Weekly Capsule (Oct 29 – Nov 02) and Impact Analysis

News Announcement Impact Analysis
Nifty gains over 500 points during the week ended November 02nd
  • The sharp rally in the Nifty was largely driven by reconciliation of the US-China trade war and Iran oil exemptions to India
  • Banking, metals and auto stocks were among the major gainers even as pharma and IT remained under pressure
US grants exemption to 8 nations from ban on Iranian oil imports
  • India, Korea and Japan are among the nations to be exempted from Iran ban. India can pay Iran in rupees for oil
  • India is the second largest importer of oil from Iran after China and Iran has been a source of cheap oil for refiners
Trump hinted at a likely end of the US-China trade war based on negotiations
  • Both Trump and Xi have given up their intransigent stands and China may also be allowed to import oil from Iran
  • China has been on the throes of a slowdown and a final announcement is expected during the G-20 summit
Brent crude prices edge lower towards $73/bbl during the week
  • Brent crude fell sharply after US agreed to tone down sanctions on Iran by giving exemptions to exports
  • The price of oil has now corrected nearly 15% from peak on worries that the trade war would lead to growth slowdown
Apple shares crash on slowing I-Phone sales worldwide
  • With fears of a global slowdown and tepid Chinese demand, Apple is finding it hard to maintain sales momentum
  • After the disappointing results in the Sep quarter, Apple stock has crashed below the $1 trillion market cap mark
ONGC reports 61% rise in Q2 net profits at Rs.8265 crore
  • Despite a dip in oil production, ONGC benefited from higher crude prices globally which touched a high of $86/bbl
  • Its average price realization in the quarter was $73.07/bbl compared to $49.43/bbl last year
Next few months likely to be challenging for NBFC liquidity
  • NBFCs have nearly $10 billion worth of commercial paper to be redeemed in the next 2 months
  • Most NBFCs will have to resort to bank loans, refinance and also asset sales to tide over the liquidity crisis
SEBI passes Rs.813 crore disgorgement order against Satyam promoters
  • Nearly a decade after the Satyam scam broke out, SEBI has asked Raju and 3 others to pay up Rs.813 crore
  • This represents the unlawful gains made by the promoters along with interest. Their debarment for 14 years stands
RBI permits partial credit enhancement of NBFC bonds
  • This partial credit enhancement will enable the NBFCs to get access to bank liquidity to roll over their loans
  • NBFCs have become systemically important and the RBI would want to avert a crisis, especially after the IL&FS fiasco
Manpasand Beverages loses over 80% since auditor resignation
  • Manpasand has seen a sharp rise in trade receivables and a worsening of the working capital cycle in last one year
  • Manpasand borrowings have also increased by nearly 50% in the last one year, predominantly short term facilities
Analysts have cut target prices for 70% of the stocks during October
  • This only pertains to the 276 stocks tracked by more than 10 analysts. On a larger scale, this could be much bigger
  • Target cuts have been prominent for downstream oil, NBFCs and for specific stocks like Dish in the DTH business
HDFC reports a 25% jump in profits in Q2 at Rs.2467 crore
  • This seems to be an interesting performance considering that most HFCs have been under pressure in October
  • Apart from growing the top line at 25%, HDFC also managed to keep its NPAs under check
FPIs pull out nearly $17 billion from EM equities in October
  • This risk-off trade was triggered by fears of a global trade war, weakness in China and higher prices of oil
  • India alone saw FPI selling of Rs.35,000 crore in October taking full year FPI selling to above Rs. 1 trillion
CRISIL expects aviation companies to report Rs.9300 crore losses this year
  • Ironically, this is coming at a time when the global aviation industry is likely to report $33 billion in combined profits
  • Higher competition, higher ATF prices and a price war have led to these airline companies bleeding
India rises to 77th spot in the Ease of Doing Business ranking
  • This is a rapid growth from being at the 142nd spot in 2014 and has been driven by simpler rules and processes
  • The implementation of GST and the success of the bank resolution through IBC has given a boost to rankings
Italian PM justifies his expansionary budget and refuses to compromise
  • This intransigence was an outcome of the EC sending the Italian budget for reconsideration
  • Italy has refused to give up on its profligate ways and that is something Spain, Portugal and Greece had done in the past
BOB and Union Bank report positive growth in the quarter
  • There appears to be a clear indication that the NPA cycle may be bottoming out as indicated by the reviving profits
  • Additionally, the NCLT is also likely to lead to a write back of Rs.1 trillion of loans which are already provided for
Realty projects worth $63 billion could be in limbo due to NBFC squeeze
  • Most of the realty companies had been relying on NBFCs for funding after RBI barred banks from subvention schemes
  • With NBFC liquidity tightening, realty companies are likely to be crunched for funds in the short term
Banks feel the heat of exposure to the IL&FS loan book
  • After Yes Bank, IndusInd Bank also took sharp price cuts after they disclosed Rs.3000 crore exposure to IL&FS
  • IL&FS has already missed Rs.400 crore of debt repayments and the resolution may still be a good 9 months away
CRISIL expects big pharma companies to return to double digit growth
  • This growth is likely to be triggered by a turnaround in demand in the principal US market which is 35%
  • US is expected to return to positive demand growth after nearly 5 years of negative growth
Ruias make an offer to pay off all their debt post asset monetization
  • A day after the Committee of Creditors ruled in favour of Arcelor, Ruias offered to pay off all the debts
  • While the offer may hint at no haircuts, banks are unlikely to buy into the argument as it would undermine NCLT process

Leave a Reply

Your email address will not be published. Required fields are marked *

*

12345

*