NSE and BSE suspended the trading membership of Karvy Stock Broking effective from 02 December. This would mean that customers of Karvy cannot place any buy or sell orders in cash / F&O / CD / IRFs. Existing open positions in F&O and CD will be allowed to be squared off while customers of Karvy will have to shift their trading accounts to another broker to be able to execute fresh orders. In a swift move, SEBI ensured that 90% of the investors managed to get the shares legitimately due to them from Karvy. This will create another issue because the bank loans will now become unsecured loans to Karvy.
According to a report by Anarock, nearly 62% of the total real estate loans of $93 billion are completely stress free. Of the balance $35 billion worth of loans given to real estate developers, Anarock estimates that nearly $21 billion of loans of loans do have some kind of stress but they could be entirely or substantially resolved. The stress on these loans is largely on interest and not on the principal component. Lastly, there are about $14 billion worth of realty loans which are under severe stress due to excess leverage and may have to be written off. That would still be a big hit on banks / NBFCs.
The NCLT admitted RBI’s plea for insolvency proceedings against Dewan Housing. In the past, there was no provision to refer an NBFC to insolvency under the Insolvency and Bankruptcy Code (IBC). However, a special clause was inserted into the IBC wherein the RBI was authorized to refer an NBFC to bankruptcy if the situation demanded and there was systemic risk. DHFL owes nearly Rs.90,000 crore to banks and NBFCs and most estimates are pegging the recovery rate at lower than 40%. That would mean that banks and NBFCs will have to take a huge write off in their books on account of DHFL.
CRISIL has cut India’s full year GDP forecasts to 5.1% from its original estimate of 6.3%. With the GDP growth at 4.75% in the first half, CRISIL is pegging the second half growth at just about 5.35%. That is understandable considering that the IIP and the core sector growth have slipped into negative territory for two months in succession. The positive outcome could be that this would impel the Monetary Policy Committee of the RBI to give a dovish outlook apart from cutting rates by 25 bps. The MPC meeting will begin on 03 December and the monetary policy will be announced on 05 December.
The markets closed with very marginal gains on Monday. The overhang of the GDP number and the uncertainty over the trade deal between the US and China kept the markets on tenterhooks. The GDP number was lower but along anticipated lines and that ensures that there were no negative surprises. There was no surprise as the big rally came from telecom stocks on Monday after the massive tariff hike ranging from 15% to 40% announced by the telcos. While Airtel and Vodafone could get some respite, it is Reliance Jio that looks set to benefit the most from this tariff hike. Bharti and Vodafone have combined dues of nearly Rs.72,000 crore on account of adjusted gross revenue (AGR) charges, apart from spectrum usage charges payable. This could help Jio consolidate its position in the industry.
Saudi Arabia has been calling upon OPEC and Russia to increase their supply cuts. The supply cuts have been static at around 1.2 million bpd for some time now and Saudi Arabia wants this supply cut hiked to at least 1.6 million bpd. Saudi estimates that the supply cut would be sufficient to keep prices at around $70/bbl for the Brent crude, which will be instrumental in holding aloft the valuation of Saudi Aramco. The Aramco IPO values the company at a record $1.71 trillion and a strong oil price scenario will help push the valuation of Aramco closer to the $2 trillion; something Prince Salman had been targeting.
