| News Announcement |
Impact Analysis |
| PNB got embroiled in a $1.77 billion global fraud in its Mumbai branch |
- The fraud pertains to illegal LOUs drawn by officials of PNB based on which other banks funded the Nirav Modi group
- The size of the fraud is nearly 1/3rd the market cap of PNB and the contagion could spread to other banks as well
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| Banks and jewellery companies take a hit after the PNB crisis |
- As the $1.77 billion PNB fraud came to light, other banks are likely to be pulled into the larger LOU vortex
- The fraud is also expected to extend to other diamond companies where such facilities may have been sought
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| January trade deficit came in at a multi-year high of $16.3 billion |
- While exports growth was weak at just about 9%, imports were led by higher prices of Brent Crude
- With imports likely to cross $500 billion this year, the forex reserves are just enough to cover 10 months imports
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| Enthusiasm for FAANG stocks in the US appears to be waning for hedge funds |
- FAANG includes the 5 new age tech companies; Facebook, Apple, Amazon, Netflix and Google
- These 5 stocks have a combined market cap of nearly $3 trillion and there are some real valuation concerns now
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| SGX can still offer Nifty options for the next 18 months to its clients |
- Last week, Indian bourses had decided to stop licensing index data to all global exchanges
- However, in case of SGX, the agreement calls upon NSE to support till the expiry of all contracts which is 18 months
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| MSCI comes down heavily on NSE decision to stop data sales |
- MSCI has warned that this move by the exchanges could lead to global investors downgrading India’s weight
- MSCI India Index trades quite heavily in the SGX and could face problems. India has 8.4% weight in MSCI-EM Index
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| Fed is now expected to hike rates by 100 basis points in year 2018 |
- This may have been triggered by the US CPI inflation getting close to 1.9% on a YOY basis, close to the 2% target
- With the $300 billion spending plan approved and 2.7% GDP growth, the case for 4 rate hikes in 2018 becomes stronger
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| Jet Airways reports fall in profit for the second straight quarter |
- The pressure on costs was apparent after crude oil stayed in the vicinity of $70/bbl for most of the quarter
- While the domestic aviation market is likely to grow at 18% yearly, the pressure on costs is likely to stay
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| Berkshire Hathaway has almost entirely exited its holdings in IBM |
- Buffett himself has admitted that his decision to buy IBM a few years back was a piece of wrong analysis
- Other FAANG stocks have vastly outperformed IBM and now even Buffett has been adding to his position in Apple
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| Major write-offs by PSU banks puts pressure on banking stocks |
- Apart from SBI, IOB and Bank of India also saw huge spill over in their NPA reporting on higher recognition
- Gross NPAs of PSU banks has already crossed 12.4% and there are questions of solvency over quite a few banks
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| SAIL nears a massive turnaround in its steel operations this year |
- This includes a massive manpower reduction by 50% and a 50% expansion in steel capacity to 21 million tonnes
- The net income per tonne for SAIL is also likely to expand 4-fold after this entire exercise is completed
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| RBI announces a new framework for stressed assets of banks |
- The new framework will subsume and replace other measures of restructuring like SDR, CDR and S4A etc.
- The new model will allow exactly 180 days for a resolution consensus failing which it will be referred to the IBC
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| CPI inflation for January came in slightly lower at 5.07% in Jan 2018 |
- There has been some respite in the food prices with Mandi prices of most food items trending lower
- RBI has already guided first half inflation at above 5% and the second half inflation at a tad below 5%
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| IIP for December trended lower at 7.1% compared to 8.4% in November |
- There was some tapering on the oil sector contribution to IIP due to lower crude oil prices
- However, cement and commercial vehicles are showing sharp growth which is a good economic lead indicator
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| RBI to launch SDF facility for liquidity management in the future |
- This Standing Deposit Facility (SDF) will replace the existing Market Stabilization Scheme (MSS)
- In the SDF, unlike in case of MSS, there is no need for RBI to have collateral for liquidity absorption, giving more flexibility
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| Paytm founder Vijay Sharma objects to WhatsApp payment security model |
- WhatsApp with over 23 crore users in India has already started testing a payment platform in India
- WhatsApp is part of Facebook and Indian players are more worried about the reach and spread of Facebook in India
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| LIC reported an 87% drop in profits for the December |
- This sharp fall in profits was largely due to the lower profits made on the sale and redemption of investments of LIC
- There are worries that a large chunk of LIC portfolio could get stuck in illiquid bonds and equities to support state programs
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| Wal-Mart in talks to buy a 40% stake in Flipkart of India |
- This could be the best bet that Flipkart could hope for to take on the deep pockets of Amazon in the Indian market
- The final valuation of Flipkart is expected to be more than $12 billion based on the last major deal with Softbank
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| Gitanjali Gems and SBI get drawn into the PNB – Nirav Modi fracas |
- PNB has now alleged Rs.4900 crore loss caused by a fraud committed by Gitanjali Gems, owned by Mehul Choksi
- In the meanwhile, SBI has also disclosed a $212 million exposure to the PNB fraud case on LOU loans
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| CLSA bets big on Cement, Steel and Life Insurance in Indian markets |
- Cement and Steel expected to be the big beneficiaries of the government thrust on affordable housing and infrastructure
- The Life Insurance companies could structurally benefit from greater penetration in the Indian markets
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| OPEC Russia to extend oil supply cuts till the end of 2018 |
- For Russia and Saudi Arabia there is merit in keeping prices of oil high by depleting global oil inventories
- Inventories are close to their 5-year average but Saudi may want to ensure high oil prices till the Aramco IPO
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