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Weekly Capsule (Aug 28 – Sep 01) and Impact Analysis

Posted on 01-Sep-2017 Comments  0

Major News Item

Impact Analysis

  • GDP for the 1st quarter of the fiscal year 2017-18 came in at 5.7%

  • This is 100 bps below the Reuters consensus estimate and 200 bps below the GDP growth in 1st quarter of previous fiscal

  • While demonetization and GST are being cited as reasons, this puts India’s GDP growth below that of China

  • Core sector growth comes in higher on a M-O-M basis at 2.4%

  • The revival in core sector growth was largely led by natural gas and steel on the back of supportive government policy

  • The core sector accounts for over 40% of the IIP and hence is a critical cue for GDP and corporate top-line growth

  • GST collections for July 2017 came in at Rs.93,000 crore according to the FM

  • This may not bethe full picture as migration is yet to happen in many of thecases

  • GST went live on July 01st by subsuming a host of indirect taxes including excise, sales tax,VAT and service tax

  • DLF sold a 33.34  % stake in its real estate subsidiary to GIC of Singapore 

  • The stake sale was lower than the 40% planned originally but helps the company to collect up to Rs.9000 crore

  • The funds will be used to defray part of the outstanding debt of DLF which is likely to give better valuations

  • Deutsche Securities recommends going long on the IT Sector

  • The brokerage expects that 75% of all the bullish triggers for the IT sector are currently in place

  • They are positive on the US markets as most sectors other than retail and BFSI are seeing a rise in tech spending

  • Jackson Hole ends with a warning to Trump to keep status quo

  • This comes in the aftermath of Trump expressing his intent to do away with most of the restrictions imposed after 2008

  • Both Yellen and Draghi were of the view that these restrictions will end up making the markets safer

  • Government has come out with its modified FDI policy

  • This FDI policy will be consolidated with an intent to encourage start-up businesses also

  • Start-ups will now be able to raise up to 100% funds from VCFs directly through equity, debt or through hybrids

  • Infosys promoters may participate in the buyback offer

  • The news has not gone down well with the markets, especially after Nandan was brought back to head the board

  • However, even if the founding promoters participate in the buyback, their stake will still remain the same

  • Ray Dalios and Jeff Gundlach warn about the risks of EMs

  • Both star fund managers have expressed concerns over the relatively rich valuations of EM equities

  • They also believe that macro risks are elevated in EMs and they are more vulnerable to geopolitical shocks

  • North Korea continued to add to the geopolitical tension during the week

  • The first provocation came when N Korea fired a missile over Japanese airspace, clearly an act of war

  • Trump has already warned N Korea of dire consequences and military exercises are going on at sea

  • JSW Steel is aggressively looking at expanding its steel portfolio

  • The company has a target of reaching 40 MT capacity in the next couple of years and is looking at inorganic growth

  • JSW is also focusing on stressed steel companies that come under the purview of NCLT settlement

  • Reliance Infra plans to unlock value through sale of non-core assets

  • The company is looking to hive off its Mumbai power operations to Greenko for about $2 billion

  • The company is also looking at reducing its massive debt burden of over Rs.45,000 crore to improve solvency

  • Parliament passes ordinance enabling imposition of cress on luxury cars

  • The maximum cession luxury cars and SUVs has been increased from 15% to 25%

  • While the GST Council will take the final decision, this is in tune with the progressive GST approach of the government

  • L&T is planning to make its biggest future bet on defence

  • L&T will be bidding for defence orders worth nearly $28 billion for manufacture of submarines and warships

  • L&T has been one of the big beneficiaries of the government decision to open defence manufacture to private sector

  • IDBI looks to sell non-core assets to tide over its 24% Gross NPA problem

  • The bank will be looking to hive off its stake in its insurance and AMC subsidiary apart from NSE and NSDL

  • The Gross NPAs of IDBI Bank stand at Rs.50,000 crore and this sale will net the just about Rs.5000 crore

  • RBI has released the second list of 40 names for banks on watch list

  • Unlike the NCLT list of 12 companies, these 40 companies will have time to workout a resolution with the banks

  • If a solution is not found in the stipulated time, then it will be referred to the NCLT

  • Government approaches RBI for a higher dividend payout

  • Against the government expectation of Rs.58,000 crore, the RBI paid dividend of less than Rs.31,000 crore for the fiscal

  • This reduction in dividend was due to seignior age as well as the transfer of Rs.13,000 crore to the Contingency Fund

  • Supreme Court orders status quo on Singh Brothers stake in Fortis Health

  • The stay was granted at the request of Dai-Ichi which has won an arbitrarily of Rs.2560 crore against the Singh Brothers

  • This pertains to the acquisition of RayBan where the promoters are accused of concealing vital information

  • PSU banks are likely to be exempted from CCI approvals for mergers

  • This exemption will be valid for 10 years and will give a boost to the proposal of government to consolidate banks

  • All mergers beyond a certain size are currently required to be approved by the Competition Commission of India (CCI)

  • Maruti clocked a 26% growth in August Sales on festive growth

  • Maruti already commands a 50% market share in the passenger car market and this will reinforce its position

  • Most of the mid-range and entry level cars of Maruti have also benefited from a more positive GST regime

  • Bankers fear the next round of NPAs may come from real estate

  • New and existing realty projects have come into trouble due to the imposition of RERA regulations

  • The RERA stipulates stringent restrictions on developers and distributors of real estate properties



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