The 2 day meeting of the Monetary Policy Committee (MPC) will commence on 04th April and will culminate in the monetary policy on 05th April. While there is a virtual consensus on the status quo being maintained on repo rates, the markets will be interested in other areas. Firstly, the markets will look at the inflation guidance in the light of food and oil inflation. Secondly, the markets will also be keen to understand RBI’s monetary policy outlook in the light of Fed hawkishness. Lastly, the markets will also be looking at the RBI plan of action to address the rising bond yields.
The IPO of ICICI Securities lists on the bourses on Wednesday, 04th April. This will be the first major IPO in the last 3 years that actually got undersubscribed on valuation concerns and on weak market visibility. There are also concerns that the buoyancy in the broking industry of the last 4 years may not last much longer due to tough market conditions. But above all the massive overhang over the ICICI group will be hanging over the ICICI Securities listing after the group’s CEO has embroiled in some serious questions about standards of corporate governance and the arm’s length relationship with clients.
JSW Steel has purchased a 26% stake in Numetal to facilitate their bid for Essar Steel. The bid was original rejected because a member of the Ruia family had a stake in Numetal. Essar is currently under insolvency resolution and there have been important bidders including Numetal and Arcelor Mittal. JSW Steel is entering the deal only as an investor and hence it will not get a board seat on Numetal. While Numetal has submitted the fresh bid, it has also simultaneously challenged the rejection of its first bid since Rewant Ruia (son of Prashant Ruia) did not have a control stake in Numetal.
In the financial year just concluded, India spent a total of $18 billion on construction of roads. This is nearly 44% more than was spent a year ago. In a bid to boost economic growth, the government has envisaged building a total of 83,677 KM of roads by 2022. For a long time it has been spoken about how the thrust on roads could improve the annual GDP growth by nearly 2%. This big thrust may actually give a push to GDP growth. The government added nearly 1600 km of roads in this year with orders for another Rs.17,000 crore of roads already being given out by the Ministry.
In a no-holds barred interview to the press, Mr. N Vaghul has reiterated that the ICICI Board could have done a much deeper inquiry on the conflict of interest allegation. However, Vaghul continued to underscore his full faith in the ICICI Board as well as the current CEO of the bank. According to Vaghul, the Rs.3250 crore was not a fresh loan given to Videocon but was more in the nature of a consolidation of existing loans. To that extent the question of quid pro quo did not arise in this case. The whole case came out in the open when a whistle blower had alleged that the business dealings between Mr. Dhoot and the CEO’s husband and the Videocon loan turning bad reeked of a quid pro quo. While the stock of ICICI Bank did show some respite, the stock still looks quite fragile and vulnerable to selling.
According to a note put out by Deutsche Bank, the big trade in the last few days in the bond markets appear to be fund managers buying $745 billion of emerging market bonds as a proxy for a dollar short position. The trade has been lucrative till date earning nearly 13% returns in the last 1 year due to consistent weakness in the Greenback. However, analysts have also warned that since most of the EM bond investments are unhedged it could create a crisis like situation if the dollar was to strengthen. In the last year alone 50% of the EM bond gains came purely on the back of a weak dollar!
