Weekly Capsule (Sep 11 – Sep 15) and Impact Analysis
| Major News Item | Impact Analysis |
| Ø Inflation came in sharply higher for the month of August at 3.36% | Ø That marks a rise of nearly 190 bps in inflation in the last 2 months essentially driven by food inflation
Ø This almost negatives the possibility of the RBI cutting repo rates in the October policy considering inflation fears
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| Ø IIP for the month of July came in at 1.2%, better than June | Ø The big disappointment was manufacturing with a growth rate of just about 0.2% due to GST and demonetization pressure
Ø Weak growth as not offered any correlation with repo rates and hence RBI may choose to maintain status quo
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| Ø Bank of England for the first time hinted at a hike in benchmark rates | Ø Inflation and growth has been on an uptrend in the UK and that has spurred the need to hike rates
Ø BOE will become the second “First World” central bank to hike rates after the Fed and the pound is already strengthening
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| Ø P-Note investments slump to a record 5-year low of Rs.135,000 crore | Ø This is largely an outcome of SEBI imposing heavy costs of up to $1000 per P-Note opened and banning naked P-Notes
Ø Apparently, a lot of the P-Note volumes have shifted to Singapore and are not trading on the SGX Nifty
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| Ø IndusInd Bank official announces likely merger with Bharat Financial | Ø The merger is likely to be through a stock swap and will be earnings accretive for both the parties
Ø IndusInd will benefit from the access to rural markets while Bharat Financial gets a sounder balance sheet
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| Ø ITC to undertake a mega-investment of Rs.25,000 crore across product lines | Ø Most of the investments over the next few years will be enhancing the market share of the non-tobacco business
Ø Tobacco is still the most lucrative for ITC and the idea here is to gradually reduce the dependence on tobacco products
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| Ø North Korea geopolitical risk continues to get compounded | Ø Despite sanctions, North Korea continues to fire its missiles over the territories of Japan and South Korea
Ø China continues to be a key ally of North Korea and any UN sanction will require veto from China and Russia
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| Ø Indian banks to require additional $65 billion capital for Basel III | Ø The government will provide just $11 billion and the balance will have to be raised from the open markets
Ø That is the challenge for Indian banks as they are already sitting on gross NPAs of over 12% as on March 2017
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| Ø Tata Steel to exit entirely from the British Pension Scheme | Ø Tatas will shell out nearly $725 million plus a 33% stake in the BSPS to facilitate its exit from the scheme
Ø This will enable Tata Steel to go ahead and sign its JV agreement with Thyssen Krupp of Germany
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| Ø Petrol and diesel prices have touched a 3-year high in India | Ø This is ironic since the crude continues to hover around $50 and the real pressure is coming from government excise
Ø Oil is still out of GST and hence states have been quite aggressive hiking their VAT, which is a state subject |
| Ø Mutual Fund received nearly Rs.5206 crore in August via SIPs | Ø A total of 700,000 new SIPs were opened during the month of August, most from second tier cities
Ø There are already nearly 1.4 crore SIPs running and is proof of the rising equity cult among the retail investors
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| Ø Interglobe plans to raise nearly Rs.3945 crore through QIP placement | Ø The funds will be largely utilized for expanding its fleet and to finance the aircraft ordered
Ø Indian aviation market is growing at 25% annually and airlines are trying to make the best of this big growth story
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| Ø Hindalco plans to repay debt to the tune of Rs.1100 crore this month | Ø This comes on top of the Rs.7815 crore of debt that the company had repaid to its lenders till August
Ø This is good progress for Hindalco as its net debt is at just about Rs.10,000 crore giving it giving good operating leverage
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| Ø Vikram Pandit expects nearly 30% of the IT jobs to vanish in 5 years | Ø The combination of automation, machine learning and IOT is likely to make most IT jobs redundant
Ø However, experts like Jamie Dimon feel that automation will eventually create more jobs that it destroys
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| Ø Japan has committed billions of dollars to the Indian economy | Ø Apart from a huge investment in the Bullet Train project, Suzuki is also investing in the Gujarat plant
Ø Toshiba and Denso will also be involved in a project to manufacture lithium batteries
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| Ø Yield on Indian debt benchmark crossed that of Indonesia | Ø This was largely an outcome of Indian inflation going up and Indonesian inflation coming down
Ø For over 2 years, Indonesia has offered the best debt yield and now debt inflows will gravitate more towards India
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| Ø WPI index of inflation also showed a rise of 3.24% for August | Ø Like in case of CPI inflation, WPI inflation was also largely driven by the impact of food inflation
Ø WPI inflation is more critical from producer prices point of view and the GST impact is surely showing
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| Ø India’s GDP growth to dip below 7%, says DBS | Ø The UNCTAD had recently downgraded India’s GDP growth to 6.7% on the back of weak Q1 GDP numbers
Ø With Q1 growth at just 5.7%, there are concerns that the note ban and GST may further put pressure on GDP growth
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| Ø Tata Sons plans to change its legal status to prevent Mistry from selling | Ø Tata Sons may shift its status from a Public Limited Company to Private Limited company and the vote is on Sep 21
Ø This conversion will make it impossible for Mistry to transfer their 18% stake in Tata Sons to outside parties
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| Ø Former CEA, Shankar Acharya, advises against rupee appreciation | Ø Dr. Acharya has called for RBI to stem rupee appreciation to protect the interests of exporters
Ø According to Acharya, one of the reasons for the weak GDP is weak exports which also creates a weak SME syndrome
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| Ø SEBI is looking at ways to remove clearing function out of brokers | Ø This is in tune with the global standards where clearing is handled by banks and custodians
Ø This will ensure that clients do not have to wait for 2 days for settlement and there is greater transparency |
