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Weekly Capsule (Jun 01 – Jun 07) and Impact Analysis

Posted on 11-Jul-2017 Comments  0

Major News Item

Impact Analysis

  • The nation finally gets ready for the “One Nation One Tax” via GST

  • GST will go effective the midnight of 30th June and will be applicable to all transactions post that

  • While the IT backbone will be stress tested, it will be the ability of banks to handle the migration that will be the key

  • CRISIL estimates a hair cut of up to 60 % in the 12 problem NPA accounts

  • The hair cut becomes critical as the RBI has been pushing the banks to arrive at a speedy resolution to the NPA issue

  • The 12 cases are those where the NPAs account for nearly 50% of the total NPAs of the banking system and worsening

  • NPPA has announced ceiling prices for 761 medicines for now

  • This new ceiling becomes relevant in the light of the anti-profiteering clause inthe GST Act

  • Under the GST Act,all tax cuts will have to be fully passed on to the end customer,else inviting penal action

  • European Commission imposes $2.7 billion penalty on Google

  • This penalty is under the EU anti-trust rules for mis using the dominant position of a company in an industry

  • According to EU,Google had used its dominant position to create barriers to entry, inviting this penalty

  • Jaypee group debt may be the first to arrive at a substantial resolution

  • Jaypee owes overRs.50,000 crore to a consortium of banks led by ICICI Bank whichhad been working on a resolution

  • The deal to sell off the Jaypee cement plant to Ultratech for Rs.16,200 crore has been closed as part of this deal

  • Reliance seeks approval to cap ownership limit at 5%

  • This limit will be  applicable to non-promoters and will be restricted to 5% of the paid-up capital of the company

  • This is necessitated under the RBI rules for payment banks as RIL already owns 70% in Jio payment bank

  • Godrej plans to raise Rs.400 core through the Agrovet IPO

  • The Godrej Agrovet IPO will be a mix of a new offer and an offer-for-sale by Godrej,which owns 61% in the company

  • Godrej has been looking to monetize the agri side of the business as the valuations are currently attractive

  • Be arish bets on crude oil at record highs globally

  • The net short position in crude oil globally stood at 169 million barrels, the highest level in the last 3 years

  • A huge short position normally is indicative of a likely short squeeze, which could take the stock price sharply up

  • ADB plans to raise nearly Rs.1400 crore through the issue of Masala Bonds

  • ADB has been a regular player in the off shore Rupee Bonds market and this is the 3rd tranche

  • This will be used to on-lend in India and rupee bonds have become popular due to a stable rupee and sound macros

  • Government unveils new hydro carbon policy on 28th June

  • Nearly 2.8 million square KM of sedimentary basins like to come under oil prospecting and exploration

  • The government is starting off with data collections as data is available for just 50% of these sedimentary basins

  • NRIs can now access the listed currency derivatives market in India

  • NRIs can only use this market for hedging their underlying currency risk and not for trading naked positions

  • However, the banks will have to monitor the overall position of traded currency and OTC market jointly

  • Indigo Airlines has expressed interest in global business of Air India

  • Air India could be a logical extension to the domestic aviation business leadership of Indigo, which has a 40% market share

  • The big challenge in the deal will be the structuring and the Rs.50,000 crore debt that Air India has in its books

  • Azim Premji Invest to acquire 2.2% stake in Aditya Birla Capital

  • Premji Finvest is a family office with a corpus of $1 billion and looking to take a strategic stake in specific stocks

  • Premji Finvest will be allotted 4.8 crore preference shares at Rs.145.1/share after the restructuring is completed

  • Vedanta plans to invest nearly $3 billion inits oil extraction business

  • Vedanta plans to account for nearly 50% of India’s total oil extraction by year 2020

  • At a time when oil companies are cutting CAPEX, Vedanta is funding the entire $3 billion with internal resources

  • Core sector growth for May 2017 grew by 3.6% against 2.8% in April

  • The big push came from energy including output of electricity, refinery products and natural gas

  • Core sector growth has been critical as it constitutes nearly 40% of the IIP and has a major influence on growth

  • BOFA Merrill lowers its guidance for oil prices for the full year

  • Increasing supply of crude oil from the US and Libya and rise stock piles could be responsible for this tepid prices

  • Even on the demand side, the supply is expected to continue to be in excess of demand despite OPEC cuts

  • CDSL IPO makes a stellar listing on the stock exchanges

  • CDSL debuted on the stock exchanges at a premium of 75% to the issue price and sustained through the day

  • The Rs.525 crore was over subscribed by nearly 170 times and funded HNIs needed a 50% premium to cover their costs

  • Nomura upgrades the stock of Bank of Baroda

  • Nomura expects better pre-provision profit outlook for Bank of Baroda compared to its peers

  • The brokerage also expects BOB to sustain 10%+ loan growth over the next 3 years,which makes it truly attractive

  • Traders continue to protest heavily across India ahead of GST

  • Most traders are grossly under prepared for GST and are likely to feel the heat if GST is launched as per schedule

  • However, the FM has already ruled out the possibility of any postponement of GST from here on

  • RBI warns of further stress of bad loans on banks

  • RBI is of the view that the bad loans could cross 10% of the total loans of banks with gross NPAs already at 9.6%

  • PSU banks continue to account for a chunk of the NPAs in the Indian banking system and remain the weak link

  • Fiscal deficit hits nearly 68.3% of its full fiscal year target in May itself

  • This situation could be largely mitigated once tax flows and investment proceeds start coming in

  • Either ways, the government fiscal responsibility appears to be tested to the hilt this financial year



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