The Sensex rallied sharply by over 267 points on Wednesday on the back of the MSP announcements at sharply higher levels. This is in line with the commitment given in the Union Budget 2018 that the MSP would be fixed at 150% of the cost of production. While the government has confirmed meeting this commitment, it has not disclosed granular details of cost of production. The rally was led by consumption stories like FMCG and autos as a higher MSP is likely to be value accretive for these consumption driven sectors. The government had committed to double farm incomes by 2022.
SEBI has sent show-cause notice to NSE in the co-location case after investigations had proved that there was unfair access given to a handful of brokers. Senior former employees of the NSE like Ravi Narain, Chitra Ramakrishnan and a few other are already under a cloud since this misuse of co-location actually happened at a time when they were at the helm. The co-location revenues of NSE continue to go into an escrow account pending investigation which is one of the main reasons that the IPO has been indefinitely delayed. A lot will depend on how Vikram Limaye handles the crisis.
Mutual funds saw a 20% rise in assets in April-June quarter. This is a trend that has been sustaining for quite a few quarters in the Indian markets. With an overall AUM of Rs.23.2 trillion, the growth in mutual funds has been largely driven by retail appetite for equities and that has been predominantly through the SIP route. Out of the total AUM, nearly 1/3rd is taken by equity funds and another 1/3rd is taken by debt funds. The remaining AUM is split between all other categories of mutual funds. Not surprisingly, domestic funds have become significant players in the domestic space, almost upstaging FIIs.
Yes Bank gets SEBI nod to launch mutual funds business. Yes Bank will also look to leverage on its banking channels to develop the asset management business with a platter of equity and debt funds. In fact, one of the reasons why AMCs like ICICI, HDFC, Kotak and SBI have done very well is due to the banking business. It offers an automatic extension via captive customers to whom mutual fund products can be offered as a financial planning solution along with the bank account. For Yes Bank it will also help them to build and gradually reinforce a retail franchise, which is still quite small for them.
Five major powers may sideline the US over Iran sanctions. China, France, Russia, Germany and UK will meet in Vienna on Friday to defend the nuclear deal with Iran. None of them are in favour of Iran sanctions imposed by Trump. This could be a very significant test for the influence of the US and other nations may look towards other economic powerhouses like China and Germany to take the lead against US bullying. India also appears to be gravitating towards this bloc although it is still not too sure about its stand. The idea is that these nations are unhappy with the US on the Iran sanctions as well as for triggering a trade war with the EU and China. Even UK, which has traditionally been a staunch ally of the US, appears to be gravitating towards this 5 member bloc.
Shriram Transport clears the air on off-balance sheet liabilities. The stock had corrected sharply after Jefferies had pointed out that a guarantee given by STFL for a group company did not appear in the previous years. This created a serious question mark over corporate governance matters. Mr. Tyagarajan has confirmed that the group company is solvent enough to repay the debt of Rs.872 crore. However, the issue of not disclosing the guarantee given on behalf of its group company for its NCD issue will remain as an unfinished corporate governance issue
