Wall Street gave up early gains after Fed announced that it was holding status quo on rates. In fact, Wall Street was trading in the positive territory ahead of the Fed rate announcement. The Dow did show a sharp fall after the Fed decided to maintain status quo on rates. The CME FEDWATCH probability of a rate cut had already fallen to as low as 25% from 33% suggesting that the Fed may wait for more rounds of data flows. However, Fed has opened the doors for future rate cuts. But the language looks like the Fed may not really attempt any more rate cuts or rate hikes in the current calendar year.
It was a tale of 2 markets on Wednesday. On a day when the Sensex closed in the positive, over 500 stocks touch a 52-week low on the Bombay Stock Exchange. It was a volatile day when the index really did not reflect what was happening to specific stocks. Vulnerable stocks belonging to beleaguered business groups as well as NBFCs and banks with worrying levels of doubtful assets saw some sharp correction in the market. The unfavourable A/D ratio indicated that the correction was fairly widespread across mid caps and small caps too. Most of these stocks have large retail participation.
As per the latest ICRA data, India seems to be progressing satisfactorily in its IBC efforts as operational and financial creditors recovered over 40% under IBC. According to a report by ICRA, for the 92 companies evaluated till March 2019, operational creditors recovered 42% of their dues while financial creditors recovered 44% of their dues. As per ICRA, this is considered to be a healthy recovery rate by global standards. Unlike popular belief, operational creditors were not required to take on larger haircuts compared to financial creditors. That should be a good template for the future.
India could be an all electric vehicles nation if the government decides to go by the Niti Aayog white paper on the subject. In fact, Niti Aayog has drawn out a detailed plan where the EV push will be extended to all vehicles beyond two and three wheelers. The Niti Aayog has, in fact, moved a cabinet note to that effect although the Indian auto industry is up in arms against this move. Interestingly, it is the Japanese and Korean auto parent companies that are lobbying hard against making EV mandatory by 2030. However, the direction appears towards more green and eco friendly vehicles.
For the first time, there could be a rift open wide in the OPEC meet. According to a Reuters report, the meeting date for the coming month is yet to be finalized as the two major members (Iran and Saudi Arabia) are not able to agree. Relations had taken a turn for the worse after the attacks on tankers in the Gulf of Hormuz; which the US had blamed on Iran. Iran is unhappy that decisions are being increasingly driven by Saudi and Russia, outside the OPEC ambit. This has been happening for quite some time now. One of the benefits of low oil prices has been on the Indian aviation industry which has handled the pain of Jet Airways shutdown with ease. In fact, Air India and Vistaara announced a slew of new routes and discounted fares to enhance market share and protect customer interests too.
With too much money chasing too few goods and services in the Euro region, experts warn of Japan style stagnation in the Euro region. On Tuesday, when Mario Draghi eased liquidity concerns, it did help to stem the sharp fall in inflation in the Euro zone. However, experts believe that too much liquidity could create a situation like Japan’s lost decade. The ECB already holds the world’s largest bond portfolio worth $5.5 trillion and the room to manoeuvre monetary policy is already quite limited. Trump had criticized this as a deliberate by the EU to weaken the Euro and boost exports.
