Some food for thought
"If you have tears, prepare to shed them now."
—William Shakespeare (English writer 1564-1616)
Word for the day
Remora (n)
An obstacle, hindrance, or obstruction.
First thought this morning
In past two months the BJP led NDA governments have done few
uncharacteristic things. That must have confused a lot of political strategists
advising the opposition parties.
For example, (1) Transgender rights bill has been introduced in
the parliament; (2) unprecedented high number of top bureaucrats has been
arrested/suspended in corruption cases; (3) no major BJP leader has uttered the
"Ram Mandir" or "Ayodhya" word post election results; (4)
BJP accounted for 93% of all corporate donations in run up to the elections,
still BJP has refused to concede to any demand of corporate lobby in the recent
budget; (5) Women right to work at night and domestic workers' rights bills cleared
by cabinet for introduction in parliament; (6) Goa government has decided to
renew liquor licenses which were not renewed following the SC directive in
December 2016; (7) Anti Pakistan
rhetoric has been completely killed, though there is no canvassing for peace
with Pakistan too. Recent caution by the Army chief did not evoke any material
response from BJP leadership; (8) Taking a lesson from its mistakes in North
East, BJP is not showing any hurry in toppling Karnataka and MP governments and
letting these fall under their own weight.
It is not even 3 months, and opposition parties are already
perplexed. It's certainly going to be an interesting term of 5years.
Chart of the day
Some more evidence of recessionary pressures building up
After Yesterday's post (see
here) many readers have highlighted more evidence of a recessionary
undercurrent in India economy. For example-
Kotak Research in a note to its clients on Monday, commented-
"We wonder if the Indian market and ‘growth’ stocks will
trade at current high multiples if the current slowdown in the Indian economy
was to be more prolonged than the market’s current expectations. The Indian
market has hardly seen any correction despite growing growth worries as the
market has found comfort in the (1) accommodative monetary policies of major
central banks, (2) lower domestic bond yields and (3) hopes of an economic
recovery."
Bond yields down to post DeMo levels
Bench mark 10yr GOI bond yields have crashed to 6.35%, a level
not seen since economic slowdown triggered by demonetization in winters of
2016. Such sharp fall bond yield is usually read as an indicator of
recessionary tendencies.
Core inflation at 31months low
The June 2019 Core WPI inflation (manufactured products
excluding food products) softened further to 0.8% in June (1.2% in May); on a
sequential basis, it fell by 0.2% (-0.1% in May). Important to note that only 9
out of 22 items in manufactured products registered an increase in price in
June 2019.
June imports down 9%
Imports to India were down ~9% yoy to USD 40.29 billion in June
2019, Many categories like pearls, precious & semi-precious stones
(-23.64%), petroleum products (-13.33%), machinery, electrical &
non-electrical (-9.03%), coal, coke & briquettes (-3.44%), and electronic
goods (-1.66%) registered fall in imports. April-June 2019 imports are down
0.29% to USD 127.04 billion.
Business confidence at 3yr low
India’s slowing economic growth, water shortage and regulatory
hurdles have taken its business sentiment in June to the lowest level since
2016, a survey by market research firm IHS Markit showed on Monday.
The aggregate of private sector companies forecasting output
growth during the current year fell to 15% in June from 18% noted in February.
This level was hit three years ago. Capital investment confidence in India is
among the weakest of all countries for which comparable data are available,
ahead of only China and the UK. The survey also found companies were concerned
about potential depreciation in the rupee pushing prices for imported materials
higher, lack of skilled labor, tax hikes, financial difficulties and customers
increasingly insisting on discounts.
Consumer confidence down sharply
Consumer Confidence in India decreased to 97 Index Points in the
third quarter of 2019 from 105 Index Points in the second quarter of 2019.
Consumer Confidence in India averaged 103.35 Index Points from 2010 until 2019,
reaching an all time high of 116.70 Index Points in the fourth quarter of 2010
and a record low of 88 Index Points in the third quarter of 2013.
Globally also, the investors and fund managers are growing
increasingly concerned about the recessionary/deflationary pressures building
up. As per the latest credit investors' survey of BoFAML, in July
"Recession/Deflation", "Asset Bubbles" "Currency
War" emerged as the fastest growing concerns of credit investors. Concerns
over "Trade War", 'Geopolitical risk", eased from the levels
noted in lat survey in May 2019.
Comfort for stock markets
While the businesses, employees, fiscal managers et al struggle
with the recessionary fears, stock markets may be drawing some comfort from the
current spate of poor economic data. The collective wisdom of market appears
expecting material monetary easing and some form of fiscal stimulus to support
the sagging stock prices.
Bridged gap between the bond and equity yields indicates a
favorable environment developing for stock investors.
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