SEBI has announced additional risk management measures for the F&O segment with respect to collection of margins and calculation of liquid net worth. The big change is that now brokers are required to deposit the SPAN margin and the exposure margin with the clearing corporation. Currently, brokers are required to only deposit the SPAN margin statutorily while the exposure (extreme loss) margin is at the description of the broker. This is especially likely to be negative for the option writers who purely pay SPAN margins to the broker. This could have an impact on F&O volumes.
Just a couple of days after Liberty became the highest bidder for Bhushan Steel, NCLT has asked Binani to consider the offer made by Ultratech. While Dalmia Cements had put in the highest bid for Binani Cements in the NCLT tendering process, Ultratech then decided to offer a bid that was nearly Rs.1000 crore higher to Binani outside the purview of the NCLT. While the NCLT has negated any possibility of going outside the ambit of NCLT, a higher bid will make sense for the company promoters and to the external lenders, who will get a much better price for their loans.
Moody’s has sounded a note of caution that the final push to clean the books of banks is likely to worsen the bad debits situation of Indian banks. The New Stressed Assets Framework is likely to be the basis on which the final push will be given and that is likely to make a substantial dent on bank profitability. Under the new framework, a large number of restructured loans could be reclassified as NPAs and that could really hurt profitability. In case of PSU banks, the New Framework could spike NPAs by 400 basis points while in case of private banks, the spike could be 200 basis points.
Hero Motocorp surpassed analyst expectations and posted the highest quarterly profit growth in 2 years. Net profit for the quarter was up by 34% at Rs.967 crore. Revenues were also up by 23.7% at Rs.8564 crore on the back of robust rural demand and a pick up on consumer spending in the semi urban and urban areas too. Hero Moto also became the first 2 wheeler in global history to sell 7.5 million two-wheelers in a single year. Operating profits at Rs.1370 crore were up by 2.6% even as the Operating profit margin (OPM) moved up from 13.8% to 16% in the fourth quarter.
When the Fed concludes its meeting, the broad consensus estimates put out by Bloomberg appears to hint at a status quo on rates. But the real challenge could be how the Fed will deal with the 2% inflation target being breached. More than the rate decision, the global markets are more interested in reading the outlook for Fed rates. The Fed is still undecided between 3 rate hikes and 4 rate hikes during the year. With one rate hike already done in March, a rate hike in May would be seen as a clear indication of the Fed veering towards 4 rate hikes during the calendar year. In fact, the probability of 4 rate or more rate hikes during the calendar year 2018 has shot up from 20% to 38% in the last 1 month. A sharper than expected Fed rate hike will result in risk-off trade, which does not favour EMs like India.
Even as the markets obsessed over the resignation of the CEO Aditya Ghosh, the real strain on Indigo’s performance was evident in the fourth quarter numbers. Net profits dropped sharply by 73% to Rs.118 crore in the fourth quarter. The culprit was the 33.5% rise in fuel costs during the quarter. With competitive pressure mounting, the average fare realization per passenger has also been falling gradually. Indigo has already been in the news for all the wrong reasons due to a mix of bad customer management, frequent staff run-ins and the grounding of its planes.
