Weekly Capsule (Jun 26 – Jun 30) and Impact Analysis
| Major News Item | Impact Analysis |
| Ø The nation finally gets ready for the “One Nation One Tax” via GST | Ø GST will go effective the midnight of 30th June and will be applicable to all transactions post that
Ø While the IT backbone will be stress tested, it will be the ability of banks to handle the migration that will be the key
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| Ø CRISIL estimates a haircut of up to 60% in the 12 problem NPA accounts | Ø The haircut becomes critical as the RBI has been pushing the banks to arrive at a speedy resolution to the NPA issue
Ø The 12 cases are those where the NPAs account for nearly 50% of the total NPAs of the banking system and worsening
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| Ø NPPA has announced ceiling prices for 761 medicines for now | Ø This new ceiling becomes relevant in the light of the anti-profiteering clause in the GST Act
Ø Under the GST Act, all tax cuts will have to be fully passed on to the end customer, else inviting penal action
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| Ø European Commission imposes $2.7 billion penalty on Google | Ø This penalty is under the EU anti-trust rules for misusing the dominant position of a company in an industry
Ø According to EU, Google had used its dominant position to create barriers to entry, inviting this penalty
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| Ø Jaypee group debt may be the first to arrive at a substantial resolution | Ø Jaypee owes over Rs.50,000 crore to a consortium of banks led by ICICI Bank which had been working on a resolution
Ø The deal to sell off the Jaypee cement plant to Ultratech for Rs.16,200 crore has been closed as part of this deal
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| Ø Reliance seeks approval to cap ownership limit at 5% | Ø This limit will be applicable to non-promoters and will be restricted to 5% of the paid-up capital of the company
Ø This is necessitated under the RBI rules for payment banks as RIL already owns 70% in Jio payment bank
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| Ø Godrej plans to raise Rs.400 core through the Agrovet IPO | Ø The Godrej Agrovet IPO will be a mix of a new offer and an offer-for-sale by Godrej, which owns 61% in the company
Ø Godrej has been looking to monetize the agri side of the business as the valuations are currently attractive
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| Ø Bearish bets on crude oil at record highs globally | Ø The net short position in crude oil globally stood at 169 million barrels, the highest level in the last 3 years
Ø A huge short position normally is indicative of a likely short squeeze, which could take the stock price sharply up
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| Ø ADB plans to raise nearly Rs.1400 crore through the issue of Masala Bonds | Ø ADB has been a regular player in the offshore Rupee Bonds market and this is the 3rd tranche
Ø This will be used to on-lend in India and rupee bonds have become popular due to a stable rupee and sound macros
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| Ø Government unveils new hydrocarbon policy on 28th June | Ø Nearly 2.8 million square KM of sedimentary basins like likely to come under oil prospecting and exploration
Ø The government is starting off with data collections as data is available for just 50% of these sedimentary basins |
| Ø NRIs can now access the listed currency derivatives market in India | Ø NRIs can only use this market for hedging their underlying currency risk and not for trading naked positions
Ø However, the banks will have to monitor the overall position of traded currency and OTC market jointly
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| Ø Indigo Airlines has expressed interest in global business of Air India | Ø Air India could be a logical extension to the domestic aviation business leadership of Indigo, which has a 40% market share
Ø The big challenge in the deal will be the structuring and the Rs.50,000 crore debt that Air India has in its books
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| Ø Azim Premji Invest to acquire 2.2% stake in Aditya Birla Capital | Ø Premji Finvest is a family office with a corpus of $1 billion and looking to take a strategic stake in specific stocks
Ø Premji Finvest will be allotted 4.8 crore preference shares at Rs.145.1/share after the restructuring is completed
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| Ø Vedanta plans to invest nearly $3 billion in its oil extraction business | Ø Vedanta plans to account for nearly 50% of India’s total oil extraction by year 2020
Ø At a time when oil companies are cutting CAPEX, Vedanta is funding the entire $3 billion with internal resources
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| Ø Core sector growth for May 2017 grew by 3.6% against 2.8% in April | Ø The big push came from energy including output of electricity, refinery products and natural gas
Ø Core sector growth has been critical as it constitutes nearly 40% of the IIP and has a major influence on growth
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| Ø BOFA Merrill lowers its guidance for oil prices for the full year | Ø Increasing supply of crude oil from the US and Libya and rise stockpiles could be responsible for this tepid prices
Ø Even on the demand side, the supply is expected to continue to be in excess of demand despite OPEC cuts
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| Ø CDSL IPO makes a stellar listing on the stock exchanges | Ø CDSL debuted on the stock exchanges at a premium of 75% to the issue price and sustained through the day
Ø The Rs.525 crore was oversubscribed by nearly 170 times and funded HNIs needed a 50% premium to cover their costs
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| Ø Nomura upgrades the stock of Bank of Baroda | Ø Nomura expects better pre-provision profit outlook for Bank of Baroda compared to its peers
Ø The brokerage also expects BOB to sustain 10%+ loan growth over the next 3 years, which makes it truly attractive
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| Ø Traders continue to protest heavily across India ahead of GST | Ø Most traders are grossly underprepared for GST and are likely to feel the heat if GST is launched as per schedule
Ø However, the FM has already ruled out the possibility of any postponement of GST from here on
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| Ø RBI warns of further stress of bad loans on banks | Ø RBI is of the view that the bad loans could cross 10% of the total loans of banks with gross NPAs already at 9.6%
Ø PSU banks continue to account for a chunk of the NPAs in the Indian banking system and remain the weak link
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| Ø Fiscal deficit hits nearly 68.3% of its full fiscal year target in May itself | Ø This situation could be largely mitigated once tax flows and divestment proceeds start coming in
Ø Either ways, the government fiscal responsibility appears to be tested to the hilt this financial year |
