With the Dow down by 2.41% and the NASDAQ down by 4.67%, there was no way the Nifty was going to be in positive territory. Nifty reacted negatively to global cues on Thursday and opened weak and also failed to show any signs of recovery. Bharti corrected sharply on the back of weak Q2 expectations even as other stocks like Indiabulls Finance and Tata Motors also gave up value. The A/D ratio at 2:5 showed all round selling even as more than 300 stocks in the BSE-500 touched 52-week lows. Early results for Q2 indicate an impact of the global trade war and also pricing pressure due to oil.

When an industry is under a cloud, the best way to make a statement on liquidity is via a buyback of commercial paper. Edelweiss bought back Commercial Paper (CP) to the tune of Rs.1,000 crore issuing a statement of financial health to the market. Earlier IIFL Finance and JM Financials had bought back CPs to the tune of Rs.2,600 crore. Buybacks of CPs are seen as a confidence building measure at a time when most NBFCs are struggling to match their cash flows and their liabilities. Markets had de-rated most NBFC stocks on fears that the liquidity crunch might really hit them hard.

There is a positive side to the weak rupee as it has boosted remittances of money into India. One positive feature of the weak rupee has been that there is a spurt in inward remittances from abroad. India is expected to receive inward remittances of $76 billion during 2018, which is 10% more than the previous year. Normally, the inflows become active when rupee weakens because NRIs can now earn their fixed return on deposits plus on rupee appreciation. NRIs also have access to cheap funding from global banks and this becomes a double benefit of higher returns and a hardening currency.

There was good news and bad news on Bharti. The bad news was that profit pressures continued but the good news was that the profits had beaten market expectations. Bharti Airtel reported 58% fall in net profits for Q2 on pricing pressures. Net profits for the second quarter were down by 58% at Rs.249 crore as competition from Jio put the brakes on profit growth. Even total revenues were down by 6% at Rs.20,422 crore in Q2. Due to higher competition, the Average Realization per Unit (ARPU) from mobile services came in lower at just Rs.101. Bharti’s Africa revenues showed a robust 10.6% growth during Q2.

Now there are bizarre things happening at the NCLT. Ruias, the promoters of the Essar Group, have made an offer to lenders to buy back Essar Steel at Rs.54,389 crore. The promoters offered to pay the lenders Rs.54,389 crore which is slightly higher than the bid made by Arcelor Mittal. They have also made a request to NCLT to withdraw the company from insolvency proceedings. While the Committee of Creditors (COC) is empowered to consider this offer, it could make a mockery of the NCLT resolutions process. Arcelor Mittal has already protested as a misuse of the NCLT process by promotes to take haircuts and get back their company through the back door. This could entice most business houses to retail control by giving an offer to creditors at higher than the last bid.

Yes Bank reports lower profits in Q2 on slippages and higher provisioning. The 3.8% fall in profits to Rs.964 crore was largely due to a one-time provisioning on corporate bonds on account of higher bond yields. This MTM provision was to the tune of Rs.252 crore. Gross NPAs of the bank went up sharply from 1.35% to 1.60%. The bank showed a 28% growth in net interest income (NII) to Rs.3,891 crore. Yes Bank has an Rs.2,621 crore exposure to IL&FS which is classified as Standard as per RBI norms. The final RBI divergence report on NPAs is still awaited.