If you thought that your debt fund investments are safe and secure; just think again. Mutual Funds have postponed redemption of FMPs due to NCD exposures. Most of the FMPs that are due to mature in March and April this year have postponed their FMP maturity dates. Fixed Maturity Plans (FMPs) are closed-ended debt funds where the maturity profile of assets is matched to the tenure of the FMP. As per the BS report, Indian mutual funds have an exposure of Rs.8000 crore to Zee Group, which has sought more time from MFs to repay the loans. The actual repayment is uncertain!
After a brief lull, crude oil was again firing on all cylinders. Brent Crude eased past $71/bbl as Venezuela reported collapse in oil supply. After a tentative start, Brent Crude shot up by 120 bps to $71.45/bbl. While worries of the Libya disruption were there, the real trigger came from Venezuela reporting a collapse in supply and reported a drop of 33% in its daily output which has now fallen to less than 1 million bpd on the back of sanctions. US inventories also witnessed drawdowns and that has also put pressure on oil pressures. Saudi Arabia remains committed to continuing supply cuts until December.
Indian Rupee ended sharply stronger at 69.11/$ on exporter support. According to bankers, there was a rush from exporters to sell the dollars leading to a strengthening of the rupee. The rupee had gotten above the 70 marks briefly during the week after the dollar swap auctions had induced weakness in the INR. Additionally, the IMF has given a positive outlook for India’s growth, despite downgrading global GDP growth. That also worked in favor of the INR. However, if the government continues its rupee swap auctions on a regular basis, the dollar demand from RBI will keep the rupee under pressure.
US markets are back with a bang since the lows of December 20189. Wall Street surged 22% in 3 months led by technology stocks. Since the lows of December 24th, the US market rally has been led by technology stocks even as analysts have been warning about stretched valuations in the tech sector in the US. The real surprise outperformers in the last quarter have been the FANG stocks with Netflix gaining 56% and Facebook rallying 43% in this period. S&P 500 is trading at above its 20-year P/E. Even as FANG stocks have shown resilience, it has had a positive spill off effect on Indian IT stocks.
Volatility in the markets continued as Sensex and Nifty got cautious after the weak IMF growth forecast and the Sensex crashed over 350 points. IMF had downgraded global growth by 20 bps to 3.3% on Tuesday. The pessimism was visible despite IMF bracketing India as a high growth large economy in its report. FIIs continued to be buyers on Wednesday but global investors have been showing some risk-off tendencies. In the meanwhile, the IMF has called for fiscal stimulus to boost growth in China and Germany to overcome the risk of a sharper than anticipated slowdown in principal global economies. IMF has also highlighted the risks of a slowdown in countries like Japan and Korea. In the absence of monetary options, fiscal stimulus normally comes in the form of tax cuts or higher public expenditure.
UK may really get some breathing space as the EU is willing to grant more time to the UK for BREXIT subject to clear conditions. The French President has been averse to any commitment to delay the BREXIT beyond the fourth week of May as against the end of June date sought by the British PM. However, Theresa May could have an ally in Angela Merkel who is willing to give a few more months to the UK to ensure that the BREXIT is handled smoothly. April 12th was the last day for the original BREXIT agreement. Germany is willing to give the UK up to 1 year to work out a full-fledged exit from the common market.
