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Weekly Capsule and Impact Analysis

Posted on 20-Apr-2018 Comments  0

News Announcement

Impact Analysis

  • Minutes of the MPC clearly hinted at possible rate hikes in 2018

  • While the vote was 5:1 in favour of status quo, there was an acknowledgement of the inflation risk by all members

  • The impact was immediately felt on banks which cracked sharply on Friday on investment loss fears

  • Nokia tax dispute settled under India-Finland mutual treaty

  • The penalty of Rs.2500 crore was later reduced to Rs.1600 crore which has been accepted by Nokia

  • With the Nokia issue resolved one can expect an early resolution of the Vodafone and Cairn cases also

  • TCS on course to touch market capitalization of $100 billion

  • The stock was up by 7% after its quarterly results showed a growth of 4.5% and TCS declared 1:1 bonus

  • The effect of TCS has already rubbed off on other software stocks too with Infosys and Wipro also gaining

  • The INR cracked beyond the 66/$ mark after holding the level for a long time

  • The panic was caused by Brent Crude prices going beyond $72/bbl with continued tensions in the Middle East

  • The fall in INR was caused by banks and importers rushing to cover their open dollar exposures

  • Axis Bank hires Egon Zhender to look out for a new CEO for the bank

  • Shikha Sharma has already expressed her intention to be relieved from the bank as of end of 2018

  • This came after the RBI asked the Axis Bank board to cut short her 3 year tenure considering rising NPAs at Axis

  • CBDT and ED seek ban on trading of crypto currencies in India

  • It may be recollected that the RBI in its last monetary policy had already cautioned regulated entities on Bitcoins

  • SEBI and RBI had also expressed fears about round tripping of funds using the crypto currency route

  • Vedanta gets Electrosteel at lower than current market valuations

  • Vedanta, the diversified commodities conglomerate, had emerged as the highest bidder for Electrosteel

  • The enterprise valuation is at 4.7 times EBITDA, which is cheaper than the industry norm of 6 times EBITDA

  • Former SEBI boss, Damodaran, comes down heavily on governance practices

  • Damodaran called upon the boards and especially independent directors to represent small shareholders

  • He was talking with reference to the ICICI case where the board had stood behind the current CEO

  • Iran to switch out of US dollars to Euro for settling foreign trades

  • This could actually inspire a lot of other nations to shift their focus out of the dollar, which has been weakening

  • This decision came after the US threatened to re-impose sanctions on Iran and walk out of the Nuclear Deal

  • Salil Parekh of Infosys to buy growth at the cost of margins

  • Parekh has adopted a strategy that is largely at cross purposes with the strategy that Sikka had adopted

  • Parekh will also be exiting from Sikka’s expensive buys like the controversial Panaya of Israel

  • Power PSU show little interest in the governments stressed asset plan

  • The government wanted NTPC, PFC and REC to take over the stressed assets of the Indian power sector

  • The worry for the government is that 57% of the power debt has an interest coverage ratio of less than 1

  • Rabobank believes that India could be a major loser in the global trade war

  • Rabobank expects India to lose nearly 2.3% of GDP growth in the next few years due to the trade war

  • The trade war could actually make India’s exports un-competitive and put pressure on trade deficit

  • CBI questions former BOB chairman in the Rs.2900 crore Rotomac default

  • The pen manufacturer had incurred huge losses after it had diversified into unrelated areas like trading

  • The CBI believes that the money was diverted out of India with the connivance of BOB officials

  • Deutsch not to sell its PWM business to IndusInd Bank

  • In a change of heart, Deutsche plans to invest more into the India operations to revive the Indian business

  • Deutsche has a €15.20 billion credit exposure to India, which is the second largest in Asia after Japan

  • IMF sees impediments to global growth after the year 2020

  • IMF expects growth to rise in the next couple of years as an outcome of the Trump tax cuts

  • However, post 2020, the cumulative impact of rate tightening will have a negative impact on global growth

  • IMD predicts 2018 rainfall at 97% of long term average (LTA)

  • This is within the normal definition of 96%-104% of LTA as defined by the Met department

  • The next and more realistic estimate will come by June when the El Nino effect will also be factored

  • Equity SIPs collected Rs.67,200 crore ($10 billion) in fiscal 2017-18

  • This represents a 53% growth in SIP collections on a YOY basis largely driven by retail appetite for equity funds

  • The drop in the mutual fund expense ratio is likely to further open the gates for SIPs to expand this year

  • Trump identifies Russia, China and India as potential currency manipulators

  • Trump has accused these countries of keeping their currencies deliberately weak to boost exports

  • The argument sounds a tad ironic considering that short US dollar was the biggest trade in the last one year

  • Risks of World War III underplayed by the US and Russia

  • While Trump carried out a test attack on Syria, it was not really followed by more attacks

  • Even Putin threatened reprisals and counter attacks but stopped short of making any attacks on the Allied forces

  • India’s trade deficit for March 2018 comes in higher at $13.7 billion

  • The trade deficit for the full year 2017-18 was double that of the previous year due to a sharp rise in imports

  • India could end the current fiscal year with a sharply higher trade deficit in excess of $200 billion if oil stays higher

  • India’s forex reserves cross the $425 billion mark during the week

  • This puts India along with other Asian miracle economies in the Top-10 in terms of forex chest

  • China remains the leader of the pack with a forex chest of nearly $3.50 trillion followed by Japan at $1.2 trillion



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