Weekly Capsule (Jul 24 – Jul 28) and Impact Analysis
| Major News Item | Impact Analysis |
| Ø Tata group to integrate technology units under TCS | Ø Most of the IT, technology and new age initiatives of the Tata Group will be integrated with the profitable TCS
Ø This is part of Chandra’s larger plan to shift the focus of the group towards profitability, ROI and market leadership
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| Ø CAG points at massive revenue under-reporting by telecom companies | Ø According to CAG, under-reporting of revenues by Rs.61,000 crore had led to tax revenue loss of Rs.7700 crore
Ø This was done through accounting adjustments for discounts and free talk-time as well as netting of infra revenues
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| Ø IMF expects the US economy to drive growth to a lesser extent | Ø As per the IMF, the world will be looking to China, Western Europe and Japan to actually drive growth in 2018
Ø IMF expects the world economy to grow at around 3.5%, while the US will grow at just above 2% per annum
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| Ø HDFC Bank saw a marginal rise in NPAs in the June quarter | Ø Gross NPAs were up from 1.05% to 1.24%, which is still very healthy from overall banking asset stress standards
Ø However, HFDC Bank feels that this more of a one-off impact and is likely to normalize from next quarter onwards
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| Ø Goldman expects world oil demand to peak by around 2024 | Ø Goldman expects this demand peak to be the result of slower economic growth and higher oil prices
Ø But the big game-changer for oil could be the demand for electric cars which is likely to grow 40-fold by 2030
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| Ø Fed maintained status quo on rates at its July FOMC meeting | Ø The decision was along expected likes after Janet Yellen’s testimony before Congress earlier in July
Ø However, the Fed has emphasized that it will embark on debt unwinding as early as August this year
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| Ø Nifty crossed the psychological 10,000 mark last week | Ø The rally beyond 10,000 was largely tentative as the Nifty is still to break the level convincingly with volumes
Ø The key drivers of the Nifty scaling 10,000 were heavyweight stocks like Reliance Industries, HDFC Bank and HUVR
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| Ø Demonetization may have led to a massive shift to financial assets | Ø According to RBI Deputy Governor, Dr. Viral Acharya, real assets were less in demand post demonetization
Ø That also explains why banks and brokerage houses have done exceptionally well as the real beneficiaries of this shift
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| Ø Axis Bank and ICICI Bank continued to disappoint on Q1 results | Ø Both the banks saw a rise in their stressed assets and that has proved a drag on their profitability
Ø Axis and ICICI are among the two most stressed private banks with others having NPAs less than 2% on an average
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| Ø Vedanta saw its first quarter profits doubling to Rs.1525 crore | Ø This was largely driven by higher price realizations across key Vedanta products like zinc and aluminium
Ø Metal markets have also got a sentimental boost after China reported better GDP and industrial growth performance |
| Ø Cochin Shipyards to launch IPO in the first week of August | Ø The company proposes to raise Rs.1470 crore towards building a dry dock and a ship repairing facility
Ø The IPO will be a mix of fresh issue and an offer-for-sale with nearly 2/3rd going towards a fresh issue
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| Ø A poll of economists has pointed towards an RBI rate cut in August | Ø Lower inflation and weak IIP growth has already made a strong case for the RBI to cut rates
Ø The Fed status quo could be an added advantage but the MPC will have to first change its monetary stance
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| Ø HDFC has cleared a stake dilution of 9.57% in HDFC Life | Ø HDFC Life will be the third life insurance IPO after ICICI Pru Life and SBI Life, with Pru already being listed
Ø This will be the first step for HDFC Life before the merger with Max Life is once again considered
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| Ø Wilmar raises stake in Renuka Sugars up to a total of 38% | Ø This allotment of compulsorily convertible preference shares was approved by the Renuka Board this week
Ø Renuka is saddled with debt of over Rs.6000 crore and this fund infusion will give the company a breather
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| Ø Too much of rains may pose a problem this year | Ø It is estimated that nearly 2.23 million hectares of cultivable land may have been lost due to excess rains in some parts
Ø This could have a major impact on the supply of Kharif crops this year and consequently on food inflation too
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| Ø L&T reported a 46% rise in net profits at Rs.893 crore in Q1 | Ø The bigger key takeaway for L&T could that the top-line has also grown at a healthy clip of 10% this quarter
Ø A revival in the fortunes of L&T is crucial to the hopes of a revival of the capital cycle in India
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| Ø Amazon global reported a 77% fall in net profits to $197 million | Ø Amazon managed to buy revenue growth of 25% in the quarter with its “Revenue First” policy
Ø However, Jeff Bezos has stuck to his commitment of investing $5 billion into its India operations
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| Ø Nitish Kumar won the confidence vote in Bihar after his resignation | Ø Nitish decided to shift loyalties from Lalu Yadav to the BJP to overcome the corruption allegations against Lalu’s son
Ø This move virtually gives the BJP full control over the Hindi Belt ahead of the central elections in 2019
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| Ø Moody’s places Lodha Developers on a rating watch for its $200 million debt | Ø The $200 million debt issued by Lodha Developers matures in the year 2020 and shows high probability of downgrade
Ø The action was triggered by Lodha asking bondholders to grant a waiver of restrictive covenants on the loan
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| Ø US economy reports 2.6% growth in GDP for the June quarter | Ø The big thrust to growth came from consumer spending which was up by nearly 2.8% for the quarter
Ø US economy also benefited from a sharper rise in exports as a weak dollar helped export competitiveness
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| Ø India may look to reduce the import duty on gold | Ø With a healthy current account deficit situation, there is a case to reduce the gold import duty lower from 10%
Ø Industry has been demanding 2% duty on gold imports, but the RBI is wary of a surge in gold imports |
