Weekly Capsule (Feb 04– Feb 08) and Impact Analysis

News Announcement Impact Analysis
  • Nifty and Sensex plunge on Friday led lower by Tata Motors
  • The Tata Motors stock corrected nearly 18% in a single day after a record loss of Rs.27,000 crore in Q3
  • The markets were also roiled by the growth downgrade of EU economies and the ongoing trade war
  • Edelweiss and L&T Finance clarify to BSE after ADAG allegations
  • ADAG group had alleged that Edelweiss and L&T Finance had deliberately dumped shares to depress prices
  • Both companies have clarified that the pledged shares were sold in the market only after repeated notices of default
  • RBI cuts repo rates by 25 bps in its February monetary policy
  • The repo rates were cut by 25 bps to 6.25% taking the reverse repo to 6% and the bank rate to 6.5%
  • In addition, the RBI also changed the stance of the policy from “calibrated tightening” to “neutral”
  • RBI relaxes ECB borrowing rules for potential IBC bidders
  • Now potential bidders will be permitted to fund their target company loan repayments using ECB borrowings
  • This will be an exception only for IBC since ECBs cannot be used to repay domestic loans currently
  • Banks can now lend to NBFCs based on variable risk weights
  • Currently, all bank lending to NBFCs attracts mandatory 100% risk weight for capital adequacy purposes
  • Now the bank has the leeway to assign risk weights to the NBFC portfolio based on credit ratings
  • RBI now permits unlimited group exposure to FPI inflows into debt
  • Currently, FPIs can only up to 20% of their total investment in Indian corporate bonds into a single business group
  • This relaxation will ensure that FPIs are not compelled to diversify their debt just for regulatory purposes
  • Vodafone idea reported record losses of Rs.5,005 crore in third quarter
  • This is much higher than the Rs.4000 crores of losses reported by Vodafone idea in the previous quarter
  • With the lowest ARPU of Rs.84, Vodafone Idea is literally losing money on every new client acquired and serviced
  • Tata Motors reported net loss of Rs.27,000 crore in Dec quarter
  • This was due to an extraordinary write-off due to asset impairment in the books of Jaguar Land Rover
  • JLR is under stress due to the impending BREXIT well as due to slowdown in demand in its core market of China
  • Telecom companies start shedding of low margin customers
  • Bharti Airtel and Vodafone have cancelled over 10 crore customers with monthly billing of less than Rs.35
  • Jio is now the only company that is willing to offer absolutely bottom rates for low value customers
  • Global ecommerce giants restructure their vendor ownership
  • There has been a rapid restructuring of the vendor relations with Amazon taking the lead in the process
  • Its JV with Catamaran has reduced its stake to below 25% as per the new ecommerce policy
  • Anil Ambani’s RCOM files for bankruptcy in NCLT
  • With the process of sale to Reliance Jio taking longer than expected, the creditor pressure has been building up
  • The company still has 270 days time to work out a resolution and it could be done with Reliance Jio itself
  • RBI governor underlines government has full freedom on reserves
  • The government has been demanding a higher share of RBI reserves this year to bridge the resource gap
  • The proposed RBI board meeting for interim dividend has been put off now to February 18th
  • Banks pressure Essar Power on personal guarantees given
  • ICICI bank and IDBI have moved the DRT to cash the personal guarantees given by Ruias for the debt of Essar Power
  • If the guarantee is invoked then the Essar group could have trouble raising requisite resources for Essar Steel
  • Saudi Arabia pumped just 10.24 million bpd of crude in January
  • This is lower than the eligible quote of 10.331 bpd that is allowed for Saudi Arabia under the OPEC agreement
  • Being the world’s largest oil exporters, Saudi actions still have a major bearing on the oil prices globally
  • Banks may fall short of deposit collections by $75 billion this year
  • Banks need deposit inflows of $350 billion in next two years against the regular annual flow of $100 billion
  • This has been necessitated because the growth in deposits has not kept pace with loan growth in last few years
  • US reports a fall in trade deficit for the first time in 6 months
  • The sharp 11.3% fall in trade deficit in January was largely driven by reduced imports of phones from China
  • Global markets have interpreted this as a sign of a slowdown in global trade with implications for GDP growth
  • Mutual funds make a request to SEBI to give more time to Zee to pay its debt
  • Mutual funds have exposure to the tune of Rs.8000 crore to the Essel Group and this could be a setback for them
  • Subhash Chandra has agreed to restructure and repay all their debentures by September this year, subject to SEBI approval
  • Government may shift to pre paid power to reduce losses
  • Currently, power suppliers owe close to $5.7 billion to power producers in the form of unpaid dues
  • In India, nearly 20-25% of the power gets lost in transmission due to theft and pilferage making the problem worse

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