Will 11,000 be the new resistance for the Nifty will be the big question for them as the Nifty settled below the mark last week at 10,930. The markets last week reacted negatively to the US Fed rate hike but the bigger worry was that the problem of lack of transparency was much more rampant than originally anticipated. INR strengthened to 72.490/$ while 10-year bond yields fell to 8.02%. There was relative calm in the rupee markets and also in the bond markets last week. The rupee saw some relief after the government announced higher tariffs on 19 non-essential items, in a fiscal push.
India may actually end up with lower than normal rainfall in 2018. IMD estimates monsoon to fall short by 9% in the current season. With monsoon withdrawing from the Western coast, IMD estimates the overall rainfall for 2018 to be short by 9%, indicating a year of deficit. A total of 12 out of 36 met divisions recorded and nearly 38% of all the districts received deficient rainfall. However, according to the IMD, the timeline and distribution have been favorable and that could mean an overall Kharif food-grain output of 141 million tonnes. It remains to be seen what happens to prices.
After rocking the markets for the last 3 months since listing, it was a return to reality for Bandhan Bank. RBI came down heavily on recently listed Bandhan Bank. The prices were headed south for quite some time but on Friday the government withdrew the general permission to open branches and also announced a freeze on pay and remuneration of the MD & CEO. The bank currently has a promoter holding of 82% which needs to be reduced to 40%. RBI has expressed its preference for a holding company structure for banks, which is considered more favorable for depositor interests.
The ghost of sell-offs returned to attack Infibeam this time and the trigger came from an innocuous WhatsApp message. Infibeam cracked by 73% in a single day on transparency issues. Infibeam Avenues, an F&O stock, cracked on Friday after a WhatsApp message was circulated that the company had extended loans to a loss-making group entity, free of interest. This raised serious questions of governance and transparency in the company’s financials. Eventually, the company had admitted to an inter-group loan, but clarified that it was purely to help them get out of losses.
In a bid to calm the bond yields, the government has again issued a lower borrowing program for the second half. The government set Rs.2,47,000 crore as borrowing target for second half of 2018-19. This was against a market estimate of Rs.3.20 trillion. This is expected to soothe yields in the bond markets as fewer government borrowings will keep yields lower. A lot would depend on how much the government will eventually borrow from the National Social Security Fund (NSSF). In the first half, the government had kept the borrowing target at just Rs.2.88 trillion. But if the government continues to borrow heavily from the NSSF, then the bond markets may not really assign too much weight to this lower borrowing announcement. Sentimentally, this should be a positive for bond markets.
IL&FS appears to be finally showing some real signs of urgency in resolving its issues. IL&FS appointed Alvarez and Marsal to help restructure the group businesses. The restructuring plan will include the asset monetization plan, complete restructuring of the group companies, seeking moratorium from creditors etc. IL&FS is also planning to seek protection under Section 230 of the Companies Act to protect against any legal hindrances to the restructuring process. The entire restructuring plan is expected to be approved and implemented shortly. Implementation remains to be seen.
