Nifty managed to hold on with minor losses

It was a day when the INR cracked sharply and the Nifty managed to hold on with minor losses of 13 basis points at 11,676. The tentativeness in the stock markets continued on Thursday even as the INR continued its correction. The correction could have been steeper had it not been for support from Sun Pharma and Tata Steel. The A/D ratio was evenly distributed.  But rupee is still a worry. Indian rupee weakened by 21 basis points to close at Rs.70.74/$. The aggressive dollar demand from banks and importers continued unabated and the heavy FII selling of Rs.1400 crore added to INR selling.

The big story of the first quarter was the growth in the Non-banking financial sector. NBFCs and Micro Finance Institutions posted 50% growth in Q1. Finally, growth appeared to have returned to MFIs and NBFCs after the twin attacks of demonetization and farm loan waivers. The gross loan portfolio of NBFCs and MFIs showed a sharp growth in Q1 compared to the corresponding period last year. Both the segments have not only benefited from inactive PSU banks but also via lower NPAs. These companies have made the best of the gap left by the PSU banks in credit delivery.

The latest gas price revision is likely to be sharply on the higher side. Natural Gas prices are expected to be hiked by 14% shortly. Gas prices are subject to a half-yearly resetting as per the formula accepted by the government in 2014. The proposed hike in natural gas price from October is likely to translate into higher CNG prices as well as escalation in cost of electricity and urea production. India imports 50% of gas needs and one of the big challenges is that domestic gas is far cheaper. The need of the hour is investments in expanding gas capacity supported by a friendly gas policy.

Frenetic growth in auto sales is likely to hit a speed breaker in the month of August. Autos are sales expected to slow in August when the numbers are announced on 31st of August. The auto slowdown could happen due to the impact of Kerala floods and a delayed festival season. In fact, passenger car sales are likely to remain flat even as the base effect that we saw in the last few months may also start diminishing. There have also been aggressive price hikes in August on the back of higher input costs and that is also likely to put some pressure on auto demand and off take in August.

Corporate governance issues are back at ICICI Bank, albeit from a different route. ICICI Bank has backed the appointment of Chanda Kochhar to the board of ICICI Securities, India’s largest retail broker by a mile. The bank emphatically voted in favour of Chanda Kochhar’s appointment to the board of group company, ICICI Securities. She is currently on leave as the allegations of conflict of interest against her are being investigated by Justice Srikrishna. Proxy firms like In Govern have expressed dissatisfaction at this decision as they see it as Chanda Kochhar entering the ICICI Bank through the back door. It may be recollected that the Chanda was asked to go on long leave after conflict of interest allegations surfaced against her for giving loans to a group that had business links with her spouse.

As the world fights for alpha and passive funds are aggressively cutting their costs, Sweden may have just launched the world’s cheapest investment fund. This has been confirmed by Morningstar which is the largest firm dedicated to mutual funds research in the world. One of the key criteria for selecting an investment fund is the costs involved. In India, the average total expense ratio (TER) on equity funds in India range from 2.3% to 2.5%. Avanza Bank of Sweden has launched a fund with a management fee of just 0.05% and a total annual cost of just 0.10%. That is likely to be hugely value accretive.

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