Nifty and Sensex ended the day almost flat

After 3 days of extreme volatility, the Nifty and Sensex ended the day almost flat on lack of triggers. The A/D ratio said it all as the advances and declines were almost at par. The pressure came from IT stocks as the rupee strengthened on Thursday. The metal pack saw some positive ramifications after the Chinese government promised an aggressive stimulus plan. Meanwhile, the rupee strengthened by 50 bps as macros show signs of improvement. The risks to the Yuan waned after the Chinese stimulus. The lower prices of crude led to exporters selling dollars which helped the rupee to strengthen.

Even as housing finance companies struggled, HDFC reported 25% jump in profits in the second quarter to Rs.2,467 crore. With little risk of maturity mismatch, HDFC has flattered the street with sharp growth in profits. Total income during the period was also higher by more than 25% at 11,257 crore. The lender has managed to consistently maintain its NIMs at healthy levels and has managed to keep its gross NPAs well in control. HDFC also has a lot of hidden value in its stake in HDFC Bank, HDFC Life and HDFC AMC, which are not yet fully factored into the stock price of HDFC.

October saw biggest FPI exit from emerging markets since taper tantrum in 2013. It is estimated that money managers pulled out nearly $17 billion from EM equities in the month of October alone. China and India were impacted but emerging market debt saw inflows to the tune of $9.5 billion on higher yields. Emerging markets across Asia and Latin American bore the brunt of the FPI selling. Indian markets saw outflows of nearly $6 billion in the month of October alone in equity and debt put together. Total FPI selling in Indian markets since January has crossed Rs.1 trillion.

Now IPO investors will be able to pay for their investments with their mobile UPI codes. SEBI may introduce UPI for retail investors in IPOs effective from January. The idea of Unified Payment Interface (UPI) payment for IPO investors was raised in the SEBI board meet when the idea of compressing IPO allotment time to 3 days was first mooted. UPI is part of the digital effort where transfers of funds can be done via a unique bank code. It is free of cost and it also does not require the normally banking channels like NEFT, IMPS and RTGS. One needs to see the practicality of the process.

CRISIL expects Indian aviation companies to report losses of RS.9,300 crore in FY-19. According to a report put out by CRISIL, this could be the worst loss by aviation companies in the last decade, largely driven by stiff price competition and higher ATF prices. Airlines have also been hit by higher currency losses. The last time the airlines posted a big loss was in FY-14 when it had posted a loss of Rs.7,300 crore but that was when the crude prices were above $100/bbl. The big challenge in the last few months has been that aviation companies have seen a distinct narrowing of spreads between the RASK and CASK. This spread has been hit by the falling prices and the rising costs. The government duty structure on ATF has also been skewed against the airline companies. Globally airlines are in profits.

RBI board will meet again on November 19th 2018 because the October 23rd board meeting was inconclusive. There have been differences with the government on the strategy to be adopted for the NBFCs and in terms of banks under PCA. While RBI was all for discipline on both fronts, the government is keen to push growth and prevent a liquidity crisis in NBFCs. The difference is quite common and has happened in the past since the RBI puts banking strength and price stability above growth while the government is keen to push growth. It may be an interesting situation ahead of elections.

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