Even before the actual Confidence Vote happened, it was a foregone conclusion. The vote of 325/126 in favour of NDA was merely a formality. Nifty crossed the 11,000 mark and saw renewed buying in Bajaj Finance and Bajaj Finserv even as Reliance Industries continued to make new highs. Rupee strengthened by 29 basis points on Friday to close at Rs.68.85/$ The sharp revival in the rupee was a combination of RBI support for the INR at 69 and the confidence that the mere formality of the trust vote. The only possible concern for the ruling NDA would be the Shiv Sena choosing to abstain from the vote.
The 28th meeting of the GST Council was momentous in more ways than one. GST Council announced massive rate cuts and rationalizations costing Rs.7000 crore. Many products of mass consumption and aspirational products of mass use have been moved to the lower slabs. Some products of mass consumption like sanitary pads and stored milk were brought under 0% GST. Interestingly, TVs, washing machines were removed from the 28% bracket for demerit goods and reduced to 18%. GST Council will meet next on August 04th with the focus entirely on the MSME sector.
Reliance, Infosys, TCS, and Bharti asked to split post of Chairman and MD. This is an outcome of the Corporate Governance Committee recommendations, which had clearly called for the splitting of the post of the Chairman and MD into 2 separate roles to avoid conflict of interest and ensure professional management. This is part of SEBI governance norms and a total of 291 companies need to adhere to these norms by April 2020. For the top-500 entities, the chairman will have to be a non-executive director. The top managements of large companies could see some interesting shifts.
HDFC Bank reported 18% rise in net profits in Q1 to Rs.4600 crore. The only disappointment for the market would that it was lower than their estimates and this is the first sub-20% growth for HDFC Bank in the last 4 quarters. Otherwise, the top line and bottom line growth have been robust considering that HDFC Bank has the largest loan book among the private sector banks and the second largest in India. The bank took a hit of Rs.391 crore as mark-to-market losses on its corporate bond portfolio due to rising bond yields. NPAs at the gross and net levels continue to be under control.
As the global turmoil continues, the world will be watching Iran and China. Iran has warned Trump over his attempts to throttle Iranian oil exports by imposing sanctions on Iran. This will make it impossible to export oil legally. Iran has hinted that it controls the Straits of Hormuz, which is the passage for 30% of world oil movement. Any disruption here could have serious consequences for oil prices. Chinese Yuan devaluation may be hitting a real bottleneck for now. This came after objections from Trump that China was deliberately sliding its Yuan to boost exports. However, the Yuan has been managed better this time, compared to the Yuan shock of 2015. Hence the shock after effects of the Yuan weakness may not be as violent as it was in the year 2015.
Finally, there is some good news for Bajaj Auto. Apart from a turnaround in its Africa exports, Bajaj Auto is also eyeing 20% of domestic market share in next 2 quarters. Bajaj Auto’s market share in the domestic market is currently at 16.3% and it ranks 4th in the 2-wheeler space in terms of market share after Hero Moto, Honda and TVS Motors. It had reported 39% growth in sales in the first quarter. Once a leader in the two wheeler market; Bajaj Auto has been gradually losing market share in the Indian market. Currently domestic sales account for just about half of its total sales of two wheelers.
