Tightening of Liquidity Taps Leaving Investors Thirsty
Weakness continued to persist on the Indian bourses and benchmark indices traded under pressure for yet another week. The week started on a negative note as lacklustre macro-economic updates and weary global markets impacted domestic investor sentiment. Tepid global markets further fuelled the negative sentiment as investors dogged fears about global growth. Additionally, the minutes of the Fed's September meeting released last week, indicated that policy makers are prepared to forge ahead with increases and will likely hike rates again as early as December, as expected.
European and Asian stocks traded lower for most of the week as diplomatic tensions in Saudi Arabia, concerns over Italy's Budget and ongoing Brexit talks all depressed market sentiment. Meanwhile, the spat between Rome and Brussels over next year's budget continues. Italian Finance Minister Giovanni Tria said Wednesday that he sees no reason to present a new budget, after the European Commission said the plan was not good enough and wanted a new version within three weeks' time. Additionally, the European Central Bank (ECB) reaffirmed its plan to end the asset-buying program at the heart of its quantitative-easing strategy in December provided data show inflation remains on track to eventually meet its target. The ECB left interest rates unchanged and repeated that they will remain at present levels at least through the summer of 2019. Most Asian stocks declined as well as concerns mount that corporate profits and economic growth are peaking amid rising borrowing costs.
On the macro front, the fiscal deficit of the Central government has widened in the first half of 2018-19 to 95.3% of the Budget Estimate (BE), mainly on account of slow growth in revenue collections. The deficit was at 91.3% of BE at September-end of the last financial year.
The Government of India has received Rs 7,09,483 crore (39.03% of corresponding BE 18-19 of Total Receipts) upto September 2018 comprising Rs 5,82,783 crore Tax Revenue (Net to Centre), Rs 1,08,969 crore of Non-Tax Revenue and Rs 17,731 crore of Non-Debt Capital Receipts. Non-Debt Capital Receipts consists of Recovery of Loans (Rs 7,786 crore) and Disinvestment of PSUs (Rs 9,945 crore).
Foreign institutional investors (FIIs) persistently sold India equities during the week and were net sellers in all four sessions since 22nd October 2018. FIIs have net sold Indian equities worth INR 4394.51 crore since 22nd October 2018. Domestic institutional investors have net bought Indian equities worth INR 2632.73 crore, in the same time period.
Disclaimers: The material contained herein has been obtained from publicly available information, internally developed data and other sources believed to be reliable, but BNP Paribas Asset Management India Private Limited (BNPPAMIPL) makes no representation that it is accurate or complete. BNPPAMIPL has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as 'will', 'would', etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BNPPAMIPL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. The words like believe/belief are independent perception of the Fund Manager and do not construe as opinion or advise. This information is not intended to be an offer to sell or a solicitation for the purchase or sale of any financial product or instrument. The information should not be construed as an investment advice and investors are requested to consult their investment advisor and arrive at an informed investment decision before making any investments. The Trustee, Asset Management Company, Mutual Fund, their directors, officers or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.