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WEEKLY CAPSULE & IMPACT ANALYSIS


Posted on 18-Jan-2019 Comments  0

Weekly Capsule (Jan 14– Jan 18) and Impact Analysis
News Announcement Impact Analysis
Brent crude closed the week near the $62/bbl mark
Brent has gained nearly 20% from the lows touched in the month of December2018
Despite US supply crossing 12 million bpd, OPEC cuts are likely to keep crude oil prices above the $60/bbl mark
Sun Pharma stock crashes to close at a 5 year low on the stock exchange
The stock has been on a downward spiral since 2015 due to the worries surrounding pharma margins
The recent sharp correction to a new low was on the back of serious corporate governance issues pertaining to promoters
Government likely to miss divestment target by nearly Rs.20,000 crore
The government had set a target of Rs.80,000 crore for the year but had achieved only Rs.32,000 crore till December
With elections approaching, the government may not too keen to push through divestment aggressively
China announces $85 billion stimulus to prop up GDP growth
The steps were taken after the exports and imports of China fell sharply on the back of the ongoing trade war
Economists are already projecting Chinese full year GDP growth to fall below 6.3%
The rupee weakens to 71.20/$ on fiscal deficit worries
The rupee has fallen close to Rs.2 in the last couple of weeks after the government hinted at the farm rescue package
With divestment and GST revenues likely to fall short by Rs.1.2 trillion, there may be huge spike in fiscal deficit
Jet Airways saga continues as Naresh Goyal refuses to cede control
The fracas started after Etihad agreed to infuse equity into Jet at 50% lower valuation compared to the CMP
Etihad had called for Goyal to step down, but Goyal has given a counter offer with infusion of Rs.700 crore
SBI Life reported 15% higher profits at Rs.254 crore in third quarter
This reflects the pace at which private insurers are taking away market share from LIC (now below 70%)
SBI Life has an AUM of Rs.135,000 crore and the insurer has managed to move well beyond its ULIP business
Wipro reported 35% growth in consolidated net profits in Q3
This profit growth was supported by a 10% growth in the top line revenues too; better than expectations
The company also announced a bonus issue which was already anticipated by the markets
Fund raising at NBFCs is back in the big bulge bracket
IIFL is raising Rs.2,000 crore and Edelweiss is raising a massive Rs.9,200 crore for its ARC business
It indicates that for the big bulge NBFCs, availability of funds is really not a major challenge
Kotak Bank stake sale hearing deferred to March 12th by High Court
Kotak had filed write petition against the RBI on its objection to Uday Kotak diluting stake through issue of PNCPS
The court case is more on the lines of a form versus substance debate on the interpretation of the dilution rule
CII has requested RBI for 50 bps cut in repo rates and CRR
CII has asked RBI to step in to bring down rates and also ensure sufficient liquidity for the Indian banks
The calls for rate cuts have become a lot more strident after retail inflation came in an 18-month low of 2.19%
Reliance is first Indian company to cross Rs.10,000 crore profits in one quarter
RIL reported a 55% rise in net revenues and an 8.82% growth in net profits for the quarter
Refining, petchem, retail and the much touted telecom outperformed during the quarter
US steps up pressure on China based technology companies
The US may ban sale of equipment to Chinese companies like Huawei and ZTE on business violations
This is likely to worsen the trade war and has already been condemned by China as being provocative
Mutual funds may be allowed to write covered calls against positions
Covered call entails selling higher call options against cash market holdings so that upside risk is contained
However, there are still curbs at a stock specific level which may make expansion of volumes difficult
SBI puts up Rs.15,000 crore of Essar debt on the auction block
ARCs and NBFCs have been invited to bid for this block at a minimum reserve price of Rs.9,588 crore
There is an NCLT bid available next year and SBI has discounted that price by the IRR of 18%
PWC warns of negative fallout of stringent ecommerce curbs
Government recently prevented foreign ecommerce players from owning the channel or exclusive marketing
PWC estimates that the overall impact of this move could cost $46 billion as ecommerce business
Trade deficit for December 2018 came in lower at $13 billion
While there was a 20% fall in gold imports and lower crude prices, exports were also quite tepid
This is worrisome because it leaves India with limited leeway if the Make in India program does not taken off
Finance ministry asks PSBs to bring down government stake to 52%
This is in line with the SEBI requirement to leave at least 25% of free market float in public hands
Government may be looking at this move more to raise funds ahead of the Union Budget and the elections
India likely to overshoot fertilizer subsidy by $4.2 billion this year
This has been triggered by the global fall in price of fertilizers and also the weak Indian currency
Government may look at a special banking arrangement to bridge this gap as the ministry has refused to take it up
RBI warns of MUDRA loans as the next big NPA challenge for banks
Since MUDRA (small loan scheme) was launched total loan disbursals are to the tune of Rs.246,000 crore
RBI has warned that the lag effects of GST and note ban could create problems for these companies on cash flows
Economists raise serious questions about the 3.3% fiscal deficit target
The shortfall in divestment revenues itself is likely to push up the fiscal deficit to 3.5%. Then there is GST shortfall
Economists worry that the generous dole outs in the budget could only worsen the fiscal deficit

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