Weekly Capsule with Impact Analysis for the week ending 20th Jan 2017

Highlights of the Week (Jan 16 – Jan 20) and Impact Analysis

 

Major News Item Impact Analysis
   
Ø Indian Realty sector worst hit by the demonetization drive

Ø Most developers and key geographies have seen demand and off-take dip by nearly 50% in the last 3 months

Ø Most retail investors in realty are holding back their purchases on expectations of lower interest rates and lower prices

 

Ø SEBI has permitted celebrities to endorse mutual funds

Ø This endorsement will have to be for mutual funds as an industry or as an investment vehicle

Ø Celebrities still cannot endorse specific AMCs or specific features or attributes of a particular product

 

Ø GST to go live on July 01st with most contentious issues sorted out

Ø The major bone of contention of sharing of powers between centres and states has been sorted out

Ø States will get full control over 95% of businesses with annual turnover less than Rs.1.50 crore

 

Ø Reliance Industries reported an expansion in GRMs in 3rd quarter

Ø Gross refining margins (GRM) went up from $10.1/bbl to $10.8/bbl for the third quarter of the current fiscal

Ø While petchem margins were actually robust, the real worry was over the massive telecom investment of Jio

 

Ø SEBI to put restrictions on listing of shares through reverse merger

Ø SEBI has made an attempt to prevent the back-door listing of larger companies through the reverse merger route

Ø SEBI has notified conditions under which the larger company will have to obtain specific permission from shareholders

 

Ø Government to go ahead with GAAR implementation on April 01st

Ø General Anti-Avoidance Rules (GAAR) allows the IT Dept to come down heavily on transactions structured to save tax

Ø The focus of the GAAR will be on substance rather than form, although, GAAR will not be with retrospective effect

 

Ø SFIO seeks details of the 15% stake purchase in MCX by Kotak group

Ø This is part of the overall investigation that the Serious Frauds Investigation Office (SFIO) is carrying on into the NSEL scam

Ø SFIO wants to find out if the stake purchased in 2014 at Rs.469 crore was deliberately underpriced as it was at 15% discount

 

Ø UK£ came under pressure during the week on BREXIT woes

Ø Theresa May has emphasised that Britain will make an attempt to exit the EU at the earliest

Ø The UK£ has been under tremendous pressure on worries that BREXIT may cause damage to UK and EU trade

 

Ø WPI inflation for December comes in at 3.39%

Ø This is slightly higher than the WPI level of 3.15% in November and almost entirely bridges the gap between CPI and WPI

Ø While food has applied downward pressure on WPI inflation, oil has been the key reason for the higher WPI inflation

 

Ø Government to seek $2.2 billion dividend from Hindustan Zinc

Ø Government is currently holding 29.5% stake in HZL with the Vedanta group being the majority shareholder

Ø Government is likely to coax most profitable PSU to pay higher dividends this year to make up for disinvestment shortfall

   
Ø Raghuram Rajan warns of serious trade war between the US and China

Ø According to Rajan, the highly protectionist and isolationist policies of Trump can snowball into a trade war

Ø Trump has been talking about a border tax on outsourcing plus a duty of 45% on all Chinese imports

 

Ø Arun Jaitley confirms that they plan to sell 25% stake in general insurers

Ø Government may look to sell 25% in five general insurers in the current fiscal but leave LIC out of the process

Ø It is likely to give an important benchmark to private insurers for valuing their general insurance business

 

Ø NCLT dismisses contempt petition against Tata Sons by Cyrus Mistry

Ø Mistry had sought intervention of the National Company Law Tribunal (NCLT) over breakdown of governance in Tata Sons

Ø The trigger was the ouster of Mistry from the chairmanship of Tata Sons on October 24th 2016

 

Ø Warburg Pincus acquires a 14% stake in PVR Cinemas from the promoters

Ø Promoters, Bijli Group, have sold the stake for Rs.820 crore to raise funds for their other ventures

Ø Bijli group continues to be the largest shareholder of PVR, although Multiples and Warburg are key shareholders now

 

Ø Ecommerce websites continue to bleed in a big way in 2016

Ø Flipkart announced a loss of Rs.5223 crore for 2016 while Amazon followed with a loss of Rs.3571 crore

Ø Large ecommerce sites have been spending heavily in promotion, advertising and offering festival discounts

 

Ø Most economists at DAVOS highlight Trump as biggest risk for markets

Ø Economists are apprehensive that the protectionism and isolationism may trigger off a trade war with China

Ø A trade war may force China to drop its currency and that could also trigger off a currency war among EMs

 

Ø China exerts pressure on India through the visa route

Ø After offering visa-free access to Indians for many years, Hong Kong has decided to top Visa-on-Arrival for Indians

Ø Over 5 lakh Indians visit Hong Kong frequently and this has obviously happened under pressure from China

 

Ø M&M marks foray into Europe with Turkish tractor firm buy

Ø M&M bought a controlling 75% stake in Turkish tractor maker, Hisarlar, for $19 million

Ø This gives M&M free and unfettered access to the vast European market which is lucrative and also growing rapidly

 

Ø George Soros predicts a market slump with the ascent of Trump

Ø Soros fears that the protectionist and narrow policies of Trump could lead to a global asset sell-off

Ø Trump also expects Theresa May to resign as well as the EU to gradually integrate post Britain’s exit

 

Ø GST, Demonetization to hurt earnings for 2-3 quarters says, BOFA

Ø According to BOFA, the disruption will depend on the final GST rate and the sustained impact of demonetization on liquidity

Ø While the liquidity impact has been severe on sectors like auto and realty, other sectors have actually managed quite well

 

Ø Donald Trump took charge as the 45th US president on 20th January

Ø His ascent to the top job was marked by a vow to make America great again amidst protectionist noises

Ø Not surprisingly, safe haven assets like gold have been attracting demand and moving higher

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