Weekly Capsule (Oct 22 – Oct 26) and Impact Analysis

News Announcement Impact Analysis
World markets fell sharply as US and Europe touched multi-month lows
  • US markets were hit by the potential outcome of a trade slowdown caused by the sanctions
  • European Union has been trying hard to save the Euro by forcing Italy to go for more austerity in its budget
RBI forex reserves fall by $5.2  billion to $394 billion in October 2nd week
  • The sharp fall in the forex reserves has been largely due to the RBI supporting the rupee at around the 74/$ level
  • With falling forex reserves, the options in front of the RBI may be limited and aggressive forex intervention may not be viable
Arun Jaitley sounds out PSBs to ensure no defaults by NBFCs
  • After the IL&FS defaults, the government is cautious of any negative impact on the NBFCs and bond markets
  • SBI had promised to triple its NBFC lending this year and other banks are also following suit
Viral Acharya of RBI cautions against any relaxation to PCA norms
  • Government had sought concessions for Prompt Corrective Action (PCA) banks to resume their lending operations
  • However, RBI has turned down that idea since it could potentially undermine the entire NCLT process
Government to inject Rs.40,000 crore liquidity into markets in November
  • This infusion will be done by the RBI via open market operations i.e. buying bonds to infuse liquidity
  • These OMOs will keep the liquidity situation comfortable also keep the bond yields at the short end under check
ICICI Bank turns around to report profit of Rs.909 crore in Q2
  • While the profits were 56% lower than Q2 last year, it is surely an improvement over the huge loss in the first quarter
  • While gross NPAS were still higher, net NPAS showed up lower at 3.65% compared to 4.19% previously
Equitas and Ujjivan hit all-time lows after RBI ruling on listing of small bank
  • On Thursday, the RBI had instructed Ujjivan and Equitas to list their small banking business as a separate entity
  • Existing shareholders sold out on worries that they may not be allotted shares of the small finance bank
US GDP forecast for the 3rd quarter comes in higher at 3.50%
  • This positive news comes on the back of fears that the trade war with China could hit US GDP growth
  • The higher GDP cues from the US economy could mean that the US Fed could sustain its path of hawkishness on rates
NASDAQ worst hit after weak results from Amazon and Google
  • IT companies with predominantly global businesses are feeling the heat of a strong dollar
  • Most tech stocks were also quoting at very rich valuations and this correction had a spill-off on Indian IT stocks too
NBFCs buy back commercial paper from the market ahead of redemption
  • The trend began with IIFL and JM and now Edelweiss has also bought back CP worth Rs.1000 crore
  • Buy back of CP is a message to the markets that the company has sufficient cash reserves to handle liquidity pressures
Weak rupee boosts remittances into India in the last year
  • Remittances during 2018 have been higher by 10% at $76 billion compared to the previous year
  • NRIs do look at bringing in funds when the rupee weakens to benefit from higher return and a strengthening rupee
Bharti Airtel reported 58% fall in the net profits for the second quarter
  • The sharp fall in the net profits was on the back of ARPUs falling to just Rs.101 due to stiff competition
  • During the week, Bharti had received commitments from 6 global investors to invest $1.25 billion in its Africa business
Committee of Creditors reject Ruia offer to buy their own shares
  • After the Arcelor offer, Ruias offered to pay Rs.54,389 crore to retain their stake in the company
  • The COC, however, rejected the bid as being against the basic NCLT principles and opted to go with the Arcelor Mittal bid
Indigo Airlines reported a loss of Rs.652 crore for the second quarter
  • This is the first loss reported by Indigo in its 12 quarters of listing and was driven largely by higher fuel prices
  • While ATF and competition have hit Indigo, their spread are still among the best and they retain a 42% market share
Cadilla group to buy part of the food portfolio of Kraft Heinz
  • The bid for $628 million will be made jointly by Cadilla Healthcare and Zydus Cadilla
  • The purchase will include some of the marquee brands of Kraft Heinz like Complan and Glucon-D
Brent Crude fell sharply during the week and settled well below $80/bbl
  • The slowdown in oil prices was primarily driven by rising inventories in US oil
  • The markets are also fearing a compression in global oil demand due to a slowdown caused by trade wars
Adani Ports net profits drops by 39% on the back of forex losses
  • The lower profits of Rs.606 crore was largely due to a one-time forex loss of Rs.570 core during Q2
  • The company, in the meanwhile is all set to achieve its target of 200 million tonnes of cargo at its Mundhra port
Bajaj Finance flatters the street with a 54% jump in net profits in Q2
  • In the midst of the NBFC melee, Bajaj Finance reported sharp rise in profits on the back of 42% growth in NII
  • Gross NPAs were marginally up in the quarter to 1.49% but Bajaj Finance does not have a maturity mismatch challenge
Oberoi Realty surprised the street with 100% growth in net profits in Q2
  • Oberoi saw a 100% growth in sales and profits during the quarter resulting in net margins of over 33%
  • The company has benefited from a small but focused franchise in the top end of the Mumbai segment
Tata Sons writes off Rs.28,652 crore of its investment in telecom sector
  • This includes the entire investment made by Tata Sons into Tata Tele over the years
  • The mobile business of Tata Tele was sold to Bharti and the enterprise business to transferred to Tata Communications
HDFC Bank reports 21% growth in revenues and profits for Q2
  • The bank also showed a 20% growth in the net interest income (NII) and in CASA deposits
  • The bank did see a marginal rise in gross NPAs from 1.26% to 1.33% during the second quarter

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