Weekly Updates

Posted on 16-Jan-2017 Comments  0

Big News

On a day when TCS announced a stable growth of 1.5% in revenues and 2.9%in profits, the attention was occupied by a different subject altogether. On the same day, the company made two major changes. The current TCS CEO moves on to take charges as the Chairman Tata Sons.Chandra will be replaced by CFO, Rajesh Gopinathan, who takes over as the next CEO of TCS. What are the big challenges for Rajesh as he steps into Chandra’s shoes?

Living in the post-Trump era…

Chandra is, probably, exiting TCS at a time when the level of uncertainty in the short term is the highest. H1-B visa costs are likely to go ups harply and if Trump has his way then minimum wages for Indian onsite workers may have to be increased. Trump is keen to do away with the cost arbitrage that countries like India have enjoyed over the US in the department of costs. Then there is the additional threat of apenal tax on outsourcing. That basically means that US companies that hive off key jobs to India will have to pay a border tax in the US.At least, Trump has promised to make the border tax steep enough to dissuade outsourcing. If any of these threats are even partially implemented, then Indian IT companies are going to have a tough time.Rajesh will have to live with the immediate uncertainty of a Trump revenge series. For a large player like TCS, it could have significant implications for revenues.

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Market Capsule

Highlightsof the Week (Jan 09 – Jan 13) and Impact Analysis

Major News Item

Impact Analysis

  • Much awaited Trump Speech fails to cheer global markets

  • Trump’s conference did not contain any references to the tax cuts or to the infrastructure spending of $1 trillion

  • In a negative move for IT and Pharma, Trump spoke about border tax on outsourcing and penalties for drug makers

  • Auro bindo acquires Portugal based Generis Farmaceutica for €135 mn

  • This gives Aurobindo seamless access to the entire Europe market which already accounts for 23% of revenues

  • The deal helps Aurobindo largely de-risk its exposure to the US, where FDA problems are likely to increase

  • Mohammed El Erian warns global markets of strong dollar

  • According to Erian, a strong dollar could make US companies uncompetitive in global markets depressing equity values

  • A strong dollar will also force the Chinese Yuan to weaken setting off a price war among emerging markets.

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