Weekly Capsule (Jul 03 – Jul 07) and Impact Analysis
| Major News Item | Impact Analysis |
| Ø Prime minister concludes a successful visit to Israel | Ø Mr. Modi is the first Indian prime minister to visit Israel without visiting Palestine, indicating a diplomatic shift
Ø The two countries agreed on cooperation in water treatment, agriculture technologies and defence
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| Ø Automobile sales come under pressure in the month of Jun 2017 | Ø Tata Motors, M&M and Hyundai came under pressure while Maruti and Eicher outperformed in monthly sales
Ø With GST launch on July 01st, most dealers focused on disposing off their existing inventory of vehicles
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| Ø Goldman Sachs admits to badly misjudging commodities trajectory | Ø Goldman had got its bullish call on oil wrong as US supply compensated for the OPEC supply cuts
Ø Goldman also did not anticipate the sharp cuts in copper prices as dealers started de-stocking at higher prices
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| Ø Trading in corporate bond markets touched a record Rs.4.34 trillion | Ø This mark nearly 65% growth over the previous year over the first quarter last year, with NSE dominating the market
Ø With bank funding becoming more tepid, most corporates have relied on the bond market to raise funds
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| Ø SEBI is likely to impose greater degree of accountability on rating agencies | Ø For starters, rating agencies have been asked to focus on public and non-public information to review ratings
Ø Additionally, companies will now be required to give a “No Default” declaration to rating agencies each month
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| Ø PMI Manufacturing for the month of June disappoints | Ø The manufacturing PMI came in at 50.9 for June as against 51.6 for the month of May 2017
Ø This could be partly explained by the uncertainty surrounding the GST launch which has made companies put off decisions
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| Ø North Korea successfully fired its ICBM during the week | Ø The intercontinental ballistic missile (ICBM) is an open challenge to US which wants to rein in North Africa
Ø Markets have been jittery after this event as it may force the US to consider military options
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| Ø MSEI puts off its decision to extend trading timings till 5 pm | Ø The extension of trading decision was unilaterally made by MSEI but the BSE and the NSE did not bite the bait
Ø With almost nil volumes, MSEI has little leverage and In the past exchanges have decided against the extension
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| Ø Fed minutes clearly point towards more hawkishness coming | Ø Fed members have expressed concerns over the slow pace of rate hikes considering the robust data
Ø A lot would depend on the jobs data for the month and strong data may force the rate hikes to move faster
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| Ø New project announcements have fallen to lowest level in 3 years | Ø The worrying factor is that nearly Rs.240,000 crore worth of projects have been stalled due to a variety of reasons
Ø While private sector maintained momentum, it was the government sector that faltered in new projects |
| Ø RBL Bank reports Rs.339 crore of NPA divergence with RBI assessment | Ø Divergence indicate the gap between the actual NPAs reported and the RBI assessed NPAs
Ø This problem of divergence first came to light in the case of leading private banks like ICICI Bank and Axis Bank
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| Ø RBI revises guidelines for regulating digital fraud | Ø RBI has absolved the consumer from the loss where it was caused by fraud or negligence of the banks
Ø Now the onus will be on the bank to ensure that all such cases are fully compensated within a period of 90 days
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| Ø There could be a possible merger of IDFC Bank with Shriram Capital | Ø The merger will create a Rs.65,000 crore behemoth and will be able to take on the larger banks
Ø While IDFC gets a ready rural network, Shriram gets the comfort of a much larger balance sheet
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| Ø Fed hawkishness has resulted in a rout in bond prices across the world | Ø Bond market across the US, Europe and Asia reacted negatively to Fed hawkishness as yields hardened
Ø Fed members have been calling for quicker rate hikes and the jobs data on Friday could be critical
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| Ø Essar Steel adopts the legal route against the insolvency proceedings | Ø According to Essar the biggest loss happened due to government cancelling gas supply contract to Hazira
Ø The other 11 stressed companies may also explore the legal route to prevent summary liquidation of assets
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| Ø Indigo has been making a pitch to buy Air India’s global operations | Ø Indigo has clarified that it will not be keen on the domestic operations, wherein Indigo already has 40% market share
Ø The global network and code sharing arrangement of Air India gives an automatic diversification to Indigo
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| Ø GST could lead to inflation in the short term, fear experts | Ø With dual taxes in some states leading to higher end-prices, economists believe that GST could actually be inflationary
Ø Inflation was seen in other countries also that implemented GST as being a consumer tax, price impacts are immediate
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| Ø Narendra Modi and Chinese premier unlikely to meet in Hamburg | Ø The original meeting between the two leaders on the sidelines of the G-20 summit now looks unlikely to happen
Ø Both India and China are currently in a border stand-off over the Doka La pass on the border of India, China and Bhutan
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| Ø Bank credit for fiscal year 2017 showed negative growth of -2.7% | Ø This marks the worst performance in bank credit in the last 5 years and is largely due to stress on bank balance sheets
Ø However, this is also indicative of increasing disintermediation as companies increasingly prefer the bond market
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| Ø Microsoft to lay off nearly 3000 employees globally | Ø The idea is to lighten the ship and bring about a greater focus in operations and ensure better customer service
Ø This is less than 10% of the total workforce of Microsoft and over 75% of the job cuts will be outside the US
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| Ø GST may be an added incentive ahead of the latest Gold Bond issue | Ø Gold coins invite a GST levy of 3% which can be overcome through gold bonds making their stronger
Ø The RBI has anyways been trying to reduce the focus on physical gold and prefer non-physical gold |
