Page 42 - The Indian EYE 092421

Business EYE SEPTEMBER 17, 2021 | The Indian Eye 42

mnCs shutting shops, loss of jobs and bank

credit crisis but stocks are still rising

The bull market continues to baffle experts as bull market has been an

almost one-way street for almost 18 months now

Our Bureau ing away, Guhathakurta said.
“We have lost a complete chunk
New Delhi of this appetite because of the

ndian economy is giving credit crisis of 2018-19,” accord-
mixed signals: it seems to ing to a Bloomberg report.
Ibe going up and down at the Sales of rupee bonds rated
same time. below AA have dropped 20%
The closure of five glob- so far this year to 355.4 billion
al auto companies in the last rupees ($4.8 billion), the low-
four years -- Ford India, Gen- est since 2013, according to
eral Motors, Harley Davidson, Bloomberg-compiled data. Is-
MAN Trucks and UM Lohia suance of notes rated AA and
-- has caused a loss of 64,000 above, meanwhile, remains at
jobs in the auto industry and a high level historically in 2021,
bled automotive dealers to the making up about 74% of total
tune of Rs 2,485 crore, the Fed- sales.
eration of Automotive Dealers But, Indian stock market
Associations (FADA) has said. Indian stock market benchmark Sensex on Thursday zoomed 950 points to benchmark Sensex on Thurs-
In a letter to the Union heavy end near the historic level of 60,000 day zoomed 950 points to end
industries minister Mahendra near the historic level of 60,000.
Nath Pandey, FADA calculated on a day-to-day basis. I have ever seen,” said Guha- However, the massive rally in
the loss due to closed factories, Ford announced its decision thakurta, 52, in an interview to Sensex from March lows of last
workshops and dealerships and to stop production in India last Bloomberg. “Our market has year - without any significant
added that with the production week and will cost the dealer taken quite a few steps back- correction in between - has
stoppage at Ford India, a total community a total investment ward.” made some analysts cautious.
170 dealerships will be affected of Rs 2,000 crore. Guhathakurta blames the “All previous bull markets
taking the total 5-brand tally to Meanwhile, in an indica- nation’s lingering credit tur- in India - 1992-92, 1994, 1998-
464 dealerships in all. tion of crisis in the banking sec- moil, triggered by the collapse 2000, 2003-07 - had big correc-
Of the 64,000 job losses, tor, a veteran banker at Kotak in 2018 of infrastructure fi- tions of 5%, 10%, even 20%.
the highest numbers are due to Mahindra Bank Ltd has said nancier IL&FS Group, for the But not now so far. But this will
Ford and GM which accounted that strains in India’s bond plunge in activity caused by change and the market will cor-
for 40,000 and 15,000 job losses market are at the highest she’s investors’ aversion to all but rect, perhaps soon, since valu-
respectively, said FADA. MAN seen in her two-decade career. the best-rated short debt. She ations are hard to justify,” said
Trucks accounted for 4,500 jobs, The flood of cash that the Re- doesn’t expect demand to re- V K Vijayakumar, Chief Invest-
UM 2500 and Harley Davidson serve Bank of India (RBI) has vive soon, with long-term bond ment Strategist at Geojit Finan-
2000 jobs, said the letter. pumped into the market amid buyers such as pension funds cial Services.
Ford India, for instance, is the pandemic has headed into and insurers opting for liquid “This ferocious bull market
“forcing its dealers to first sign shorter notes with top ratings, notes from states rather than continues to baffle both bears
non-disclosure agreement be- while there’s little demand for corporate securities. and bulls. Stock markets are all
fore any compensation pack- weaker credit due in more than The retreat in demand about ups and downs. But this
age is worked out. “Many Ford three years, according to Sujata could block progress in making bull market has been an almost
dealers have directly or indi- Guhathakurta, the head of debt India’s $125 billion corporate one-way street for almost 18
rectly requested FADA to take capital markets at the Mum- bond market deeper and more months now. More important-
up the matter for amicable res- bai-based lender. liquid. That may delay raising ly, this is almost a global phe-
olution,” said the letter. FADA Companies are instead get- much-needed funds for long- nomenon with China, Hong
has already written to the Ford ting funds from banks, obstruct- term infrastructure from do- Kong and a few other coun-
management on this “coercive” ing India’s efforts to wean bor- mestic and foreign institutional tries being the exceptions. The
action and the letter request- rowers from loans by expanding investors. mother market US is leading
ed the ministry to set up a task the bond market. “We don’t have any market from the front, ignoring even
force to monitor the dealer and “This is the most challeng- for long-term infra bonds,” with tapering indications from the
dealer employee compensation ing times for the bond market insurers and pension funds stay- Fed,” he said.

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