Weekly Capsule (Oct 16 – Oct 20) and Impact Analysis

Major News Item Impact Analysis
   
Ø  IndusInd Bank formally sealed its merger with Bharat Financial Ø  The merger share swap between Bharat Financial and IndusInd will be in the ratio of 639:1000

Ø  Bharat Financial gets a larger balance sheet and IndusInd Bank gets a much wider reach in the hinterland

 

Ø  D-Mart witnesses a slowdown in growth for the September quarter Ø  The profit growth for the quarter dipped from 35.7% to 26% following GST inventory related pressures

Ø  This does raise doubts over the company’s valuation as it is already quoting at around 90-95 times earnings

 

Ø  India will require nearly $45 billion to upgrade its airports as per CAPA Ø  CAPA expects the current capacity of the Indian airports to saturate in the next 5 years

Ø  The current expansions will take the capacity from 3 crore passengers to 4.5 crore but that will still be insufficient

 

Ø  NIIF inks a $1 billion equity investment deal with ADIA Ø  This investment proposal from the Abu Dhabi Investment Authority will be a big boost for infrastructure projects

Ø  Other sovereign funds like RUSNANO of Russia and Qatar Investment Authority are also contenders to invest

 

Ø  Rising fuel and freight cost to weigh on the profits of cement companies Ø  Aggressive re-stocking in the aftermath of GST launch is already putting pressure on cement costs

Ø  Cement companies are likely to see 14% fall in sales and 32% fall in profits as sand mining has also come under attack

 

Ø  WPI inflation for September 2017 came in lower at 2.6% Ø  Lower WPI inflation was largely driven by weak food inflation with vegetables prices seeing a sharp cut

Ø  However, Manufacturing inflation did see a spike for the month due to the lag effect of GST implementation

 

Ø  Next Fed chairperson name likely to be announced in early November Ø  Janet Yellen is one of the contenders but is unlikely to get the job due to her pronounced differences with Trump

Ø  As per market estimates Jerome Powell and Kevin Warsh are emerging as the 2 likely candidates for the job

 

Ø  Axis Bank stock tanks as the company disappoints on the NPA front Ø  Gross NPAs were sharply up from 4.17% to 5.9% while net NPAs shot up from 2.02% to 3.12% in the September quarter

Ø  Higher slippages and red flags over some of its exposures have raised concerns despite rise in profits

 

Ø  Leading funds tweak their portfolios in the month of September Ø  HDFC Fund has been buying beaten down stocks like Infosys and Axis and selling Vedanta and Tata Steel

Ø  Reliance MF has been buying Tata Motors and SBI but has been selling in ONGC and Coal India

 

Ø  Some positive financial triggers emerge from Wipro Q2 results Ø  Despite flat revenues, Wipro managed to report 5.3% growth in profits on the back on 100 bps expansion in OPM

Ø  However, the disappointment appears to be that the guidance is still muted on the back of weak global IT spending

   
Ø  Unilever believes that pricing power in the Indian market is yet to pick up Ø  While volume growth is visible post GST, the price traction is still missing in India

Ø  India remains a key market for Unilever as it is the second largest market after the US

 

Ø  OPEC signals extension of oil supply cuts till end of 2018 Ø  This indication in the aftermath of a key meeting between the Middle East leaders and Vladimir Putin

Ø  They have curtailed 1.8 million bpd and may either sustain or increase the cuts to maintain oil prices around $60/bbl

 

Ø  Blackstone announces details of its $100 billion infrastructure fund Ø  The fund is allocating $100 billion to infrastructure with a $20 billion support from the Saudi based PIF

Ø  Blackstone will be looking at listed companies, private equity and in carve outs and will include focus on India too

 

Ø  Dollar climbed and treasuries fell on major tax reform hopes in the US Ø  Major tax cuts were part of the deal that Trump had announced while campaigning for presidency

Ø  Apart from tax reforms, there is also the expectation that a Fed insider may emerge as a likely candidate for the chair

 

Ø  Global investors line up for stressed assets of Essar Steel and Bhushan Steel Ø  Both the companies have been referred to the NCLT under the Insolvency and Bankruptcy Code (IBC)

Ø  Global giants like Arcelor Mittal and POSCO of Korea are strong contenders for the stake in these companies

 

Ø  Piramal targets $1 billion of pharma sales by year 2020 Ø  The company can re-enter the Indian pharma space only after 2018 due to its non-compete clause with Abbott

Ø  Piramal had sold its domestic formulations business to Abbott in 2010 for a consideration of $3.8 billion

 

Ø  Ultratech profits fall but still beats street estimates Ø  The fall in profits was driven by higher pet coke prices and a 5X increase in sand prices

Ø  The top-line grew by 17% and that is likely to sustain due to the government’s aggressive infrastructure spending

 

Ø  India tightens gold import norms to plug loopholes in gold Ø  Government imposes curbs on some trading houses after a surge in gold shipments in the last one year

Ø  Gold imports are a worry as it leads to depletion in forex reserves without any concomitant productivity benefits

 

Ø  MPC minutes suggest that RBI may tread a cautious path Ø  With inflation staying above the 3.2% mark, the RBI may not be too keen to cut rates

Ø  The consensus appears to be leave rates untouched at least till the next calendar year begins

 

Ø  Hero Moto witnesses record sales on the day of Dhanteras Ø  Dhanteras single-day sales at 3 lakh units was at an all-time record for Hero Moto as spending remained buoyant

Ø  Hero Moto has been seeing a sharp rise in off-take in the aftermath of the implementation of GST

 

Ø  The national mood could now shift political with elections coming up Ø  The big focus will be on Gujarat which goes to polls later this year, possibly in the second half of December

Ø  While the BJP has dominated Gujarat for over 20 years, there is a crisis of leadership that is visible currently

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