Weekly Capsule (Jan 01 – Jan 05) and Impact Analysis

India’s fiscal deficit for 2017-18 touches 112% of full year target by Nov 2017
  • With 4 more months to go for the fiscal year, the government looks set to exceed the fiscal deficit target by 50 bps
  • This will also compromise the 3% FRBM targets for 2018-19 raising questions over the rating upgrade by Moody’s
Government of India 10 year bond yields touch a high of 7.39%
  • This sharp rise in the recent past has been driven by rising inflation and a hawkish view by the Federal Reserve
  • This means that the RBI may be constrained to consider a rate hike of 25-50 bps during the calendar year 2018
Core sector growth comes in at a healthy 6.8% for November 2017
  • This was largely driven by a healthy growth in the steel and the cement sector giving hopes of a revival
  • However, this could be due to the base effect as November 2016 was a weak month post demonetization
US government likely to clamp down on H1-B visa requirements of IT players
  • IT companies may have to now certify that any H1-B visa issued is not displacing US workers for the next 5 years
  • This could be a big challenge for the Indian IT industry which corners nearly 70% of all US H1-B visas issued each year
US government likely to clamp down on H1-B visa requirements of IT players
  • IT companies may have to now certify that any H1-B visa issued is not displacing US workers for the next 5 years
  • This could be a big challenge for the Indian IT industry which corners nearly 70% of all US H1-B visas issued each year
Salil Parekh has taken over as the new CEO of Infosys
  • His primary business challenge at Infosys will be to address the big shift to digital that is happening globally
  • More importantly, he will also have to address the critical issue of engaging with the promoter group effectively
Oil prices crossed the $68/bbl in the global Brent crude market
  • This rise in prices is largely driven by rapidly falling US stockpiles of oil in the last few weeks
  • OPEC and Russia have also agreed to continue their supply cut of 1.8 million bpd till the end of 2018
PMI Manufacturing and PMI Services flattered on the upside in December
  • PMI manufacturing at 54.7 was largely driven by better order flows and higher input costs post GST
  • The PMI Services just about recovered above the 50 mark after touching 48.5 in the month of November
SEBI to draw a line between financial advisory and distribution
  • By April 2018 financial services companies will have to make a choice as a financial advisor or as a distributor
  • This will largely remove the conflict of interest but also force the broking industry to change its distribution model
Indian government comes down hard on small savings rates
  • The government began by reducing PPF rate down to remove the tax related distortions in these PPF accounts
  • The government has also replaced the 8% RBI bonds with a 7.75% taxable bond, giving a clear signal to markets
Government to put ports at par with highways for ease of operators
  • Like in case of highways, port operators will also have an exit after 2 years of completion of the project
  • The method of royalty calculation is also being tweaked to make it more friendly to port operators
Economists warn of India’s full year GDP for 2018-19 at below 7%
  • This will mark a sharp fall from the 8% and 7.2% growth achieved in the previous two years
  • The first 2 quarters have seen growth at 5.6% and 6.2% and growth could be tepid despite good 3rd and 4th quarters
Mutual funds have to shift to Total Returns Index from Feb 2018
  • Currently MFs report outperformance over index by measuring index returns on a point-to-point basis
  • By shifting to TRI basis, the outperformance will reduce as index returns will now also consider the dividend yield
Hindalco is likely to make a $2.5 billion bid for Aleris of the US
  • The bid will be made through Novellis, which Hindalco had acquired back in 2007
  • This is in tune with the global trend wherein metals appeared to have gotten into an up-cycle
Government seeks parliamentary nod for its $12 billion bank bailout
  • This Rs.80,000 crore bailout will be effected through the issue of recapitalization bonds to banks
  • Effectively, the surplus deposits of the banks will be moved towards its capital to shore up ahead of Basel IV
Dow Jones surges past the 25,000 level for the first time in history
  • The surge in the Dow is largely driven by higher growth and lower unemployment expectations for the year
  • The Dow started celebrating the Trump trade from Jan 2017 and has gained more than 25% since then
Donald Trump has blocked the $1.1 billion security aid to Pakistan
  • The US has been unhappy with its traditional ally in the way it has dealt with terrorism in the past
  • This is likely to push Pakistan closer to its new-found ally, China, and also possibly destabilize the area’s geopolitics
Idea Cellular plans to raise close to $1 billion ahead of Vodafone merger
  • Nearly 50% of the $1 billion will come in the form of fund infusion from the Aditya Birla group
  • The balance will be raised through a variety of market options including a rights issue to shareholders
IOB to write off accumulated losses against share premium account
  • IOB has a share premium surplus of $1.2 billon which will be used to entirely write off its accumulated losses
  • Post the clean up, the balance sheet of IOB will present a clearer picture and could become a template
Rupee touches a 30-month high of Rs.63.41/dollar
  • Capital flows into India, especially into debt, have been extremely healthy and that is holding up the INR
  • While the strong rupee is keeping our import bill in check, it is coming at the cost of exports, which are badly hit by INR
Metal prices surge globally as factory output picks up across the world
  • From Europe to the US to Japan, there is a sharp revival in factory output as depicted by the PMI numbers
  • This is only underscoring the view that the global metals cycle may be finally turning out to be favourable
India to consider 7.5% tariff on imported solar panels
  • India imports most of its solar panels from China and there are no import duties as of now
  • It remains to be seen what it means for Mr. Modi’s target of 100 GW of solar power by the year 2022