Here’s a lowdown on top macro triggers that may move market on Tuesday. This report was compiled from agency feeds.
No Bad Bank, 5-pt Strategy to Combat NPAs
Shunning the idea of a bad bank, the government has opted to go for the AMC route, proposed by a panel of public sectpr banks. A five-pronged strategy including SME resolution approach, bank-led resolution approach, AMC/AIF led resolution approach, NCLT/IBC approach, and asset-trading platform has been decided upon to solve the banks' NPA problems. PSU banks will take the lead in setting up an asset management company (AMC) for resolution of loans above Rs 500 crore. They will also set up alternate investment funds to raise money and back this asset management company.
Rupee Plunges Again
The rupee suffered yet another blow on Monday by plunging 34 paise to end at a near five-year low of 68.80 against the buoyant US dollar in the midst of weak global trends and concerns on macro-economic front. This is the level last seen on 28 August, 2013. The Rupee has been one of the worst performing currencies among peers against the USD.
Core Growth Slows...
The pace of growth of India’s infrastructure sector slowed to a 10-month low in May, dragged down by declining output of crude oil and natural gas and slower expansion of coal, steel and cement production. The eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity constitute 40.27% ofthe Index of Industrial Production. The Index of Eight Core Industries grew 3.6% in May compared with 4.6% in April and 3.9% a year earlier.
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..But Factory Activity Improves
India’s manufacturing conditions improved in June, with factory activity expanding at its fastest pace in seven months as favourable demand led to greater output, a private survey showed on Monday. The Nikkei India Manufacturing Purchasing Managers’ Index, or PMI, rose to 53.1 in June from 51.2 in May. A reading above 50 indicates expansion while one below 50 points to contraction. Manufacturing PMI has been above 50 for 11 months in a row.
Crude Update
Crude rose in early trade on Tuesday after Monday’s declines that were triggered by U.S. President Donald Trump putting pressure on Saudi Arabia to ramp up oil output, with traders worrying about how it could affect spare capacity ahead. President Trump said in a tweet on Saturday that Saudi Arabia agreed to boost oil production by 2 million barrels per day (mb/d), a claim that surely came as news to the Saudis. WTI crude was trading at $74.70 and Brent crude at $78.02.
More Jobs, Ahoy!
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iring outlook has turned rosier in India than it has been in the past two years. TeamLease Employment Outlook Report for April-September 2018-19 has revealed a significant increase in the number of employers who expect to hire in the ongoing first half of the current financial year amid positive sentiment generated by healthy economic growth. The report says net employment outlook rose to 95%, compared to 91% for the preceding half-yearly period, October-March 2017-18.
Consumer Sentiment Stable Consumer sentiment regarding personal finances, business and buying conditions remained stable in June despite a rate hike by RBI, as consumers said they are benefitting from the revival in growth, says a report. The GICI (Genesis India Consumer Indicator)- a monthly indicator tracking consumer sentiment pan India across personal finances, business conditions and buying conditions - remained broadly stable at 60.00 in June compared with 60.45 in May.
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Long-term Bond Yields Up: Government bonds (G-Secs) declined on selling pressure from banks and corporates. The 7.17% 10-year benchmark bond maturing in 2028 went-down to Rs 95.10 from Rs 95.16 previously, while its yield inched up to 7.91% from 7.90%. The 6.68% G-Secs maturing in 2031 fell to Rs 88.6550 from Rs 88.81, while its yield edged up to 8.09% from 8.07%.
Short-term Bond Yields Mixed: The 6.84% G-Secs maturing in 2022 slipped to Rs 95.8650 from Rs 95.91, while its yield marginal up to 7.96% from 7.95%. The 8.15% G-Secs maturing in 2026 slid to Rs 99.91 from Rs 99.94, while its yield ruled steady to 8.16%. However, the 7.16% G-Secs maturing in 2023 gained to Rs 96.58 from 96.57, while its yield held to 8.02%. The 7.80% G-Secs maturing in 2021 rose to Rs 100.12 from Rs 100.1025, while its yield softened to 7.74% from 7.75%.
Call Rates Down: The overnight call money rates finished lower to 6.05% from last Friday's closing level of 6.15%. It resumed higher at 6.25% and moved in a range of 6.30% and 6.00%.
Liquidity: The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 3,871 crore in 7-bids at the overnight repo auction at a fixed rate of 6.25% on Monday morning, while it sold securities worth Rs 51,129 crore in 48-bids at the 2-days reverse repo auction at a fixed rate of 6.00% as on June 30.
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