Global markets fell sharply on Wednesday on the back of a bond selloff, especially in government bonds. The US benchmark bond yields crossed the 4.8% mark, touching a 16-year high. These levels were last seen in 2007. The spike in bond yields has been driven by expectations of rates staying higher for a longer period of time. In its last meeting, the Fed underlined that it would hold rates above 5%, even up to the end of 2024. There are also apprehensions building up that high rates could impair GDP growth.
Oil prices fell sharply after OPEC left its targets unchanged. Oil was down between 4% and 5% in the Brent market as well as the WTI market. The concerns over slowing growth are back, and that has led to a fall in oil prices. Brent fell to as low as $86/bbl after touching $94/bbl just less than 10 days ago. The current oil supply curbs by Saudi Arabia and Russia stand at 1.3 million barrels per day (bpd), and that will remain the same. Another factor that has been weakening oil prices of late is the spike in the dollar index (DXY).
The much-awaited Indo-UK trade agreement is likely to be signed by the end of this month, and UK PM Rishi Sunak is likely to be in India for the same. Officials have confirmed that most outstanding issues have already been resolved between the two countries. It will begin with a bilateral investment agreement and then evolve into a bilateral trade agreement in phases. The UK has been seeking greater access to the Indian services market, while India wants the UK market to liberalize its visa regime for Indians.
Oil marketing companies (OMCs) are likely to see marketing losses in the second half of FY24 on the back of rising crude prices. In the last 2 months, crude prices spiked from $71/bbl to $94/bbl, a spike of over 35% in a short span of time. Crude prices have moderated from the recent peaks, but the market for oil continues to be undersupplied, and the daily shortfall of 2 million barrels continues. Most refineries are already facing under-recoveries to the tune of $5/bbl. Goldman Sachs estimated crude to cross $100/bbl.
According to a report by Global Data, Indian start-ups have seen a 71.5% fall in VC funding year over year. This refers to the first eight months of the calendar 2023. During this period, a total of 734 VC funding deals were announced worth $4.9 billion. This is sharply lower than the $17.1 billion of funding raised in the first 8 months of 2022. Even the volumes last year stood at 1,266 deals, so it is a fall in volumes and value. Apart from the macroeconomic challenges and geopolitics, VCs are also sitting on funds raised due to valuation caution.
Foreign investors remain skeptical about the medium-term prospects of HDFC Bank post-merger. Most foreign brokers have expressed the opinion that the merger pain with HDFC Ltd. will last for a fairly long time. Currently, FPIs own 59% of HDFC Bank, so there is still room to increase the stake by 20%. MSCI is yet to increase the weight of HDFC Bank in the index, but FTSE has already put out an increase in weight for HDFC Bank in three tranches. The combined entity has a lower book value than the pre-merger HDFC Bank.
According to a report by JM Financial, Jio and Airtel will invest Rs75,000 crore on enhancing the networks in the current fiscal year. While Jio will invest Rs 42,000 crore, Airtel is likely to invest Rs 33,000 crore. But the pace of capex for the telecom companies is likely to slow down after the launch of 5G networks. While Jio has announced a pan-India rollout by December 2023, Airtel will complete the rollout by March 2024. In the last few months, Jio and Airtel have been adding subscribers aggressively at the expense of Vodafone Idea.
The problems for Akasa continue as the pilot exodus has forced the company to stop flights on 8 routes and stop service on 10 other routes. Interestingly, the company is likely to take delivery of more aircraft from Boeing in the current fiscal year. Its flights per week have been reduced from 945 to 754, and that is surely putting pressure on the CASK-RASK spread for Akasa. Between July and September, nearly 43 pilots left Akasa Airlines to join rival airlines without meeting the notice commitments. The legal process is currently ongoing. Uncover the causes of the recent surge in US benchmark bond rates and its influence on the stock advisory market, while obtaining top tips for navigating this volatile terrain.