Markets

Market Movers: Crisil warns of higher CAD, manufacturing improves & oil prices up on output cut hopes

Good morning! Heres a lowdown on top macro triggers that may move market on Tuesday. This report was compiled from agency feeds.

CAD may widen to 3% in September quarter: Icra
India's current account deficit is likely to rise to 3% of GDP in the July-September quarter of current fiscal, from 2.4% in the preceding quarter, driven mainly by high crude oil prices, ICRA said Monday. ICRA expects the current account deficit to widen sharply to $19-21 billion or 3% of GDP in Q2 (July-September) FY2019, from the modest $7 billion in Q2 FY2018, led by higher crude oil prices and gold imports, the credit rating agency said in a statement.

Oil prices up on hopes of OPEC-led production cuts
Oil prices rose on Tuesday, extending strong gains from the previous day amid expected OPEC-led supply cuts and a mandated reduction in Canadian output. The 90-day truce in the trade dispute between the United States and China was also still supporting markets, traders said. US WTI crude futures CLc1 were at $53.20 per barrel at 0006 GMT, up 25 cents, or 0.5%, from their last close. International Brent crude oil futures LCOc1 were up 40 cents, or 0.7%, at $62.09 per barrel.

A new challenge for LLPs
A new tax ruling threatens to challenge a strategy that allowed thousands of businesses and professionals to reorganise themselves and attract foreign investors. This involved converting closely held companies into limited liability partnerships (LLPs). LLP allowed businesses to scale up and free distribution of profits to partners as dividend. In mid-November, a Mumbai bench of the Income Tax Appellate Tribunal said conversion of a company into LLP is covered by the definition of transfer and therefore liable to capital gains tax.

Crisil cuts India growth forecast to 7.4%
Crisil on Monday cut India's growth forecast for current fiscal to 7.4% on the back of weakening global GDP and trade growth. India's growth in the July-September quarter slipped to 7.1% from 8.2% in the April-June quarter. India's export, which saw a revival in early part of 2018, could likely see a slower growth, it projected. Despite the downward revision at 7.4%, India's growth in fiscal 2019 will be faster than both, the 6.7% seen in fiscal 2018 and the trend rate of growth, Crisil said.

PMI rises to 11-month high in November
Buoyed by a rise in domestic and foreign demand, Indias factory activity in November expanded at the fastest pace this year. The Nikkei Manufacturing Purchasing Managers Index, compiled by IHS Markit, rose to 54 in November from Octobers 53.1. A reading of over 50 on this survey-based index indicates expansion, below that contraction. On the employment front, goods producers created jobs in November and was among the fastest seen in six years, the survey noted.

Mumbai most attractive Indian city for realty play
Mumbai has emerged as the most attractive Indian city in the Asia-Pacific region in terms of real estate investment potential, followed by Bengaluru and New Delhi, a report said Monday. Mumbai stood at the 13th rank, while Bengaluru and New Delhi grabbed the 16th and the 17th spots, respectively, in the list of 22 Asian markets having investment potential, a report by the Urban Land Institute and PwC titled 'Emerging Trends in Real Estate Asia Pacific 2019' said. In terms of development potential in 2019 as well, Mumbai was ranked ninth, while Bengaluru and New Delhi stood at the 14th and 13th positions, respectively.

POLICIES & MORE

  • A N Jha, Secretary, Expenditure, has been appointed as new Finance Secretary, a government order said Monday. Prime Minister Narendra Modi led Appointments Committee of the Cabinet has cleared Jha's appointment to the post after Hasmukh Adhia retired on November 30.
  • Hindustan Unilever (HUL) will merge GlaxoSmithkline Consumer Healthcare with itself in an all-stock deal that will give the countrys largest pure-play consumer goods company access to Horlicks, Boost and Maltova malted drinks brands as well as distribution rights for a five-year period over over-the-counter and oral care brands such as Sensodyne, Eno and Crocin.
  • Sun Pharmaceutical Industries, Indias largest drugmaker, said on Monday that it will work towards re-establishing credibility and corporate governance which could include the review of some past decisions such as a $250 million loan to employees and others and a possible buyout of a domestic company classified as a related party.
  • Retirement fund body EPFO is likely to increase fund allocation to its exchange traded fund manager UTI Mutual Funds as it has provided better returns than SBI Capital on ETF investment by the pension fund.

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FUNDAMENTALS

Rupee down: The Indian rupee registered its biggest single-day loss since August on Monday after crude oil prices rallied over 4% in the international markets. The local currency closed 87 paise, or 1.26%, down at 70.46 against the US dollar.

10-yr bond yields up: India 10-year bonds yields rose 0.02% to 7.63% on Monday from 7.61% in the previous trading session, according to RBI data.

Call rate: The overnight call money rate weighted average was 6.18% on Monday, according to RBI data. It moved in a range of 5.05-6.50%.

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