In this briefing:
- India Monthly Report Feb’19 – Mar’19
- FLASH: UK Retail High as BoBs Ignore Brexit Lows
- UK Inflation: Devilish Detail Extending Trends
- Global Credit Cycle: Full-Blown Repeat of 2008 Crisis Unlikely…Contrary to Doomsayers
- RBI Credibility at Stake
1. India Monthly Report Feb’19 – Mar’19
Indian indices were the least performing among the select global indices with S&P BSE Sensex and Nifty 50 generating returns of negative 1.65% and negative 0.81% in domestic terms respectively. In Dollar terms, they fell by 0.81% and 0.09% respectively. Indian Rupee witnessed an appreciation of 0.85% during the period and has risen from 71.44 USD/ INR to 70.84 USD/ INR. Among the select indices, Dow Jones was the best performer with dollar returns of 3.4%.
| Performance of Select Indices during Feb’19 | ||
| Index | Returns in Domestic Currency | Returns in USD |
| S&P BSE SENSEX | -1.65% | -0.81% |
| NIFTY 50 | -0.93% | -0.09% |
| Nikkei 225 | 2.87% | 1.17% |
| Dow Jones Industrial Average | 3.40% | 3.40% |
| HANG SENG | 2.51% | 2.49% |
| FTSE 100 | 0.78% | 2.22% |
Among the sectoral indices, Nifty Media was the highest gainer with a 17.56% return in domestic terms and 18.56% in USD terms. The worst performer has been Nifty PSU Banks with a decrease of 5.82% in domestic terms and 5.02% in USD terms.
Performance of Indian Sectoral Indices in USD | INR Returns | USD Returns |
NIFTY MEDIA | 17.56% | 18.56% |
NIFTY METAL | 1.99% | 2.85% |
NIFTY IT | 0.05% | 0.90% |
NIFTY REALTY | -0.50% | 0.35% |
NIFTY PVT BANK | -0.59% | 0.26% |
NIFTY PHARMA | -0.94% | -0.10% |
NIFTY AUTO | -1.02% | -0.18% |
NIFTY BANK | -1.09% | -0.25% |
NIFTY FIN SERVICE | -2.04% | -1.20% |
NIFTY FMCG | -3.10% | -2.28% |
NIFTY PSU BANK | -5.82% | -5.02% |
2. FLASH: UK Retail High as BoBs Ignore Brexit Lows
- UK retail sales rose again in Feb-19, contrary to Consensus expectations. Sales remain above their brisk trend and are supporting stronger GDP growth in 1Q19.
- Parliament continues to indulge in its political pantomime, but British consumers are Bored of Brexit (BoB) and more interested in spending their increasing real wage. Surveys remain bias to exaggerate the effect of uncertainty.
3. UK Inflation: Devilish Detail Extending Trends
- UK inflation was marginally stronger on the CPI and weaker on the PPI in Feb-19. Partially offsetting surprises lift my March forecast lightly before lowering it.
- Airfares and household energy prices are still set to significantly raise inflation to April before the latter unwinds enough in October to fall below target again.
- Annual updates to weightings extend trend changes in average rates and seasonality. The latter is likely to remain a source of surprise, while some market benchmarks might move almost 20bp further as they keep converging to reality.
4. Global Credit Cycle: Full-Blown Repeat of 2008 Crisis Unlikely…Contrary to Doomsayers
The slowing world economy has raised concerns in some quarters about an inflexion point in the global credit cycle that could provoke a repeat of the 2008 crisis due to higher levels of debt.
Governments have mainly contributed to the rise in global debt since 2008, particularly in advanced economies, while China has presided over debt expansion across all non-financial sectors of its economy.
Concerns about the US corporate bond market have centred around the significant growth of the BBB-rated segment since 2008, along with its ability to sustain liquidity given the looming satiation of investor mandates.
China’s corporate debt has risen aggressively and become increasingly risky since 2008, but a sovereign backstop and predominantly domestic funding sources limit any prospective cross-border fallout.
A full-blown repetition of the 2008 debt crisis is unlikely due to: 1) lower cross-border banking linkages, 2) a smaller role for banks in overall credit intermediation, and 3) far lower leverage in the US financial system.
5. RBI Credibility at Stake
By Shumita Deveshwar, Director, India research
The Reserve Bank of India’s approval of an interim dividend to the government from its surplus reserves is yet another example of the central bank conforming to the government’s wishes under the leadership of Governor Shaktikanta Das. While investors cheered the RBI’s softer monetary policy stance earlier this month, former RBI heads continue to warn against the government’s short-term bias and emphasize the need for RBI independence.
- Most policies that led to the spat between the RBI and the government spat have now been reversed
- The growth focus has translated into easier banking and regulatory norms
- A softer monetary policy puts the RBI’s hard-fought credibility at stake
- Outflows due to political uncertainty and global headwinds will prove tough for a less credible RBI to counter
- Loose fiscal and monetary policies put long-term macroeconomic stability at risk
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
