Weekly Capsule (Sep18–Sep22) and Impact Analysis

Major News Item Impact Analysis
   
Ø  SEBI to permit REITs and INVITs to raise money through bonds Ø  This move is likely to get more corporates and investors interested in these vehicles

Ø  That will encourage better monetization of real estate and infrastructure projects in future

 

Ø  Government to raise Rs.15,000 crore through sale of non-life insurers Ø  To begin with, the government will divest part of its stake in profit making GIC RE and New India Assurance

Ø  This will substantially aid the government in getting closer to its Rs.72,500 crore divestment target for the fiscal year

 

Ø  RBI likely to maintain status quo in rates in October policy Ø  With inflation moving up by 190 basis points in 2 months, the RBI may wait for food inflation to stabilize

Ø  The government is also worried about the rise in price of crude which has a strong downstream impact on prices

 

Ø  Tata Sons approves conversion into a private limited company Ø  The vote on 21st Sep was a big victory for Ratan Tata as now Mistry will not able to sell his stake in the company

Ø  While Mistry has an 18.4% stake in Tata Sons, it could be just about 2.82% if preference shares are also considered

 

Ø  Small victory for Mistry as NCLAT allows filing of minority interest petition Ø  Mistry had sought minority interest petition filing against Tatas post his removal from chairmanship of Tata Sons

Ø  However, this may not be too relevant if preference shares have voting rights after 2 years of skipped dividends

 

Ø  India’s forex reserves finally cross the $400 billion mark Ø  Even as FII equity flows have been tepid, there are strong FII debt flows and FDI flows at record levels

Ø  The only worry could be that the trade deficit for the year will nearly be $150 billion, or 40% of the forex chest

 

Ø  Fed maintains status quo on rates but talks hawkish language Ø  The Fed kept rates at the 1-1.25% range but hinted at another possible rate hike in December Fed meet

Ø  The Fed has also spoken about commencing the bond taper in October at the rate of $10 billion of taper per month

 

Ø  Exporters request Hasmukh Adhia for urgent tweaking of GST norms Ø  Exporters have got into a liquidity bind after nearly Rs.25,000 crore worth of export credits were stuck in GST

Ø  The exporters are expecting exports to the tune of nearly $10 billion impacted due to GST delays

 

Ø  TRAI sharply cuts telecom IUC charges and will move to zero IUC by 2020 Ø  This move is likely to substantially benefit Reliance Jio, which is the latest entrant in the telecom space

Ø  Bharti is the worst affected due to its vast rural network and the COAI will be moving the court on the issue

 

Ø  Jaitley promises drastic fiscal measures to revive GDP growth Ø  This was the first admission of a slowdown by the government after GDP growth for Q1 came in lower at 5.7%

Ø  Jaitley has indicated at a mix of fiscal and monetary measures including public spending and monetary stimulus

   
Ø  Further dilution of promoter holding in ICICI Prudential Life likely Ø  Exactly 1 year after the OFS, ICICI Bank and Prudential are looking to further dilute their stake in ICICI Prudential Life

Ø  This move will bring the public holding in ICICI Prudential Life to 25% in line with the SEBI public holding mandate

 

Ø  India imposes import duty on radial tyres imported from China Ø  Chinese radials had cornered 25% market share due to their artificially deflated manufacturing costs

Ø  This import duty will give a major relief to Indian radial manufacturers like JK Tyres and Apollo Tyres

 

Ø  Tata Steel Europe to form a JV with Thyssen Krupp of Germany Ø  This move will create the second largest steel producer in the whole of Europe after Arcelor Mittal

Ø  The merger JV was stuck due to the British Pension system issue which has since been amicably resolved

 

Ø  Brokers may be allowed to carry on equity and commodity jointly Ø  This was a long-standingdemand of the broking community for greater integration of the value chain

Ø  It is not very clear if cross-margining will be permitted across accounts or whether Chinese walls will be maintained

 

Ø  Wall Street retreated over the week end on Fed hawkishness Ø  Wall Street was weak due to the sudden hawkishness shown by the Fed after inflation came in at 1.9%

Ø  Higher rates will mean higher yields on debt and that will make equities relatively less attractive

 

Ø  India may stretch its fiscal deficit targets for the year Ø  To address the slowdown in the economy, the government intends to spend nearly $7 billion in public spending

Ø  This may result in the fiscal deficit going up from 3.2% to 3.7% but that will still be within the 50-bps range approved

 

Ø  S&P has cut the sovereign credit rating of China for first time since 1999 Ø  This downgrade followed the consistent rise in debt levels in China both at the government level and retail level

Ø  China also suffers from an overhang of a huge shadow banking with real estate being largely financed by shadow banks

 

Ø  North Korea hints at another H-Bomb test in the Pacific Ocean Ø  This has raised the panic buttons in South Korea and Japan as these actions are increasingly peace in the Pacific

Ø  At the UN, Donald Trump has already warned N Korea of dire consequences. Markets have corrected sharply on Friday

 

Ø  Rupee touched a 4-month low and crossed the psychological 65-mark Ø  The weakness in rupee was driven by N Korea tensions and consistent selling by FIIs in equities

Ø  Despite this weakness in the rupee, it is still overpriced in REER terms, which is detrimental to exporters

 

Ø  Power projects worth 32,000 MW in the lurch due to policy delays Ø  The government is yet to release funds to the tune of Rs.6500 crore under the Mega Power Policy

Ø  The MPP had identified 25 power projects in 2014 entitled to earn additional benefits, but that is yet to materialize

 

Ø  Ajay Singh of Spice Jet picks up a 40% stake in NDTV Ø  This will make the Roy family a minority shareholder in the company with a stake of just 20%

Ø  The company has been making huge losses annually and is also currently facing legal hurdles

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