Midnight News Update – Jul 21st 2017
NSE has filed a consent application with SEBI to dispose of the algo case. A consent application allows the accused to pay a penalty and close the case without either admitting or denying the wrongdoing. Apart from key officials of the NSE, the former CEO, Chitra Ramakrishnan and the former Chairperson, Mr. Ravi Narain is also under investigation. The case first came to light through a whistleblower who had written to the regulator about preferential access given to select brokers. This case has forced the NSE to delay its IPO and that remains the priority for the new CEO, Mr. Limaye.
European markets celebrated as Mario Draghi of the ECB gave an indication for the first time that the central bank would look to tighten monetary policy by middle of 2018. This could either happen through a marginal hike in interest rates or through tapering of its $3 trillion bond portfolio that the ECB is holding. With the US Fed embarking on rate hikes and hinting at a tapering of the bond portfolio, other key central banks will follow suit. The 4 major central banks viz. US Fed, ECB, BOJ and BOE jointly hold bonds to the tune of nearly $14 trillion and the tapering will surely tighten liquidity in financial markets.
RIL continued its healthy profit performance with a 28% growth in the first quarter at Rs.9108 crore. The gross refining margins (GRM) at $11.9/bbl came in almost $1 more than market expectations. The consolidated revenues are again above the Rs.90,000 crore mark for the first quarter ending June 2017. The company has still not started amortising the investment in Reliance Jio where RIL has sunk more than $25 billion till date. The good thing for the telecom business is that it is actually driving the growth for RIL and it already enjoys ARPUs that are much higher than competition.
For the quarter ended June 2017, Wipro announced 1.2% rise in net profits at Rs.2077 crore. This was slightly better than street expectations although the salutary impact on prices could be quite limited considering the current sentiments pertaining to tech stocks. Most IT companies are struggling as global IT spend is veering more towards digital where the alpha is actually coming from. Wipro has also announced a massive Rs.11,000 crore buyback. Buying back shares is a more tax efficient method of rewarding shareholders as dividends are now taxed in the hands of HNI investors.
With the recent acquisition of a 24.9% stake in Balaji Telefilms, the Mukesh Ambani owned MDAG group has made one more foray into media. RIL bought a 1/4th stake in Balaji Telefilms for a consideration of Rs.413 crore. The synergy appears to be finally falling in place. Balaji is a strong content company while RIL will be looking to quality content to prop up its offerings on the digital content platform under the Jio banner. RIL already holds a majority stake in Network 18 as well as its subsidiary CNBC TV-18. Over the last few years, the group has been picking and choosing select media properties. The group not only looks at media as a major growth area but also sees a major forward integration for the Jio telecom business. Now Jio will be able to integrate hardware, software, experience and content under one roof.
Foreign investments in the real estate business have touched a high of $7.6 billion in the 3 years between 2014 and 2016. This is nearly 2.5 times the investments that we saw between 2011 and 2013. The domestic real estate sector was largely dominated by the local players till 2009. However, post 2014, the entire segment has been dominated by global investors. Apart from Mumbai which leads the investment flows by a margin, other cities like Bengaluru, Chennai and Delhi are also receiving real estate flows. The future of this space could be more on the REITGs and InvITs front.
