Weekly Capsule (Jul 10 – Jul 14) and Impact Analysis
| Major News Item | Impact Analysis |
| Ø TCS disappointed the street with 10% fall in net profits in Q1 | Ø While revenues were flat for TCS, Q1 profits were down by 10% on the back of margin pressures in global markets
Ø This is likely to further dampen the sentiments surrounding the tech stocks in the Indian markets
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| Ø The CPI inflation for the month came in sharply lower at 1.54% for June | Ø Lower CPI inflation was largely led by negative food inflation at (-2.12%) as pulses and vegetables stayed negative
Ø However, the RBI may not be inclined to cut rates despite lower inflation due to upside risks to inflation
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| Ø IIP for May came in lower at 1.7% led by manufacturing | Ø While manufacturing was flat and mining was negative, only electricity showed positive 8.5% growth in May
Ø Weak growth in IIP raises questions about the sustainability of GDP growth and the revival in capital spending in India
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| Ø IDFC and Shriram Capital announced a merger over the weekend | Ø While SCUF will merge into IDFC Bank, Shriram Transport will become a fully owned subsidiary of parent IDFC
Ø While Shriram gets access to a stronger balance sheet, IDFC gets direct access to a market size of 10 million customers
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| Ø Government likely to give out defence orders worth Rs.27,000 crore | Ø Big beneficiaries are likely to be companies like BEL, BHEL, Bharat Forge, Tata Power, L&T and RDEL
Ø The government has been making efforts towards greater self-sufficiency in defence manufacturing
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| Ø NSE witnessed one of the biggest downtimes on Monday | Ø The downtime was due to a software bug which resulted in price feeds not getting updated
Ø Despite 3 attempts to resume trading, actual trading could only commence on the NSE around 1 pm
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| Ø Rolta offers to swap its defaulted bonds with 5-year PIK bonds | Ø Payment in Kind (PIK) bonds will entail payment of interest via additional bonds and not in cash
Ø Rolta has total debt to the tune of $1 billion and has nearly $500 million of bonds maturing in next 2 years.
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| Ø India’s forex reserves saw a jump of $100 billion in last 4 years | Ø This rise in the forex reserves has been largely led by healthy FII/FDI inflows and tepid imports
Ø The forex reserves is currently enough to cover 10 months of imports, down from 13 months cover last year
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| Ø The UP government to make provision of Rs.36,000 crore for farm waivers | Ø This provision is good news for lending banks and the NBFCs who are last mile service providers in such cases
Ø UP is the first state to make a provision for this in its official budget and other states like Maharashtra may follow suit
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| Ø IndusInd Bank saws a marginal rise in Gross and Net NPAs | Ø IndusInd maintained its consistent 27% growth in profits for the first quarter of the fiscal year
Ø While gross NPAs were up by 16 bps, the net NPAs were up by 5 bps, which is not exactly a major worry for the bank |
| Ø Jamie Dimon of JP Morgan warns of the larger collateral damage of Fed taper | Ø Fed is sitting on a bond portfolio of $4.5 trillion and will be shortly commencing the taper of this portfolio
Ø The taper is likely to result in liquidity tightening in EMs leading to FPI outflows in search of risk-off pastures
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| Ø Goldman Sachs predicts oil dipping below the $40/bbl mark | Ø With the US, Nigeria and Libya pumping oil at record levels, any OPEC cut will be ineffective at the current rate
Ø According to Goldman, unless OPEC undertakes a massive supply cut, oil is likely to dip below the $40/bbl mark
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| Ø Yellen Congressional testimony hints at a slight back-ending of rate hikes | Ø Janet Yellen has admitted that despite a robust labour market, the impact on inflation is just not visible
Ø Due to consistently low inflation, Yellen hinted that Fed may look to back-ending rate hikes, bringing cheer to markets.
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| Ø India looking at oil investments to the tune of nearly $300 billion | Ø India’s per capita fuel consumption is 1/4th of the global average leaving a huge room for demand expansion
Ø India will require massive investments across upstream and downstream segments of oil
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| Ø HPCL may become a subsidiary of ONGC in July itself | Ø The government proposes to sell its 51.11% stake in HPCL to ONGC so that state control over oil and gas remains
Ø While this will surely help the government meet its divestment target of Rs.72500 crore, it also aids consolidation
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| Ø Citi cautions against building earnings growth expectations | Ø According to Citi, the earnings growth in next two quarters may be muted due to the downstream effect of GST
Ø In fact, Citi expects the earnings for the first quarter to be lower by 12% compared to the year ago period
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| Ø China reports a sharp growth in imports and exports for month of June | Ø A pick up in Chinese trade is good news as China remains the world’s largest exporter and importer
Ø A pick up in Chinese trade is positive for commodity prices and for commodity driven economies
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| Ø Axis Bank appoints Egon Zhender for finding a new CEO | Ø Shikha Sharma’s term is likely to get over next year and she is unlikely to get an extension
Ø Axis Bank has been in the midst of controversies pertaining to illegal cash deposits and rising NPAs
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| Ø Tata Steel seeks shareholders nod to raise Rs.10,000 crore | Ø Tata Steel has drawn up ambitious expansion plans as government policy has been favourable for steel
Ø Tata Steel has total debt of just about Rs,.28,000 crore leaving enough room to leverage the balance sheet further
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| Ø WPI inflation for June slides to below the 1% mark from 5.5% early this year | Ø The weak WPI inflation has been largely a mirror of the sharp fall in the levels of retail inflation, especially food inflation
Ø While the fuel index fell by 1% on cheaper crude, vegetable inflation at -21% was the key trigger
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| Ø GVK has sold its residual stake in Bengaluru airport to Fairfax | Ø The sale for Rs.1300 crore is part of the GVK group’s larger deleveraging initiative to put its balance sheet in order
Ø GVK will now focus on its Mumbai airport and also on the upcoming Navi Mumbai airport project |
