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Weekly Capsule (Sep 04 – Sep 08) and Impact Analysis

Posted on 08-Sep-2017 Comments  0

Major News Item

Impact Analysis

  • Geo political tensions between the US and North Korea continue to simmer

  • There was little let-up with North Korea persisting with its nuclear tests and the US threatening sanctions

  • Equity markets have more or less discounted the risks of a full-fledged war,although gold has touched a yearly high

  • US jobs report comes in weaker than expected for August at 1,56,000

  • This raises some questions about the Fed rate action and now hikes look more likely to resume from mid-2018 only

  • The unemployment rate in the US has risen from 4% to 4.4% and the GDP and inflation are also not favoring a rate hike

  • PMI manufacturing bounces back to 51.2 for August

  • Despite the post-GST production lull, there was a visible spurt in new orders during the month pushing PMI above 50

  • However, the PMI services continues to stay below the 50-mark indicating a weakening momentum

  • Auto numbers for August were better than expected despite GST

  • The positive trend in four wheelers was led by Maruti with Tata Motors also chipping in on the CV front

  • In the two wheelers space, TVS Motors and Eicher flattered while Bajaj Auto continued to disappoint the street

  • CRISIS lowers India’s GDP forecast to 7% for fiscal year 2017-18

  • This downgrade was triggered by first quarter GDP for the fiscal coming in sharply lower at 5.7%

  • With the lag effect of demonetization and the GST disruption, the impact on GDP growth could be as high as 70-80 bps

  • ONGC to raise Rs.26,000 crore through the issue of debt paper

  • Part of the funds raised will be used to finance the buy out of the government’s 51.1% stake in HPCL

  • ONGC also has a larger plan to invest over $5 billion developing gas fields off the Eastern coast

  • Adani may write off its entire investment in Mundra Power

  • This was triggered by the SC striking down Adani’s demand for compensatory tariffs to cover higher imported coal costs

  • Banks are,however, worried that nearly Rs.25,000 worth of debt of Adani Group is accounted for by Mundra

  • HDFC Bank also classified as “Too Big to Fail” bank after ICICI and SBI

  • TBTF banks are systematically important banks that have larger implications and so need to be protected

  • These TBTF banks will be required to set aside a higher portion as Tier-1 capital impacting profitability in the short run

  • ICICI Lombard to raise Rs.6000 crore through its maiden IPO

  • Both key shareholders, ICICI Bank and Fairfax, will use the OFS route to partially exit their stake in ICICI Lombard

  • For ICICI group itis one more case of SOTP valuation opportunities after ICICI PruLife, the only listed insurer

  • ITC has filed a Rs.1000 crore defamation suit against IIAS

  • IIAS, a proxy advisory firm, had urged shareholders to vote against the proposal to pay Rs.1 crore/month to Deveshwar

  • While ITC claims defamation, the shareholders of ITC have already approved this proposal in its AGM

  • Implementation of RERA has led to delays in many realty projects

  • Marketing is a major concern as the new law prohibits pre-sales and only RERA registered properties can be sold

  • Even properties nearing completion are not taking a chance and are waiting leading to a slowdown in off-take

  • MCX proposes to launch Gold option contracts before Diwali this year

  • Commodity options were permitted earlier this year and MCX is the market leader ingold contract futures in India

  • The big challenge could be the commodities turnover tax (CTT), which could make exercise of contracts enviable

  • SEBI may permit physical settlement of stock options contract

  • The idea is to reduce the extent of volatility in stock options by forcing more of delayed delivery rather than speculation

  • The big challenge for the physical settlement to take-off may be the absence of a robust stock lending mechanism

  • Corporate Governance Committee to submit report by end of September

  • The committee, led by Uday Kotak, has creation of a governance model as its terms of reference

  • The issue came into the limelight after the recent fracas at Infosys between the board and the founding promoters

  • Stanley Fischer, Fed Vice Chairman, to step down by mid-October

  • Stanley Fischer,along with Yellen, has been an opponent of Trump’s plans to ease financial sector regulation

  • The move may induce Trump to undertake a complete overhaul of the Fed top brass

  • Mutual Fund AUM crosses $300 billion mark for the first time in India

  • While the growth has been rapid in the last 2 years, Indian MF industry is still substantially smaller than its US counter parts

  • The positive take-away is the increase in the number of individual accounts and the rise in the number of SIPs

  • Dr. Viral Acharya wants the deposit franchise of small PSU banks sold

  • According to the RBI deputy governor, this may be more feasible than trying to sell stakes in weaker PSU banks

  • However, this may come up for serious objections from the banking unions and may be hard to push through

  • Raghuram Rajan blames the GDP slow down on demonetization

  • Rajan is of the view that while containing black money is laudable,demonetization had negative repercussions

  • Rajan also referred to the need for RBI governors to be more forthright in their opinions to the government

  • GST Council may fix tax anomalies on cess hike on cars in its Sept meeting

  • The GST Council is likely to hike the cess on luxury cars and SUVs and spare small and mid-sized cars

  • The Council will also take a view on the IT related issues that people have faced with the GSTN network in September

  • FPIs may be shifting to SGX for trading index futures

  • This basically pertains to those investors who were using the FPI route, which was made expensive by SEBI

  • With the Indian option closed, most FPIs using the ODI route are now going back to trading futures on the SGX

  • Government may keep debt out to attract bidders for Air India

  • With its $8 billion in debt, this offers the best way for the government to facilitate the entry of buyers into Air India

  • Government may also look at monetizing some of its real estate assets to defray part of the debt, primafacie



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