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Week Mar 09 - Mar 13, 2020

 
Market Pulse
Markets - Last Week

Indian as well as global equity markets witnessed a sharp sell-off as investors fretted over the Coronavirus spreading globally as well as in India.  

 

On the domestic front, CPI Inflation came down in February 2020 to 6.6% from 7.6% in January 2020, aided by a moderation in food inflation while core inflation also showed a declining trend.  

 

Globally, US as well as European markets closed lower amid dampening of investor confidence due to the negative impact of coronavirus on global economic growth.  

 

The Nifty ended the week down 9.4% WoW, at 9955.  

 

Brent crude was down 22.5% WoW at US$35.1/barrel, after Saudi Arabia shocked the market by launching a price war against onetime ally Russia.

 
Week ahead

Going ahead, government measures to revive growth and updates on Coronavirus are expected to weigh on market sentiments .    

Markets - Last Week

US data: The number of US citizens filing new claims for unemployment benefits showed a decline, pointing towards a strengthening of the labour market. Initial claims for state unemployment benefits decreased 4,000 to a seasonally adjusted 211,000 for the week ended March 7, 2020.

IIP: IIP grew 2.0% YoY for January 2020, the fastest growth in six months. Manufacturing sector (~78% of index) recorded growth in output by 1.5% YoY. Further, mining sector grew 4.4% YoY while electricity production grew 3.1% YoY. Under use-based segments primary goods grew 1.8% YoY, capital goods fell 4.3% YoY, infra/construction goods declined 2.2% YoY while intermediate goods grew 15.8 YoY%. Consumer durables fell 4.0% YoY while consumer non-durables de-grew 0.3% YoY.

CPI: CPI inflation came down in February 2020 to 6.6% from 7.6% in January 2020 aided by a moderation in food inflation while core inflation also showed a declining trend. Going ahead, we expect the inflation trajectory to trend lower on the back of a sharp fall in oil prices along with a fall in other global commodity and food prices. Inflation in the current environment is not a major concern despite being above RBI's 4.0% threshold. RBI is expected to cut rates on or before its policy meeting in April.

Liquor industry: As per media sources, the Andhra Pradesh Government has launched 'Operation Sura' to curb illegal brewing and supply of country-made liquor in the state ahead of local body polls. In surprise raids carried out across the state, officials arrested as many as 702 persons and filed 683 cases. The officials also seized one lakh litre of fermented jaggery, 2115 litre of countrymade liquor, 666 kg of jaggery, 252 litres of cheap liquor and 27 litres of beer stocks. Liquor shops across the state will be shut down during March 12-29 and no liquor will be available during the election period, especially in villages.

Media & telecom sector: Due to the Coronavirus outbreak, all theatres in New Delhi and Kerala will be closed till March 31. On fear of the Coronavirus, there could be further risks of screen closures in the interim period in other places such as Pune, which could be negative. However, postponement of release (like Sooryavanshi and possibly other big movies) is likely to only result in a deferral of revenues, which later could be recouped. 

Logistics sector: As per media sources, the GST e-way bill may soon be integrated with NHAI's FASTag to check GST evasion from April 2020. One of the major reasons behind the step is to restrict transporters from using a single e-way bill for multiple trips. The integrated GST e-way bill will help in tracking the movement of goods and check evasion. The revenue department had also set up officers' committee to integrate the e-way bill, FASTag and DMIC's Logistics Data Bank (LDB) services. It would give infinite data to the authorities, which once fed into an autobot would help track tax evaders in real time.

Auto sector: The insurance regulator IRDAI has proposed ~Rs 100-200 (~5%) increase in third party motor insurance premium for automobiles sold domestically. The increase is miniscule and will not have a meaningful impact on the cost of ownership for domestic automobiles.

Ports industry: As per media sources, the Government of India has introduced a bill seeking to provide autonomy to India's major ports to improve efficiency and competitiveness was introduced in the Lok Sabha amid objections by the Opposition parties who wanted the government to redraft the legislation to remove ambiguity .