Nifty bounced on Thursday and Friday after 6 days

On the positive side, the Nifty bounced on Thursday and Friday after 6 days of correction. The Nifty still closed the week below the 11,600 mark. The Nifty has been facing resistance on the back of a weakening rupee versus the dollar as well as tightening bond yields on rate hike expectations. Rupee closed at 71.739/$ and 10 year bond yields closed marginally higher at 8.03%. The rupee has shown consistent weakness since it breached the 69/$ mark. However, RBI support was visible in the form of dollar selling around the 72 mark. The bond yields are hinting at a likely rate hike.

The pressure on the consumer stocks has started to tell on the individual stocks. Hindustan Unilever takes the biggest market cap hit during the week. Hindustan Unilever alone lost nearly Rs.29,500 crore in market value during the last week as there were genuine concerns over steep valuation of consumer stocks. Among the other big losers, SBI lost nearly Rs.15,000 crore in market cap while Maruti lost over Rs.11,000 crore during the week. Stocks like HUVR have already rallied over 60% since the beginning of the year and some amount of valuation froth had started getting built into these stocks.

Iran oil exports fell by 28% in August on sanction concerns. Most nations across the Europe and Asia have cancelled fresh oil orders to abide with the US sanctions time line of November to stop buying oil from Iran. At 2 million barrels per day, Iran’s exports have fallen to the lowest level since March 2016. This is likely to put pressure on prices. In fact, IOCL is one of the major buyers of crude from Iran and they are on the lookout for alternative supply. In the meanwhile, oil prices are likely to be under pressure due to the Iran supply cut and that could take crude past the $80/bbl mark.

The retail banking shift appears to be catching on Yes Bank too. In fact, Yes Bank aims to grow its retail portfolio by 75% to Rs.56,000 crore in next 2 years. Yes Bank had started off as a corporate lender but in the last few years the retail book has been a lot more profitable and low risk for most of the private banks. Yes Bank has also made a big foray into financial services and mutual funds to complement its big retail push in banking. Yes Bank will be looking to derive the maximum synergy by combining all the retail facing business to facilitate cross selling and more revenue per customer.

Amitabh Chaudhry is to take over as the next CEO of Axis Bank effective from January 01st 2019. The RBI has approved the appointment of Amitabh Chaudhry, former CEO of HDFC Life, as the next CEO of Axis Bank. This shift will happen once Shikha Sharma demits office on December 31st this year. Incidentally, Amitabh becomes the second insurance head to be selected for the top job at Axis Bank after Shikha Sharma moved there from ICICI Pru life in 2009. The challenges for Amitabh are likely to be immense. The bank had forayed aggressively into infrastructure financing in the last decade since Shikha took over and in the process the NPAs have gone up sharply. The gross NPAs of Axis Bank are already close to the 7% mark and we could see more pressure if the power sector NPAs start manifesting.

NMDC has sought exploration license for tungsten mining in Australia. NMDC has actually been asked by the government to expand its tungsten mining capacity to keep pace with the rising demands of the defence and aerospace sector. Tungsten has strategic importance since it is widely used by the Indian defence and military establishments. With India likely to spend on defence and aerospace in a big way, the need for tungsten is likely to increase rapidly. This move is expected to be value accretive for NMDC. Of course, this may not be a very large part of the overall revenues and profits of NMDC.

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