Stocks are ignoring crude oil’s bear market
Correlation between daily swings in S&P 500 Index and crude oil has been roughly zero in past month, the lowest since January and far below the five-year highs reached in 2016
The bear market in crude oil in many ways resembles its more severe predecessors from 2014 and 2016: oil prices plummeting, non-US producers floundering to keep supply at bay and concerns swirling around the impact of energy companies on high-yield bonds.
There’s just one exception. This time, the stock market doesn’t seem to care.
The correlation between daily swings in the S&P 500 Index and crude has been roughly zero in the past month, the lowest since January and far below the five-year highs reached in 2016 as the oil prices bottomed near $26 before staging a rebound.Bloomberg
Forex reserves on way to becoming formidable
The Reserve Bank of India (RBI) has been reiterating its intention to build a formidable foreign exchange (forex) stockpile to safeguard the country during times of extreme exchange rate volatility.
The latest forex data from the central bank show that reserves continue to rise. Reserves rose by $799 million in the week ended 16 June which puts the accretion since the start of 2017 at $18.13 billion.
Dollar inflows through strong foreign direct investment as well as portfolio investment have aided the accretion.
Portfolio investment has surged recently, the flip side of which is a sharp rise in the rupee.
Indeed, RBI has soaked up some of the inflows (leading to reserve accretion), but the intervention is not intense.
Write-offs by banks rise sharply in Q4
A silver lining in the bad loan problem of banks that has been pointed out is the rise in recoveries and upgrades during the quarter ended March.
However, a disturbing trend to note is the sharp rise in write-offs by banks over the past two quarters.
If the trend continues, write-offs will soon exceed recoveries and upgrades.
A presentation on bank earnings by Icra Ltd shows that write-offs rose sharply in the third and fourth quarters of 2016-17.
Write-offs were equal to recoveries in the third quarter and marginally lower than recoveries and upgrades in the fourth quarter.