Midnight News Update – Aug 23rd 2017
The IMF is of the view that the Indian economy is in a much better position to weather the storm of Fed tightening compared to other Emerging markets. According to Ratna Sahay of the IMF, the political certainty in India is a major advantage as decisions can be quickly taken on the strategy adopted to let the currency take some of the shock of the Fed taper. Sahay also added that the healthy inflow of FPI and FDI investments will also ensure that any risk-off trade that results from the taper does not overly impact the Indian economy. High real rates in India could be another shield against the taper.
The Infosys interim CEO, U B Pravin Rao, has warned of tough times at the company even as he has sought to assuage the fears of the employees over the uncertainty prevailing in the company. It may be recollected that Vishal Sikka had stepped down in the aftermath of differences with Narayana Murthy and the stock of Infosys has lost nearly 18% since then. It is also doubtful how much longer the board will be able to function as Murthy had come down quite heavily on the board members including Mr. R Seshasayee, the chairman of the Board. Vishal Sikka was formerly with SAP AG of Germany.
Oil prices moved up as there were concerns over US supply and Libya continued to be hit by geopolitical instability. The US has seen a decline in its crude stockpiles. Libya has been trying to gets its largest oilfield up and running but its performance has been quite spasmodic. While Brent stood at $51.80/bbl, the WTI quoted at below the $48/bbl mark. The US crude stockpiles were down in the last 7 straight weeks and are likely to fall in the 8th week too. The OPEC has already been supporting the price crude with 1.8 million bpd cut in oil production and it is looking at expanding its cut.
Effective from August 2017, investors and traders in the derivatives market will have the option to no exercise their equity options. Currently, all open long positions pertaining to in-the-money options are automatically exercised by the exchange and the profits are credited to the account of the trader. Effective August, the buyer of the option can indicate his intention not to exercise a particular in-the-money option. Under the new option, the trader is required to specifically mention that he does not intend to exercise the option. This is likely to benefit the brokers and the traders.
The Chairman of Tata Sons, Mr. N Chandrasekharan, has confirmed that Tata Motors is already making earnest efforts to turn around its domestic operations. Over the last few years, the profits of Tata Motors have been entirely driven by Jaguar Land Rover, while the domestic business has been consistently losing market share; both in the passenger car segment and the CV segment. The CEO of Tata Motors has already indicated the urgency by focusing on cutting costs, focusing on new launches and improving the supply chain management. The idea is to make the domestic business of Tata Motors profitably on a stand-alone basis and not dependent on the JLR business. Tata Motors currently earns 80% of its overall revenues and 100% of its profits purely from the JLR business.
Reliance will enter the power storage business in partnership with BP. The idea is to leverage on the fast-growing renewable energy space in India. It will set up energy storage solutions near to solar and wind farms as storage is the biggest challenge for renewable energy. Globally, companies like Royal Dutch Shell, Total and Exxon are heavily investing in renewable energy to de-risk their core business. Both BP and RIL have a huge stake in the old economy energy business and this diversification will be a logical forward integration for RIL. Renewable energy has been a major thrust of the Modi government.
