Weekly Capsule (Jul 17 – Jul 21) and Impact Analysis
| Major News Item | Impact Analysis |
| Ø Reliance Industries announces 1:1 bonus issue at its 40th AGM | Ø This is just the fourth bonus by RIL in the last 35 years and the first bonus since 2009
Ø The stock has rallied nearly 50% since the launch of Jio and the bonus will bring the stock into a lower price range
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| Ø Global stock futures are likely to start trading on NSE from July 24th | Ø The global stock futures will be traded through the NSE GIFT exchange set up at Gandhinagar in Gujarat
Ø Indian investors will now be able to diversify their India investment risk by buying global stocks in their portfolio
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| Ø HDFC Life to go ahead with its IPO and put merger on the back burner | Ø HDFC Life’s proposed merger with Max Life ran into trouble after IRDA did not approve merger with an NBFC
Ø HDFC Life will plan its IPO during this year to be the third insurance IPO after ICICI Pru and SBI Life
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| Ø RIL again flattered the street with a sharp rise in gross refining margins | Ø RIL’s GRMs at $11.9/bbl was almost $1.5 better than the consensus street estimates
Ø The stock has already crossed Rs.500,000 crore in market cap and has widened its value gap over TCS
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| Ø RIL announces another telecom disruption in its 40th AGM | Ø Reliance Jio announced its foray into mobile hardware with a smart phone that will just entail a deposit of Rs.1500
Ø The idea is to bring the 50 crore mobile users who are outside the smart phone user list, also into the data usage ambit
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| Ø Ram Nath Kovind was elected the 14th president of India | Ø With a vote share of over 65%, Mr. Kovind comfortably sailed past the opposition presidential candidate, Meira Kumar
Ø The outcome of the presidential elections was never in doubt after key non-NDA parties also decided to support Kovind
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| Ø Chinese economy shows green-shoots of recovery once again | Ø GDP growth in China for the second quarter ended June 2017 came in at a much healthier 6.9%
Ø Additionally, China industrial growth came in at 7.6% while growth in retail sales came in higher at 11%
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| Ø ITC cracked sharply after negative cues on the GST front | Ø The stock almost lost 7 months of gains in a single day during the week after government imposed additional levy
Ø The additional levy became necessary after cigarettes started enjoying concessional GST duty at just 28%
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| Ø SEBI calls upon banks to disclose bad loan divergence to exchanges | Ø Currently, the RBI requires banks to disclose the divergence only if it exceeds 15% of RBI approved NPAs
Ø The SEBI move comes after the cases of ICICI Bank, Axis and Yes Bank, where divergence proved to be price sensitive
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| Ø Trump faces a major embarrassment on his healthcare plan | Ø With 2 more Republicans voting against Trump’s healthcare plan, his plan to scrap Obamacare is as good as gone
Ø That also raises doubts over Trump’s ability to push through crucial tax reforms and on the infrastructure front |
| Ø CRISIL warns of additional $37 billion hit on the 50 stressed accounts | Ø Banks have only provided 40% in case of IBC accounts and will have to provide for a minimum of 50% as per RBI
Ø The big challenge will be to provide the requisite capital cushion for the PSU banks, whose CRAR is already weak
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| Ø Tata Group to restructure technology and infrastructure business | Ø All technology properties of the Tata Group may be merged under the TCS banner for better traction
Ø Tata Sons head, Chandrasekharan, has a clear mandate to focus the group more on ROI and value creation
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| Ø ONGC finalizes its stake purchase in HPCL for nearly $4.5 billion | Ø The Rs.30,000 crore deal will entail ONGC buying the government’s 51.11% stake in HPCL
Ø HPCL will continue to operate as a subsidiary of ONGC and there will be no open offer made to shareholders of HPCL
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| Ø Domestic air traffic showed a growth of 20% in June 2017 | Ø The growth was driven by lower fares and greater demand from retail and business consumers across India
Ø India is now approaching the 1 crore passengers per month mark which is a tipping point for big aviation growth
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| Ø NSE has filed a consent application with respect to algo investigations | Ø A consent plea allows NSE to continue with its business without accepting or denying the allegations
Ø The preferential algo issue at NSE has been under investigation for some time holding up the IPO
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| Ø Reliance expands its media interests with a 25% buy into Balaji Telefilms | Ø This is the second big content acquisition for Reliance after the stake in Network 18, which owned CNBC India
Ø For RIL, this perfectly gels with its larger plan to integrate platforms, content and access via Jio
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| Ø Foreign investors pump in $7.6 billion into real estate in 3 years | Ø This infusion in the 3 years to 2016 is more than 2.5 times the amount infused in the 3 years prior to that
Ø Most foreign investors have shown keen interest in buying commercial properties with strong rental potential
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| Ø Aggressive put writing in Nifty 9900 and 9850 strikes cushions downsides | Ø There has been heavy demand from institutions to sell put options of strikes between 9800 and 9900
Ø Writing puts aggressively indicates that traders do not visualize the markets falling below that level
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| Ø Trade deficit in June widened largely due to spurt in gold imports | Ø This is a worry as 100% growth in gold imports means using precious forex reserves for an unproductive import
Ø In fact, the gold imports for the Q1 FY2017 was almost double of last year at $11.25 billion
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| Ø ECB hawkish talk rallies the Euro versus the US Dollar | Ø Mario Draghi had hinted at possible unwinding of the bond portfolio by next year which strengthened the Euro
Ø The dollar also weakened after doubts over Trump’s ability to push through reforms and his secret Russia meeting
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| Ø Russia and OPEC to stand by supply deal at the weekend OPEC meet | Ø Russia and OPEC have cut daily supply of oil by 1.8 million bpd but prices of crude have continued to crash
Ø Despite a glut of supply from the US, Nigeria and Libya, OPEC and Russia will continue to constrain supply in the oil market |
