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WEEKLY CAPSULE AND IMPACT ANALYSIS


Posted on 14-Dec-2018 Comments  0

Weekly Capsule (Dec 10– Dec 14) and Impact Analysis

News Announcement

Impact Analysis

Assembly polls provide a temporary setback to the ruling NDA
The NDA lost the crucial states of Rajasthan, Chhattisgarh and Madhya Pradesh to the Congress Party
This opens up the field wide for the general elections of 2019 with a tougher contest among the two national parties
RBI governor Dr. Urjit Patel steps down ahead of RBI Board meet
Dr. Patel had been long differing with the Finance Ministry on RBI independence and payout from RBI capital
Former bureaucrat, Shaktikanta Das, took over as the RBI governor in place of Dr. Urjit Patel
RBI non-committal on governance issues in its Board meeting
Contrary to expectations, the RBI did not commit on governance issues and called for deeper discussion
The government is looking at a larger role in RBI decision making and also return of capital by the RBI
Congress plumps for the old guard in Rajasthan and Madhya Pradesh
Ahead of general elections, Congress party opted for Gehlot as Chief Minister and Pilot as his deputy in Rajasthan
Earlier, the Congress party had voted strongly in favour of Kamal Nath to hold the reins in Madhya Pradesh
IOC announces buyback at Rs.149 apart from a big dividend
India’s largest oil refiner will pay over Rs.10,000 crore to shareholders via dividends and buyback of shares
The government with more than 52% stake is likely to be the biggest beneficiary of this generous payout
CPI inflation came in sharply lower by 100 bps at 2.33% for November
The sharp fall in CPI inflation was largely driven by negative food inflation, despite higher MSP promises
Inflation was also impacted by the sharp fall in crude oil prices by nearly 30% since the peak levels in early October
IIP growth came in sharply higher at 8.5% for October 2018
The sharp rise in IIP growth was largely driven by a spurt of 7.5% in manufacturing IIP, which is the biggest component
While it was partly the base effect, the IIP also benefited from a genuine revival as indicated by the PMI numbers too
NBFCs receive record foreign fund inflows in first 8 months
NBFC stocks received FPI inflows to the tune of $352 million during the month of November on easing liquidity
The RBI push to liquidity and the bank promise to fund NBFCs has obviated the short term risks for the sector
China tries to make America a trade offer it cannot refuse
In the first sign of action after the G-20 meet, China agreed to resume corn imports and slash auto duties on US imports
The Chinese commitment to buy 3 million metric tons of American corn will largely soothe the trade tensions
Hindustan Unilever likely to big beneficiary of falling input costs
Key inputs for soaps have seen a price drop of 15% due to high inventories and weak demand, benefiting HUVR immensely
Most of the key inputs like PFAD and crude palm oil have fallen between 20 to 40% in a big input boost to HUVR
Global stocks continue to take a dip on global growth concerns
With the trade war still limping along, global growth is likely to falter by 30-40 bps, as estimated by the IMF
The markets have also been a tad wary ahead of the Fed meet coming up next week where rate action is still uncertain
Yes Bank put off its CEO decision to January 09th
While many names are being thrown around, Yes Bank has been delaying sending the list to RBI for approval
The stock reacted negatively to the announcement. Yes Bank had been gaining after the change at the helm of RBI
European Central Bank finally calls a halt to fresh bond purchases
ECB confirmed that it was still far from unwinding the program so renewals will continue
This is the first indication from the ECB that growth may be coming back and stimulus may not be required
Supreme Court rejects ADAG plea for more time to settle Ericsson case
ADAG was to pay Rs.550 crore to Ericsson as compensation by 15th December, for which it had sought more time
The SC warned the ADAG group that any delay will invite penal interest and also contempt proceedings
British PM, Theresa May, survived the BREXIT vote by a whisker
For now it gives May more time to negotiate a more palatable settlement for the BREXIT deal
Absence of any deal would have meant huge damage to the global stock markets and also to the UK Pound
SEBI starts probe into the role of rating agencies in the IL&FS fiasco
SEBI will look to investigate how all the rating agencies missed out the warning signals of IL&FS entirely
In addition, the SEBI will also tighten the regulation of liquid and money market funds to avoid surprises for unit holders
RBI was net seller of dollars to the tune of $7.2 billion in October
This shows the RBI’s continued support to holding the value of the rupee at psychological levels
RBI has been managing the rupee through spot dollar sales and also through the sale of dollar futures
Ind-RA expects the PFC stake-buy in REC to impact ratings
The purchase of the government stake in REC by PFC will add to its total debt by Rs.15,000 crore
Both are in the same power funding business and the deal is likely to help the government meet its divestment targets
Brent Crude has been largely subdued during the week
This is despite the aggressive 1.2 mn bpd supply cut announced by the OPEC and partner nations
The bigger worry for the oil market is that a trade war driven slowdown could deeply impact oil demand
US stock markets lost over $1 trillion in market cap in December
This sharp fall was largely triggered by the inversion of the US yield curve hinting at an impending economic slowdown
Some of the richly priced FANG stocks were among the biggest losers in this price carnage in the US markets
Kotak Bank may take the RBI head on in the PCNPs issue case
RBI had denied Kotak Bank permission to issue PCNPs in lieu of equity dilution to reduce promoter holdings
The legal case is more pre-emptive in nature since the RBI has not reverted to Kotak Bank’s request
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