considering that it was a good bet on capex revival.
The Nifty bounced back to close sharply higher on a day when the global markets were wary of a slowdown in China and Germany. Despite the CPI inflation coming in higher at 4.62%, the weak growth in IIP and core sector gave hope to the markets that the RBI would still persist with a 25 bps rate cut in December. That was something that buoyed the markets on Thursday. Meanwhile, Moody’s cuts India’s full year GDP estimate for 2019 to 5.6%. This comes in the aftermath of Moody’s downsizing the Q2 GDP growth to 4.2%. With a first half average GDP growth of 4.6%, Moody’s is still betting on India growing at an aggressive 6.6% in the second half. Moody’s had downgraded the full year growth on the back of weak global cues and fall in domestic consumption. This is evident from the IIP and core sector data.
Crude oil jumped by over 100 bps to cross beyond the $63/bbl mark. Brent Crude continued its magic run on Thursday as it got closer to the $63/bbl mark after US stockpiles fell sharply lower. In addition, IEA put out estimates that the US shale supply would also gradually slowdown and that also positively impacted oil prices. Though the trade deal appeared to be elusive, the oil markets were celebrating on the hope that China would embark on a stimulus. A China stimulus is expected to largely impact the demand from most of Asia and could be the engine for a sharp rise in oil demand and oil prices.
