What a week of high-decibel exits! UK managed to exit the Euro twice within a span of a week. Both the remain and exit camp leaders in UK i.e. PM Cameron and Boris Johnson quit, Lionel Messi quit international football, defending champion Spain were eliminated from the Euro 2016 and Nikesh Arora opted out of Softbank following on the heels of Dr Rajan’s exit from RBI.
On a serious note, had someone said a fortnight back that DrRajan would make an exit, UK will vote for Brexit, and that UK will be downgraded by S&P, most would have feared doomsday for the markets. However, the USD/ INR did not go through the roof, nor did the much feared Risk-off trade materialize. In fact, UK market has been the best performing market, being up 6% till Thursday despite huge political chaos in UK. Also, contrary to expectations, most other markets, including India, have done quite well since. In retrospect, this seems to be a combination of receding probability of a Fed rate hike, buybacks by US financials, expectations of further global easing of monetary policies; and in India, finally a start to the monsoons
In India, the government took the lead by hitting the right notes.
It cleared the much anticipated award of Seventh Pay Commission which will act as a consumer stimulus and spur growth.
In a progressive move which would boost jobs growth, it also cleared the Model Shops and Establishment Bill, 2016, which will allow shops, malls and cinema halls, among other establishments, to run 24×7 throughout the year.
Importantly, the rain gods smiled on India when it mattered the most, it seems. The monsoon after a delayed start has progressed rapidly in the last fortnight covering parts of Maharashtra, Madhya Pradesh and Uttar Pradesh (~80% of India has been covered YTD). Overall rainfall deficit has more than halved to 11% currently vs. 25% in the previous fortnight. With the IMD and the Skymet forecasting better rains in July, the rainfall deficiency is likely to move into single digit as we enter into July and if the forecasts are right indeed, the deficit should get wiped out by the end of July which is an important month from the point of view of sowing.