Weekly Capsule (Dec 18 – Dec 22) and Impact Analysis
| Major News Item | Impact Analysis |
| Ø CBI Court acquits all accused in the Telecom 2G scam | Ø The acquittals included big names like A Raja and Kanimozhi, who were all acquitted for lack of evidence
Ø CAG had put a figure of Rs.176,000 crore and that had been the base of BJP’s anti-corruption campaign against the UPA
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| Ø A total of 128 nations voted against the US motion on Jerusalem | Ø Only 9 countries are voting for and 35 are abstaining with even some of the US allies voting against the US resolution
Ø This move to recognize Jerusalem as the capital of Israel will be an acid test of the US influence in the global space
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| Ø Reliance Infra sells its Mumbai power business to Adani for Rs.13,250 crore | Ø This will enable Reliance Infra to focus on its two principal thrust areas of roads and defence
Ø The inflows will be used substantially to clear a chunk of the Rs.28,500 crore debt on the books of Reliance Infra
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| Ø Goldman Sachs to set up a crypto currencies trading desk | Ø Coming from the world’s largest investment banker, this is surely a significant move for products like Bitcoin
Ø Crypto currencies like Bitcoins and others have been on the radar of central banks for their money creation
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| Ø Financial Stability Report of RBI bets on NPA cycle bottoming out by 2018 | Ø The NPA cycle is expected to bottom out at 11.1% Gross NPAs by Sep-18 as most of the provisioning will be completed
Ø There has been a sharp increase in stress on NPA recognition in the last 2 years by PSU banks and by private banks
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| Ø SEBI insists on loan default disclosure by the company on T+1 | Ø This move was to be implemented on October 01st but banks had protested as it had would have boosted NPAs
Ø SEBI still sees merit in this disclosure as rating agencies are informed about defaults only after a month
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| Ø HDFC Bank plans to raise Rs.24,000 crore via equity placements | Ø While 1/3rd will be placed with parent HDFC, the balance will be raised through QIB placements or ADR issues
Ø HDFC Bank will look to raise its capital adequacy ratio from 15.2% to 18% to prepare for the economic turnaround
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| Ø US House of Representatives also passes the mega Tax Bill | Ø The final bill is likely to be signed by Trump before Christmas and will result in massive corporate tax rate cuts
Ø It is expected to trigger a capital spending and consumption binge and give an indirect boost to growth
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| Ø MPC minutes have hinted at gradual continuation of stable rate policy | Ø The rising G-Sec yields have been indicative of a flat to hawkish monetary policy by RBI going ahead
Ø While growth remains a challenge, the MPC expects oil, metals and food to give a thrust to inflation
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| Ø Russia becomes a key supplier of crude to Indian refineries | Ø India has been trying to gradually reduce its dependence on the Middle East, which accounts for 80% of its oil imports
Ø This will give India a major strategic advantage by diversifying its oil imports from a range of countries |
| Ø Tata Steel will raise $2 billion to fund its India operations | Ø The Tata group plans a massive expansion of capacity at its Kalinganagar plant in Odisha
Ø Indian steel demand is expected to increase from 80 million tonnes to 250 million tonnes by the year 2030
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| Ø Gujarat votes in favour of BJP but the margins were much narrower | Ø In line with the exit polls last week, BJP secured a win in Gujarat, although the margin was much narrower
Ø While BJP increased its vote share and dominated the urban areas, Congress made huge inroads in the rural areas
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| Ø Income Tax Department sends IT notices to Bitcoin traders in India | Ø IT department is calling upon all these Bitcoin traders to pay capital gains tax on the profits made on Bitcoins
Ø The IT department is also planning a penalty which could go as high as 300% of the profits made on Bitcoins
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| Ø The FRDI Bill may be put off to a later date considering its sensitivity | Ø The rankling issue in the FRDI Bill is the Bail-In clause which could call upon retail deposits to bail out a bank
Ø There is already a panic among retail investors and it needs to be seen how the erstwhile DICGC Act evolves now
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| Ø Morgan Stanley expects a revival in the capital cycle in 2018 | Ø A large part of the capital cycle revival could happen on the back of rising Chinese demand for commodities
Ø However, MS expects that core inflation will be higher and global monetary policy will continue to tighten
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| Ø Adani decides to cancel the $2 billion mining building deal in Australia | Ø The whole situation worsened after the Labour party came to power in Queensland and put impediments to the project
Ø There has been a public uproar to protect the Great Barrier Reef and many banks have also backed out from funding
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| Ø Auto Industry wants 12% concessional rate of GST for alternate energy cars | Ø To begin with, this special GST was to be limited to battery operated cars and hydrogen fuelled cars
Ø The current multi-tier structure is too complex and is not favouring the development of alternate energy cars
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| Ø Mutual Fund folios touch an all time high of 6.50 crore in India | Ø This has been largely led by the turnaround in equity inflows into mutual funds after yields came down
Ø With real estate and gold coming under the IT radar, people are preferring the safety of mutual funds
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| Ø The 2G verdict may prove to be a boost for the Congress campaign | Ø This is more so since the estimated loss of Rs.176,000 crore was the plank on which 2014 elections were fought
Ø Ahead of the 2019 elections, the ruling NDA may now require an alternative script going for a second mandate
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| Ø Bitcoin prices fell sharply below the $14,000 mark this week | Ø One of the reasons for the fall was the short selling in Bitcoin futures in the CME and the CBOE
Ø Also many central banks and governments are coming down and penalizing Bitcoin holdings leading to the chaos
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| Ø IMF report calls for greater independence for the RBI | Ø According to IMF, greater independence of the RBI is required if the drastic banking reforms have to be successful
Ø This observation was made by the IMF as part of its Financial Stability Report |
