Weekly Capsule (Oct 15 – Oct 19) and Impact Analysis

Posted on by Achiievers

 

News Announcement Impact Analysis
  • Nifty cracks hard on the last two days of trading during the week
  • Even as macros stabilized during the week, the Supertech downgrade took its toll on rate sensitive stocks
  • The sharp downgrade raised concerns over viability of realty stocks and also the loans given by NBFCs
  • WPI inflation for the month of September came in 5.13%
  • The higher WPI inflation was triggered by higher prices of food and fuel, in the aftermath of MSP implementation
  • WPI inflation is critical because it acts as the lead indicator for the CPI inflation, which determines the interest rates
  • Trade deficit comes in lower at $13.98 billion for the month of September
  • This is sharply lower than the $18 billion trade deficit touched in the months of July and August
  • However, the worry is that exports have shown negative growth and trade wars are taking its toll on volumes
  • MPC minutes shows a clear inclination towards inflation control
  • The MPC minutes announced on Friday almost predicated the entire rate setting exercise on the inflation rate
  • With inflation not really reacting to the MSP hike, RBI may have the incentive to hold on to rates for longer
  • Reliance announced lower than expected growth in profits and sales
  • The stock took a hit on gross refining margins in the oil business which fell to a multi quarter low of $9.5/bbl
  • However, petchem margins sustained and Jio continued to show growth despite falling ARPUs
  • India’s forex reserves see biggest weekly fall in 7 years to $394 billion
  • This is the first time in the last couple of years when the forex chest has fallen decisively below the $400 billion mark
  • This is largely an outcome of increased intervention by the RBI which has been selling dollars to stem the fall in INR
  • Arcelor Mittal may get to acquire beleaguered Essar Steel
  • Arcelor Mittal has emerged the highest bidder for Essar Steel, which has a debt burden of nearly Rs.1 trillion
  • However, the game may not over yet as Vedanta has proposed to offer a higher bid to buy Essar
  • China reported 3rd quarter GDP growth of just 6.5%
  • This is the lowest quarter growth reported by China in any quarter since the recession of 2009
  • China has been hit by the US trade war and has already initiated a major liquidity and growth push internally
  • RBI refuses to extend the tenure of the Yes Bank CEO, Rana Kapoor
  • Board had written to RBI requesting for an extension of Rana Kapoor’s tenure on business grounds which RBI refused
  • Yes Bank has already appointed Korn Ferry to look for a new CEO before the deadline of Feb-19. Stock has crashed.
  • FIIs sell nearly Rs.32,000 crore in equity and debt during October
  • The selling in October has been nearly 50% of the selling in the first 9 months of the year
  • The selling in India was triggered by higher yields in the US and concerns over liquidity and valuations in India
  • India likely to face a practical problem in GST Audit this year
  • With about 1.2 crore GST registrations and just 1.2 lakh CAs in India, there could be a major ratio mismatch
  • It would mean that each CA would have to complete 100 GST audits by October 31st, which does look impractical
  • Reliance has bought a controlling stake in DEN Networks and Hathaway
  • This purchase gives Reliance a virtual foothold over the broadband and entertainment access segment
  • RIL paid a sum of Rs.5260 crore for a majority stake and will also make an open offer to shareholders as per SEBI norms
  • Tata Sons may pick up a stake in beleaguered Jet Airways
  • The stake sale may come as a boon for Jet Airways which is already defaulting on employee salaries currently
  • Tata Sons already flies Vistaara and Air Asia and Jet will give it a global flying franchise plus domestic market share
  • Air India receives Rs.1000 crore from the NSS Fund
  • This has created a furore over the use of the National small savings of Indians, despite a government guarantee
  • Air India has debt of Rs.50,000 crore and will use these funds for working capital expenditure
  • Trump likely to make major changes to the H1-B visa rules
  • There could be stringent restrictions on the H1-B and the H4 visas for spouses, both extensively used by Indians
  • This is likely to hit the IT business, which relies on these visas, although it may also help on on-shoring
  • Infosys announced 10% growth in net profits to Rs.4110 crore in Q2
  • The good news was that there was better traction in billion dollar deals and also in digital services growth
  • OPM showed improvement of 40 bps at 24.1% but still lags behind TCS by nearly 250 basis points
  • Investment via participatory notes touches a 9-year low
  • At below Rs.80,000 crore, the P-note investments are the lowest since the financial crisis of 2008
  • Stringent SEBI regulations and end-use KYC restrictions have made P-Notes relative unattractive for users
  • Markets fret over exposure of Indiabulls Housing to Supertech
  • Among all the lenders, Indiabulls has the highest exposure to Supertech, which was sharply downgraded this week
  • The stock has crashed over 25% in the last two days as fears of a liquidity crunch loom over the NBFC sector
  • PNB likely to raise $1.2 billion via sale of non-core assets
  • PNB will be selling some of its real estate properties as well as a stake in subsidiary, PNB Housing
  • The bank had been asked to monetize its assets after the Nirav Modi fiasco late last year
  • Saudi Arabia threatens to retaliate over the Khashoggi issue
  • This warning was issued after the US threatened Saudi Arabia with sanctions after the alleged murder of Khashoggi
  • The US really cannot afford to antagonize Saudi, which remains its largest arms buyer by a margin
  • Opinion polls predict a Congress win in Rajasthan; close contests elsewhere
  • The state polls in November and December will be seen as a precursor to the general elections next year
  • Rajasthan, Madhya Pradesh and Chhattisgarh have been traditional BJP strongholds in the last 10 years