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Weekly Capsule (Sep 11 – Sep 15) and Impact Analysis

Posted on 15-Sep-2017 Comments  0

Major News Item

Impact Analysis

  • Inflation came in sharply higher for the month of August at 3.36%

  • That marks a rise of nearly 190 bps in inflation in the last 2 months essentially driven by food inflation

  • This almost negatives the possibility of the RBI cutting repo rates in the October policy considering inflation fears

  • IIP for the month of July came in at 1.2%,better than June

  • The big disappointment was manufacturing with a growth rate of just about 0.2% due to GST and demonetization pressure

  • Weak growth as not offered any correlation with repo rates and hence RBI may choose to maintain status quo

  • Bank of England for the first time hinted at a hike in benchmark rates

  • Inflation and growth has been on an uptrend in the UK and that has spurred the need to hike rates

  • BOE will become the second “First World” central bank to hike rates after the Fed and the pound is already strengthening

  • P-Note investments slump to a record 5-year low of Rs.1,35,000 crore

  • This is largely an outcome of SEBI imposing heavy costs of up to $1000 per P-Note opened and banning naked P-Notes

  • Apparently, a lot of the P-Note volumes have shifted to Singapore and are not trading on the SGX Nifty

  • IndusInd Bank official announces likely merger with Bharat Financial

  • The merger is likely to be through a stock swap and will be earnings accretive for both the parties

  • IndusInd will benefit from the access to rural markets while Bharat Financial gets a sounder balance sheet

  • ITC to undertake a mega-investment of Rs.25,000 crore across product lines

  • Most of the investments over the next few years will be enhancing the market share of the non-tobacco business

  • Tobacco is still the most lucrative for ITC and the idea here is to gradually reduce the dependence on tobacco products

  • North Korea geo political risk continues toget compounded

  • Despite sanctions,North Korea continues to fire its missiles over the territories of Japan and South Korea

  • China continues to be a key ally of North Korea and any UN sanction will require to from China and Russia

  • Indian banks to require additional $65 billion capital for Basel III

  • The government will provide just $11 billion and the balance will have to be raised from the open markets

  • That is the challenge for Indian banks as they are already sitting on gross NPAs of over 12% as on March 2017

  • Tata Steel to exit entirely from the British Pension Scheme

  • Tatas will shell out nearly $725 million plus a 33% stake in the BSPS to facilitate its exit from the scheme

  • This will enable Tata Steel to go ahead and sign its JV agreement with Thyself Krupp of Germany

  • Petrol and diesel prices have touched a 3-year high in India

  • This is ironic since the crude continues to however around $50 and the real pressure is coming from government excise

  • Oil is still out of GST and hence states have been quite aggressive hiking their VAT, which is a state subject

  • Mutual Fund received nearly Rs.5206 crore in August via SIPs

  • A total of 700,000 new SIPs were opened during the month of August, most from second tier cities

  • There are already nearly 1.4 crore SIPs running and is proof of the rising equity cult among the retail investors

  • Inter globe plans to raise nearly Rs.3945 crore through QIP placement

  • The funds will be largely utilized for expanding its fleet and to finance the aircraft ordered

  • Indian aviation market is growing at 25% annually and airlines are trying to make the best of this big growth story

  • Hindalco plans to repay debt to the tune of Rs.1100 crore this month

  • This comes on top of the Rs.7815 crore of debt that the company had repaid to its lenders till August

  • This is good progress for Hindal co as its net debt is at just about Rs.10,000 crore giving it giving good operating leverage

  • Vikram Pandit expects nearly 30% of the IT jobs to vanish in 5 years

  • The combination of automation, machine learning and IOT is likely to make most IT jobs redundant

  • However, experts like Jamie Dimon feel that automation will eventually create more jobs that it destroys

  • Japan has committed billions of dollars to the Indian economy

  • Apart from a huge investment in the Bullet Train project, Suzuki is also investing in the Gujarat plant

  • Toshiba and Denso will also be involved in a project to manufacture lithium batteries

  • Yield on Indian debt benchmark crossed that of Indonesia

  • This was largely an outcome of Indian inflation going up and Indonesian inflation coming down

  • For over 2 years,Indonesia has offered the best debt yield and now debt inflows will gravitate more towards India

  • WPI index of inflation also showed a rise of 3.24% for August

  • Like in case of CPI inflation, WPI inflation was also largely driven by the impact of food inflation

  • WPI inflation is more critical from producer prices point of view and the GST impact is surely showing

  • India’s GDP growth to dip below 7%, says DBS

  • The UNCTAD had recently downgraded India’s GDP growth to 6.7% on the back of weak Q1 GDP numbers

  • With Q1 growth at just 5.7%, there are concerns that the note ban and GST may further put pressure on GDP growth

  • Tata Sons plans to change its legal status to prevent Mistry from selling

  • Tata Sons may shift its status from a Public Limited Company to Private Limited company and the vote is on Sep 21

  • This conversion will make it impossible for Misty to transfer their 18% stake in Tata Sons to outside parties

  • Former CEA, Shankar Acharya, advises against rupee appreciation

  • Dr. Acharya has called for RBI to stem rupee appreciation to protect the interests of exporters

  • According to Acharya, one of the reasons for the weak GDP is weak exports which also creates a weak SME syndrome

  • SEBI is looking at ways to remove clearing function out of brokers

  • This is in tune with the global standards where clearing is handled by banks and custodians

  • This will ensure that clients do not have to wait for 2 days for settlement and there is greater transparency



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