Midnight News Update – Sep 04th 2017
The Infosys Board has sought shareholder approval to appoint Praveen Rao as its Managing Director. Rao, who was the COO of Infosys, was appointed as the interim CEO of Infosys after the resignation of Vishal Sikka. The appointment of Praveen Rao for a period of 5 years appears to be a hint that Praveen Rao may eventually confirmed as the full-time MD & CEO of the company. After the fallout with the previous board, the founding promoters will be looking for a less high-profile CEO. Praveen Rao will fit the bill and that also permits Nandan Nilekani to literally call the shots at Infosys.
The geopolitical tensions following North Korea’s nuclear tests continue to simmer. After launching two ICBMs over Japanese airspace, North Korea had gone ahead and conducted another nuclear test, which resulted in a 5.2 impact on the Richter scale. In fact, North Korea now claims to have perfected its Hydrogen Bomb technology that can be devastating when combined with the ICBMs. Large parts of the US will not come under the range of the ICBM. Japan, South Korea and the US are already in talks to defuse the crisis at the earliest. The situation could impact global markets negatively on Monday.
The cabinet reshuffle was largely along expected lines. Four ministers, viz. Dharmendra Pradhan, Mukhtar Abbas Naqvi, Nirmala Sitharaman and Piyush Goyal were elevated to cabinet rank. In addition, another 9 new ministers were inducted into the ministry with a good dash of eminent bureaucrats. As expected, Suresh Prabhu had to give up the railway ministry after the spate of accidents in the last few weeks and the grave concerns over rail safety. This is likely to be the last major cabinet reshuffle by the Modi government before the central elections coming up in mid-2019.
The US jobs report on Friday came in weaker than expected with just about 156,000 jobs being created in August as against the consensus expectation of 180,000. The unemployment which had gotten closer to 4% has now inched back to 4.4%. This data is extremely significant in the light of the upcoming Fed meet where there was almost a consensus on the need to raise rates. It needs to be remembered that the US economy has faltered on its GDP growth and inflation targets. Only the labour data was conducive for a Fed rate hike. This could probably force the Fed to back-end further rate hikes.
The Purchase Manager Index (PMI) bounced back sharply in the month of August to 51.2 from a low of 47.9 in the previous month. The month of July saw a sudden tepidness in output after the launch of GST forced companies to focus more on de-stocking of inventories rather than on fresh production. This actually came as a whiff of fresh air after the GDP growth for the first quarter came in at just 5.7%. The PMI uses 50 as the cut-off. The PMI index of less than 50 indicates contraction while the PMI of above 50 indicates expansion in output. This could be the first indication of producers and suppliers getting more comfortable with the implementation of GST. If that is the case then it could mean a turnaround in the PMI, the IIP numbers as well as GDP numbers in the forthcoming quarters.
The Auto numbers for the month of August came in much better than anticipated despite worries over the disruption that could be caused by the GST implementation. The market leader, Maruti, saw a 23% growth in sales for the month of August with a surge in demand for its compact cars. Interestingly, even the commercial vehicles (CV) space has seen resurgence in growth. Most of the inventory prior to GST has been unwound and that is unlikely to be an overhang. Among the two wheelers, Eicher and TVS Motors continue to be the star performers followed by Hero Moto, with Bajaj disappointing.
