Monthly Update – June 2020 – Street-fluence

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World Update:

  • China enforces New Security laws in Hong Kong and in turn, many countries that gave favorable policies to HK have since suspended them. The trade tensions between the U.S. and China worsen.
  • Riots in the U.S. got very violent in the first half of this month.
  • Trump Administration announced that it is considering $1 trillion in infrastructure spending.
  • DXY crashed the 99 levels on the 1st of June and has since remained below 97.5.
  • Oil went back above $ 40.

U.S. Economic Update:-

  • The unemployment number for May was expected to come at 19.6% the worst since The Great Depression. The number came to be 13.3% which positively surprised the market.
  • Non-farm payroll rose by 4.8 million in June and the unemployment rate declined to 11.1%.
  • In June, notable job gains occurred in retail trade, education, health and other services, and manufacturing.
  • In May, U.S. retail sales grew by 17.7% M.o.M which is a huge recovery from a 14.7% fall in April and was much better than the expected forecast of 8% growth. Y.o.Y the retail sales figure fell by 6%.
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Fed Activity in June:

  • FOMC kept rates as unchanged and said the same levels will be kept until 2022. The current stimulus will be kept until unemployment numbers reach pre-COVID levels.
  • Fed Reserve will now buy individual corporate bonds under the Secondary Market Corporate Credit facility. The program so far has only been purchasing ETFs.

India’s Economic Activity:

  • Q4 FY2019 GDP came 3.1% growth y-o-y v/s expectation of 2%.
Image
GDP Numbers for India
  • May PMI came at 30.5 v/s expectation of 37. Nifty quoting then was 9836.
    June PMI came at 47.2 v/s expectation of 39. Nifty quoting at 10359.
PMI data
  • Current Account Deficit for Q1 2020 came at a surplus of $600 million v/s -$2.6 Billion in Q4 2019.
  • On 1st of July Rupee broke from 75.5 levels to currently quoting at 74.84.

Indian Banking Sector:-

  • Bank Loan growth was at 6.2% y-o-y in June.
  • HDFC Bank Advances grew 21% YoY, CASA ratio at 40% in June 2020 v/s 42.2% in March 2020, and 39.7& in June 2019.
    Customer Loan disbursement is back to pre-COVID levels of Rs. 1000 cr per month.
  • RBI has opened a discussion paper which is on whether to cap tenure for a promoter who is also a CEO to 10 years, and non-promoter CEO to 15 years.
  • The bank interest waiver case- The Supreme Court has asked the government as well as RBI to consider providing relief on interest accrual during the moratorium period.
    Deepak Parekh’s comments on this in his letter to shareholders include,” By asking the RBI to consider interest relief, the court is veering towards stepping into the regulatory arena and should avoid doing so.”
    The next hearing is scheduled on 1st week of August.
  • RBI may consider a one-time restructuring scheme to cover all stressed loans.
  • RBI operationalizes Rs. 30,000 Cr scheme for NBFC’s and HFC’s. The proceeds from this are supposed to be utilized for extinguishing existing liabilities.
Also Read on FinMedium:  Welspun India Ltd- Analysis​​

Commodities:-

  • Chinese Iron Ore prices spiked to $103 after Brazil’s court shut down a mine in Vale. The mine was responsible to produce 10% of Vale’s output. This was on account on a few miners being tested positive for the virus. The decision has since been reversed and the mine has now resumed operation. Prices are now below $100.
  • NMDC in that time did not hike its prices due to weak domestic demand, despite soaring global prices.
Month Price change Sale
APRIL -100 -49%
MAY -400 -23%
JUNE FLAT -7%
JULY  200-240 (all y-o-y)
Current price 2450/tn 
Iron ore price trend for NMDC
  • SAIL reported the highest ever monthly steel sales for this year.
TOTAL SALES 12.7 LK tonnes 18% y-o-y
EXPORT 3.4 LK tonnes  highest ever
SAIL monthly numbers
  • Jindal Steel reported highest ever monthly number for:
STEEL PRODUCTION
MONTHLY 6.26 LK tonnes
QUARTERLY 16.7 LK tonnes
EXPORT (QTR) 9 LK tonnes
CONSOLIDATES STEEL SALE 7% Up Q-o-Q
Jindal Steel monthly update
  • Metal price change since 22nd June 2020:
Metal(LME prices) Jun-22 Jul-03 % change
Copper 5849 6017 2.9%
Aluminium 1592 1614 1.4%
Zinc 2082 2026 -2.7%
Metal prices

Anti-Dumping Duty Activity in June:-

  • On 24th June ADD was imposed on flat-rolled product of Steel, plated or coated with an alloy of Aluminium and Zinc, exported from China, Vietnam, and Korea. Duty at $173.1/MT for 5 years.
  • India initiates an ADD probe against Aluminium foil imports on 23rd June from China, Indonesia, Malaysia, and Thailand.
  • India may also impose ADD on certain Steel products from the EU, Japan, U.S., and Korea for 5 years, news on 19th June.
  • India has restricted import on certain types of tyres. Import policy of new pneumatic tyre is amended to ‘restricted’ from ‘free’ category on 15th June.

Other noteworthy developments:-

  • Auto: For May, only HeroMoto and M&M Tractor were able to beat the sales estimate. Hero’s management commentary was very bullish post-May numbers. In June, all auto companies met their sales expectations which Hero and M&M outperforming expectation for a second month.
  • India announced a Scheme to boost electronic production domestically. The scheme encourages local manufacturing by providing more incentives to domestic manufacturers.
  • Petrol and Diesel’s price hike started from the 7th of June till the 26th of June. The total price increase in Petrol was 9.12/l and 11.01/l for Diesel.
  • Telecom AGR case:
    – Telecom dues against PSU’s were withdrawn.
    – The question that ultimately concerns the court is whether or not the installments from telecoms can be securitized.
    – DOT is in favor to securitise the 1st installment.
    – The next hearing is scheduled for the 3rd weekend of July.
  • Reliance has raised Rs. 19704 in June by selling 4.03% of Jio Platforms.
    CCI approved FB’s acquisition in Jio on 25th June.
  • India-China tensions began to rise since 16th June, when there was a clash between Indian and Chinese troops in Ladakh at the LAC. The situation remains unresolved.
  • HDFCLIFE will now replace Vedanta in Nifty50 from July 31st. This is on account of the Voluntary delisting of Vedanta.
  • SEBI issues orders against Divi’s Labs CFO and relatives for insider trading case of 2017.
  • Ministry of Defence cleared Rs. 38900 cr worth of proposals. From this around Rs 31300 cr is from Indian Industry.
  • A few negative developments in Pharma:
    1. A new case was registered in the U.S. against Glenmark for anti-trust practice for its dermatology segment. Glenmark got charged as guilty for the accusation on July 1st.
    2. Chinese API prices have gone up by 15-20% in the last 3 months. Most of the end formulations have drug price capping by DGCA in India, which can lead to margin problems.
    3. Core base business for the Pharma industry declined by 15% in May. 12% by volume decline and 3% by price erosion.
  • Mutual funds net invested nearly 39500 crores in the Indian Stock market in the first half of 2020, which is more than 4 times the amount infused in the same period last year. This was on the account of volatility and correction providing a good investment opportunity for investors.
  • In the month of June, FII’s invested Rs 5492 cr. This is the 2nd straight month of FII buying in 2020 and in total.

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Akshada Deo
Akshada posts the daily market updates in a summarized format. Stock Market, Literature, Music, and Design are her passions.
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