Signs of net FPI inflows into Indian equities on select days this past week created hopes of their return, but it turns out those numbers had more to do with a few OFS and QIP deals. While surprise tax tweaks in the Budget might have been the immediate trigger for their selloff, FPI watchers say their exit had more to do with signs of weakness in India's macros. They may now want to see solid signs of revival in the economy and corporate earnings before confidence returns. Meanwhile, mutual funds will have to do the heavy lifting!
STREET PULSE: Where we stand Shares in Asia started mixed while US equity futures declined this morning as oil prices surged after a strike on the heart of Saudi Arabia's oil production increased geopolitical risk concerns.
 | SGX Nifty traded nearly 100 points lower at 7 am (IST), signalling a major selloff ahead on Dalal Street. MSCI index for Asia-Pacific shares outside Japan traded a tick lower at 515.4. Shares in Hong Kong and Australia slipped, while those in South Korea and Shanghai rose. READ MORE |
| In US markets, E-Minis for the S&P500 were off 0.4% while those for the Dow eased 0.3%. READ MORE |
The crude oil market is on fire after drone attacks on Saudi refineries over the weekend. Oil prices retreated on Monday after hitting their highest since May at the open, on fears over supply disruptions following an attack on Saudi Arabia's oil facilities on Saturday that cut more than 5% of global oil supply. Brent futures rose $7.06 a barrel, or 11.7%, to $67.28 a barrel after soaring more than 19% to a session high of $71.95 at opening trade. WTI futures climbed $5.76 a barrel, or 10.5%, to $60.60, after jumping more than 15% to a session high of $63.34 a barrel.
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NRIs as FPIs... The government plans to appoint a high-level committee to look into merging NRI and foreign portfolio investor routes. Finance minister Nirmala Sitharaman had announced in July Budget that the investment avenues would be merged to give NRIs seamless access to Indian equities. RBI had expressed concerns over such a merger owing to uncertainty over what would happen to deposits held by NRIs through NRE accounts, which hold deposits of about $93 billion or Rs 7 lakh crore. A Sebi panel had recommended such a merger in September 2018.
READ MORE Prized Pie… Leading builders Piramal Realty and Poddar Housing are keen to become master developers in Mumbai's slum rehabilitation projects that DHFL has funded, ensuring future cash flows to the home financier and giving comfort to lenders crafting a resolution package for its outstanding debt. The builders have signed non-binding term sheets to bid for the projects.
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Equity Shocker… A substantial cut in Saudi Arabia's oil output due to the drone attacks on its refineries could potentially hurt emerging market stocks and weigh on Indian equities in the near term. Historically, crude oil prices have been negatively correlated with Indian equities. Many foreign portfolio investors may, therefore, raise their exposure to commodity producers instead of consumers, likely affecting FPI flows into Indian equities. Saudi Arabia's oil production has halved overnight after drone strikes on the Abqaiq processing facility and Khurais oil field.
READ MORE Altico Hit... Altico Capital's bond investors, including Flipkart cofounder Sachin Bansal and Reliance MF, face immediate defaults by the NBFC on two series of outstanding debt worth about Rs 95 crore, which is coming up for repayment in two weeks on September 26 and 29. The NBFC has bonds worth Rs 1,808 crore maturing between now and May 2022, India Ratings data showed. Most of them are due to mature in 2020 and 2021.
READ MORE Meanwhile...Net asset values of some debt funds of PGIM India Mutual Fund fell by as much as 30 per cent a day after CARE downgraded the ratings on the non-convertible debentures of Anil Ambani's Reliance Business Broadcast News Holdings to "D". Besides PGIM, schemes of UTI Mutual Fund and L&T Mutual Fund hold securities worth Rs 654.5 crore. PGIM, formerly DHFL Pramerica, said the NCDs are backed by pledged shares of Reliance Nippon Asset Management.?
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