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TRUMP AND OUR MARKET CRASH

Akhilesh Bhargava

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Like the Indian rupee, which has been the worst performing Asian currency in 2018, so has been the case with the Indian stock markets. The share prices have been falling in trading session after session and dozens of prime scrips trade at a discount of over 50% to their 52 week high. As they say, the entire stock market is up for sale for the Diwali festival season. A market which was in a confident bull phase in recent memory, is now in the firm grip of bears, who are driving the prices down. Uncertainty looms large on the bourses. It is not that the Indian economy has come crashing down (India remains the fastest growing large economy), but the markets have certainly come crashing down. While everyone agrees that it will all be good in the long run, it is the immediate bloodbath on the markets, which is a matter of worry. The market cap has been decimated by Rs.9 lakh crores since October 2017 and losses are writ on the financial statements of traders and institutional investors. The reason that the markets are so nervous and negative, are primarily to do with the disruption of the global economy and diplomacy, caused by Donald Trump, the eccentric and maverick American president. His sudden policies and constant sabre rattling, have unsettled the global currency and stock markets. It starts with the dollar tightening being done in the USA, by increasing interest rates, due to which global funds are rushing into dollar assets. To India, it has meant that foreign investors have sold shares worth over Rs.66000 crores since January 2018 and have exited from our bourses. Such sell out by foreign investors, not onlyerodes stock market prices, but the value of the Indian rupee also. The next is to do with the fresh economic sanctions imposed by USA on Iran, due to which the Iran crude oil supply will be cut off from global markets and oil prices will spike further. Crude oil prices have already crossed USD 85 to a barrel and are expected to cross USD 100. India is a huge oil importer and such a price rise will only deteriorate our CAD and will put further pressure on a deteriorating rupee, apart from fuelling domestic inflation. The global economic uncertainty caused because of the USA-China tariff war, also subdues the moods on our stock markets, which is reflected on the share prices. If the economic uncertainties caused due to a maverick US president were not enough to unsettle our markets and currency, the domestic factors of the continuing banking crisis and the NBFC panic triggered by ILFS, have helped the bears to overpower the bulls and bring down stock market prices. The perception of risks in the mind of investors, shoots up, whe there is uncertainty on the economic and the political front. As India heads into a major election season, with elections in crucial states of Rajasthan, MP and Chattisgarh on the cards, in the run up to the 2019 general elections, political uncertainty has set in and the markets will remain bearish, aided by a maverick US president. The world awaits with bated breath, the next non confirmist and outlandish announcement of Donald Trump, which will only trigger further uncertainty and price erosion in global currency and share markets, including those of India.

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Most Asian markets rise as investors weigh China-US trade row

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Asia

Hong Kong | Asian markets mostly rose Monday but investors were keeping a close eye on the China-US trade row after Donald Trump’s optimistic comments on a possible deal were offset by a war of words between his vice president and Xi Jinping.

The mood across the region was a little calmer at the start of the week, providing some much-needed support after the volatility of seven days ago, with oil stabilising and the Federal Reserve tempering fears about its plans for interest rate hikes. US markets provided a positive lead after Trump said Friday that Beijing had made overtures toward resolving their trade war, meaning he might hold off imposing another round of tariffs.

The president’s comments followed an indication from one of his top economics advisers that talks were under way ahead of a planned meeting at the G20 in Argentina at the end of this month.

However, hopes for an early agreement were jolted by a spat at the weekend APEC meeting between Mike Pence and Xi over China’s economic and regional ambitions, with the US vice-president mocking Beijing’s “constricting belt” and a “one-way road” initiative. Xi defended his scheme and hit out at Trump’s “America First” protectionist agenda, saying it was a “short-sighted approach” that was “doomed to failure”.

The stark differences between the two sides meant the APEC gathering ended without a final communique for the first time in its history. Still, investors in Asia were in a buying mood Monday as they picked up bargains.

In early trade Hong Kong was up 0.5 percent and Shanghai added 0.4 percent while Tokyo ended the morning 0.4 percent higher. Seoul gained 0.3 percent and Taipei added 0.1 percent with Manila jumping more than one percent.

However, Sydney dropped 0.6 percent, Singapore was off 0.4 percent and Wellington eased 0.2 percent. There was also some support from comments by top Fed officials last week hinting at concerns about the global economic outlook, indicating they see signs of slowing that could affect their plans for raising borrowing costs.

Expectations the US central bank would press ahead with a series of hikes well into next year, making debts more expensive for investors, have helped send global markets down this year. But while the prospect of slower rate hikes would be cause for celebration, Stephen Innes, head of Asia-Pacific trade at OANDA, sounded a note of caution.

