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Weekly Capsule (Nov 06 – Nov 10) and Impact Analysis

Posted on 10-Nov-2017 Comments  0

Major News Item

Impact Analysis

  • This week the nation celebrated the 1st anniversary of demonetization

  • While the jury is still out on the merits, there has been a perceptible negative impact on liquidity and growth

  • However, banks have become flush with funds due to the note ban and that is helping the issue of recap bonds

  • Himachal Pradesh recorded a stupendous 75% polling ratio

  • The battle in the state of HP is for a total of 68 seats with the BJP and the Congress facing off in all of them

  • The HP elections are critical for the BJP ahead of the Gujarat elections in December this year

  • Broadcom has agreed to a $105 billion buy-out of Qual comm

  • This will create the world-dominant supplier of chips for mobiles and notepads

  • The combined entity will emerge as the third largest chip entity overall after Intel and Samsung

  • Oil moved higher this week to $64/bbl in the Brent market

  • The up-move was largely led by trouble in the Middle East after the Gulf of Yemen was blocked due to war

  • The OPEC decision to continue supply cuts till the end of 2018 and rising oil demand is also pushing prices higher

  • Moody’s upgrades BOI, OBC and Union Bank from negative to Stable

  • This has been largely in the after math of the massive Rs.2.35 trillion recapitalization announced by the government

  • The fact that rating agencies are upgrading the small and mid-sized banks is good news for Indian banks overall

  • Lup in stock cracks after getting warning letters from the US FDA

  • US FDA had sent warning letters to Lupin for their plants at Goa and at Pithampur near Indore

  • The Lupin stock touched a 5-year low as there appears to be no respite from stringent FDA regulations

  • Mutual fund AUM touches an all-time record of Rs.21.4 trillion

  • Equity AUM atnearly 1/3rd of the total AUM is also at an all time high on the back of heavy equity inflows

  • With returns on debt squeezed and real estate and gold coming under the government scanner, equity is the way

  • Qatar Foundation sold Bharti Airtel shares worth $1.5 billion

  • This sale was do neat a price nearly 10% below the prevailing market levels, putting pressure on the price

  • Qatar finds itself in a financial crunch after the embargo imposed by Saudi Arabia a few months ago

  • Arvind announced the demerger of its branded business

  • Shareholders will get Arvind Brand shares in the ration of 1:5 and A nup Engineering shares in the ratio of 1:27

  • Since the branded business normally gets a 3X valuation compared to textiles, the SOTP should favour Arvind

  • India to auction Khetri copper mines to reduce dependence on imports

  • Khetri in Rajasthan is estimated to have a capacity of 2-3 lakh tonnes of copper

  • Copper demand is growing at 6.8% and the investments in electric cars and solar power will mean more copper needed

  • RBI relaxes FEMA regulations for capital investments into India

  • The legislation pertaining to LLPs and partnerships will be merged in a single legislation making it smoother

  • Companies will be permitted to resolve pending FEMA disputes pertaining to reporting delays by paying a fee

  • HPCL records a 147% growth in net profits to Rs.1735 crore

  • The key driver for HPCL profits was inventory valuation and the GRM doubling to $7.61 / barrel

  • However, with crude oil prices rising sharply, the risk of oil subsidies coming back is a distinct possibility

  • Indian farmers could take a hit of nearly Rs.36,000 crore due to lower prices

  • Most Kharif crops are now selling in the mand is at below the MSP and for 7 key crops this loss is likely to be Rs.36,000 crore

  • In fact, if the gap is calculated from the government’s assured 50% return on crops, the shortfall will be Rs.200,000 crore

  • India’s ratio of rating upgrades to downgrades deteriorates

  • At 0.97, the ratio represents the worst situation in the last 5 years with the valueratio being much worse

  • To a large extent,this deterioration can be attributed to the combined effects of demonetization and GST

  • Tata Motors reported a 200% jump in net profits for the September quarter

  • The sharp rise in profits was largely driven by a sharp pick-up in JLR OPM more than doubling from 5.2% to 11.8%

  • While the domestic auto business continues to lag, the loss on the domestic business narrowed in the quarter

  • The GST Council cut GST rates on 3/4th of the goods in the 28% bracket

  • Items like chewing gum, chocolate, beauty products, after shave lotions among others have seen 10% GST cut to 18%

  • The net revenue loss will be Rs.20,000 crore but the meeting has put off decisions on inclusion of petrol and diesel in GST

  • Asset quality improves at SBI as slip pages fall by 65%

  • Gross NPAs declined by 14 bps to 9.83% while net interest margins were up by 9 bps at 2.59%

  • SBI still has exposure to 27 entities in RBI’s 2nd list but it appears like the NPA cycle may have bottomed out

  • M&M reports 24.6% growth in net profits on festive demand

  • There was a sharp uptick in demand for utility vehicles and tractors during the festival season due to good rains

  • Farm equipment was the best performer followed by the auto segment. Company also approved 1:1 bonus

  • JSPL plans more asset sales to ease its overall debt burden

  • The company plans to bring its debt to a more sustainable level of around Rs.45,000 crore by sale of non-core assets

  • That would be good utilization of resources as the company has no capital expenditure plans for the near future

  • Oppen heimer Funds continues to be extremely bullish on India

  • Oppenheimer expects the interest rate trajectory of the RBI to remain largely stable irrespective of what the Fed does

  • Among Indian stocks, Oppenheimer finds margin of safety in stocks like Infosys and HDFC at current levels

  • Just Dial shoots up on hopes of a stake sale to Google

  • Google has been one of the toughest challenges for Just Dial for the launch of its JD Search Engine

  • A stake sale to Google gives JD the backing of a global brand and a much larger and stronger balance sheet



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