Weekly Capsule (Mar 19 – Mar 23) and Impact Analysis

News Announcement Impact Analysis
US Fed hiked rates by 25 basis points along expected lines in its March meet
  • This was the first policy announcement by Jerome Powell and the big triggers were jobs data and inflation
  • Fed has projected rates at 3.2% by end of 2020 which means the Fed could look at 4 rate hikes in 2018 instead of 3
Trump virtually triggered an aggressive trade and tariff war against China
  • The predatory tariffs are likely to impact Chinese imports to the tune of $50 billion and could invite retaliation
  • China holds over $1.4 trillion of US treasuries and that could become the stick to browbeat the US
Nifty cracked below the 10,000 mark in week end trades
  • After a gap of almost 5 months, the Nifty cracked below the psychological 10,000 mark on Friday
  • While the overall trend is not clear, as of now the market appears to have become a sell-on-rises market
Crude oil prices dropped on fears of the trade war between the US and China
  • Higher tariffs could lead to large scale job losses and that could depress demand for commodities
  • That explains why most industrial commodities including oil were trading sharply in negative territory
After BOB and PNB, Union Bank also gets caught in loan scam
  • This follows after CBI booked Totem Infrastructure in a Rs.1394 crore loan fraud
  • Additionally, the promoters of India Technomac have been arrested in a Rs.6000 crore loan fraud
Dalmia files affidavit calling L&T’s bid for Binani Cement as null and void
  • After Dalmia had won the bid to buy Binani Cement, Ultratech had made a counter outside offer for Rs.7266 crore
  • Dalmia had objected to this private deal since it defeated the entire sanctity of the NCLT process for bankruptcy resolution
Indian companies may see bonds worth over $1 billion maturing in 2018
  • Close to $1 billion of bonds belong to Vedanta, Indiabulls Real Estate and Tata Motors with no liquidity concerns
  • Asia overall has nearly $850 billion of debts payable by 2022 with 10 companies accounting for 31% of the debt
Kumaramangalam Birla to head the merged Idea-Vodafone as VC
  • The merger was essentially planned to take on competition from Bharti Airtel and the price war of Reliance Jio
  • The merger makes Idea-Vodafone the largest telecom player by size but its ARPUs are way lower than competition
Government plans to permit 74% FDI in defence through automatic route
  • This will be a sharp jump up from the current level of 49% which did not elicit interest in the “Make in India” pitch
  • Government plans to increase local defence production 3-fold to Rs.170,000 crore to boost domestic production
Medical insurance premiums could see a rise in premiums
  • This has been necessitated after IRDA passed an order that genetic disorders cannot be a ground for claim rejection
  • Medical insurers already pay Rs.101 as claims for Rs.100 collected as premiums, meaning premiums need to go up
SEBI looks to revamp algo trading norms and norms for IBC
  • To avoid a repeat of NSE like situation, SEBI may mandate that exchanges need to provide basic co-location services free
  • This point is likely to be taken up for debate in the SEBI board meet slated towards the end of this month
Mark Zuckerberg has admitted to data lapses by Facebook
  • The bone of contention was the use of private FB data by Cambridge Analyttica for their business purposes
  • FB with over 1.5 billion profiles has a population larger than China and now there are serious data security questions
Lenders of Essar Steel have rejected bids by Arcelor and Numetal
  • Numetal was disqualified as it had the son of Ravi Ruia on its Board of Directors, which is not allowed under NCLT
  • Arcelor was disqualified due to their stake in Uttam Galva, which is also a company referred to NCLT under the IBC
Finance Ministry to meet with bond traders for gauging appetite for bonds
  • Bond prices have fallen sharply due to the sharp rise in 10-year yields and government needs to push its program
  • If the government auction fails then it could push the 10-year yields closer to 8%, a level that could be dangerous for bonds
Technology stocks could be seeing a repeat of a 2000 overvaluation trend
  • For the first time since 2000, the weight of IT in MSCI Global went above that of Financials
  • Ironically, the correction in IT led by Facebook began after the weight of IT crossed financials for a brief period in March
Government scraps export duty on Sugar exports out of India
  • For fiscal 2017-18, Indian sugar production at 29.5MT is likely to lead to a glut and fall in price
  • The export window will at least allow Indian sugar mills to export, although global prices remain very weak
No Confidence Motion turns out to be a damp squib in parliament
  • While the Lok Sabha hardly transacted any business, the speaker could not take up the motion in the din and noise
  • It was already quite apparent that the TDP and YSRC did not have the requisite numbers and were just biding for time
Indigo likely to lose market share due to the grounding of 7% of its fleet
  • The ground was triggered by the faulty P&W engines in its Airbus flights which forced DGCA to order groundings
  • While Indigo’s profitability will not be impacted, its market share could take a hit in this quarter
Congress promises 5% cess on 1% richest Indians at its plenary session
  • According to Rahul Gandhi, this cess would be utilized to create a National Poverty Alleviation Fund
  • This fund will be used to increase the guaranteed income under NREGA from Rs.7,200 to Rs.18,000 per year
UK judge admits to major procedural lapses by banks in Mallya’s case
  • The judge pointed out that the facts of the case clearly pointed towards connivance by bank officials in the loans
  • Mallya’s counsel has accused most of the evidence produced by India against Mallya as false and fabricated
Two major Eastern Power see a leadership status quo
  • China ended up electing Xi for life as the prime minister of China which gives Xi the upper hand in the trade war
  • Putin’s return to power in Russia means that the geopolitical tensions in central Asia and Europe could continue

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