“A Fed pause during a hiking cycle is a very strong ‘canary in a coal mine’ type of signal and could eventually lead a more profound correction lower in US equity markets if the US economy does sputter,” he said. Oil prices rose more than one percent, extending gains from the end of last week after major producer Saudi Arabia said it plans to cut output and called on other producers to follow suit.

“Hope is building on OPEC Plus (countries) to curb output as oil prices have entered into a bear market, falling over 20 percent from the peak in early October when Brent was at USD 86 per barrel,” Margaret Yang Yan, market analyst at CMC Markets Singapore.

However, the commodity remains under pressure from concerns about global demand and rising output as well as the China-US trade war. On currency markets the pound managed to hold off falling further as attention turns to British Prime Minister Theresa May’s attempts to win over enough members of her party to push through her Brexit deal.

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Rupee sheds 9 paise against US dollar at 72.02

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Mumbai | The rupee depreciated by 9 paise to 72.02 against the US dollar in early trade Monday at the interbank foreign exchange, halting its four-day winning streak, ahead of RBI’s board meet. Fresh demand for the American currency from importers amid rise in crude prices weighed on the domestic unit, dealers said.

However, weakness in the US dollar against some currencies in global market and a higher opening of the domestic equity markets limited the rupee fall ahead of Reserve Bank of India’s board meet, dealers said. Finance Ministry nominees and some independent directors are expected to take on Governor Urjit Patel and his team later in the day over issues ranging from micro, small and medium enterprises (MSME) credit to the central bank’s reserves, though both sides are in favour of reaching a common ground.

Meanwhile, the international benchmark, Brent crude was trading higher by 0.72 per cent to USD 67.40 per barrel. The rupee on Friday strengthened by 4 paise to close at a fresh two-month high 71.93 against the US currency, despite a rebound in oil prices and a stronger dollar.

Foreign institutional investors (FIIs) bought shares worth Rs 844.82 crore on Friday, as per provisional data. The benchmark BSE Sensex was trading 159.66 points, or 0.45 per cent, higher at 35,616.82 in opening trade.

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Sensex rises over 150 points ahead of RBI board meet

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Sensex

Mumbai | The benchmark BSE Sensex surged over 150 points and the broader NSE Nifty went past the 10,700 mark in opening trade Monday on the back of widespread gains ahead of the Reserve Bank of India’s board meet amid capital inflows by foreign funds. Positive leads from other Asian markets too influenced sentiments here.

The 30-share index was trading 190.81 points, or 0.54 percent, higher at 35,647.61 points. Sectoral indices, led by realty, metal, auto, IT indices and bankex, advanced up to 1.44 percent. The barometer had gained 315.17 points in the previous two sessions.

Similarly, the NSE Nifty was up 43.10 points, or 0.40 percent, at 10,725.30 points. Investors are awaiting cues from the Reserve Bank of India’s board meet later in the day.

Finance Ministry nominees and some independent directors are expected to take on Governor Urjit Patel and his team later in the day over issues ranging from micro, small and medium enterprises (MSME) credit to the central bank’s reserves, though both sides are in favour of reaching a common ground.

Brokers said besides capital inflows from foreign funds, positive cues from other Asian markets, tracking weekend gains at Wall Street after US President Donald Trump said that he may not impose more tariffs on Chinese goods after Beijing sent a list of measures it was willing to take resolve trade tensions, buoyed the sentiment.

Major gainers were Yes Bank, Infosys, M&M, Hero MotoCorp, RIL, HDFC Bank, HDFC, Sun Pharma, Maruti Suzuki, Tata Steel, Wipro, L&T, Vedanta, TCS, ICICI Bank, Coal India, ITC, PowerGrid, HUL and Bajaj Auto, gaining up to 4.29 percent. Top losers include Bharti Airtel, Axis Bank, Wipro, Asian Paints, ICICI Bank and Adani Ports, falling up to 1.30 percent.

Meanwhile, foreign institutional investors (FIIs) bought shares worth Rs 844.82 crore on Friday, while domestic institutional investors (DIIs) sold shares worth Rs 372.24 crore, provisional data showed. Elsewhere in Asia, Japan’s Nikkei rose 0.50 percent, Korea’s KOSPI gained 0.21 percent, Shanghai Composite Index up 0.22 percent and Hong Kong’s Hang Seng edged higher by 0.24 percent. The US Dow Jones Industrial Average ended 0.49 percent higher on Friday.

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