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WEEKLY CAPSULE AND IMPACT ANALYSIS


Posted on 28-Dec-2018 Comments  0

Weekly Capsule (Dec 24– Dec 28) and Impact Analysis
News Announcement Impact Analysis
10 year bond yield spike sharply on the back of farm loan waivers
Bond yields jumped by nearly 10 bps on Friday after the government hinted at Rs.3 trillion farm loan waiver package
This is likely to be a direct credit to farmers who sold below the MSP post the implementation in June
Modi hints at Rs.300,000 crore relief package for farmers
This huge package will include loan waivers and direct credit for the shortfall below the MSP at which crops were sold
There are a total of 263 million farmers who are likely to benefit from this move along with their families
Cabinet has approved the plan to list a total of 6 state owned companies
The list includes Kudremukh Iron, Telecom Consultants, RailTel Corp, National Seed Corp, Tehri Hydro among others
While the timing was not clear, it can be seen as a monetizing of value of government owned assets to meet shortfall
Banks could end up with $3 billion loss on PNB fraud case
This is the overall loss that other banks may have to take on loans and guarantees to diamond businesses over time
Apart from Modi and Choksi, who are absconding, similar frauds have been perpetrated by other promoters too
PVR seeks shareholder nod to raise a sum of Rs.750 crore
The funds are expected to be raised through placement of shares to qualified institutional buyers (QIBs)
The funds will be used for funding acquisitions and also for short-term and long-term working capital needs
Government doubles export incentives for onion farmers to 10%
This steep rise in export incentive from 5% to 10% is intended to compensate the farmers for the steep drop in price
The export incentive is in the form of credit which can be used by the farmers to pay various taxes
LIC witnessed a sharp fall in NPAs between March and October
NPAs of LIC fell from Rs.7040 crore to Rs.1580 crore, largely reversing the trend of the last three years
The company still enjoys a comfortable solvency ratio of above 1.55% which shows its ability to discharge debt
The big questions for 2019 will be on the Fed move and trade wars
The Fed hiked rates by 100 bps in 2018 and the stance in 2019 will depend on the equations between Fed and Trump
The trade war is currently suspended but relations with China worsened after the arrest of the Huawei CFO
Vadilal Industries has decided to delay the publication of audit report
This delay is largely attributed to differences within the board on the contents of the audit report
In the recent past, such moves have seen severe punishment meted out to the stock by the markets
Japan 10-year bond yields fell below 0 for the first time since mid-2017
The steep fall in the bond yields is indicative of larger worries on the Japanese growth front
Japanese Nikkei index is still below half the levels of the peak seen in 1989, at the peak of the realty boom
EOW files second charge sheet against 63 entities in NSEL scam
For the first time some major brokers have also been named in the charge sheet, expanding the scope
The Rs.5600 crore default by NSEL was triggered by illegal futures trade in the spot market
Fiscal deficit touches 115% of full year target by November 2018
The maintenance of 3.3% target under FRBM will be a real challenge for the government in election year
Higher fiscal deficit is negative for the Indian rupee and also for the external rating of the economy
Modified ecommerce rules heavily weighted in favour or domestics
The new rules put restrictions on global players like Amazon and Wal-Mart using the inventory model
These global firms will not be allowed to offer special discounts or mandate exclusive rights for selling
Vedanta to invest $8 billion in capacity expansion in next 3 years
This will entail capacity expansion across oil extraction, aluminium capacity expansion and zinc capacity building
Mr. Agarwal is heavily betting on the a revival of the commodity and industrial cycle in the coming years
Dow Jones continued to show weakness despite the brief rally
The NASDAQ has seen some of the FAANG stocks correct by nearly 30% from the peaks
The Dow lost nearly 2000 points in the last couple of weeks after the US yield curve showed an inversion
Bimal Jalan to head 6-member panel to decide on reserve transfer
The government had been eyeing the massive $40 billion dollar capital reserve of the RBI to raise resources
This was one of the reasons over which former governor, Dr. Patel had been forced to resign from his post
Congress promises entirely revamped GST structure for corporates
Congress has promised to make the GST more amenable and friendly towards MSME sector
They have also proposed to cut down the total number of rate slabs to just one with a view to simplification
PIMCO turns bullish on Indian bonds on stable rupee and good yields
According to PIMCO, with low inflation, the real rates on Indian bonds are really attractive for investors
PIMCO is the world’s largest bond fund manager and manages close to $2 trillion in AUM globally
Brent slips below $50/bbl before bouncing back from lower levels
The sharp fall in Brent came on the back of oversupply concerns and demand contraction on a slowdown
Brent Crude has fallen from a high of $86/bbl to $50 in a span of just 2 months after the Iran sanctions were diluted
NCLT recoveries could cross Rs.1 lakh crore in the year 2019
This will be on top of the Rs.80,000 crore that has been collected in the current year 2018
This is likely to boost the bottom-lines of banks and also give them more ammunition to lend to industry
GST Council implemented another round of rate cuts in its last meeting
Many products were moved from the 28% bracket to 18% bracket leaving only luxury and sin goods in the 28% league
The government has also hinted at merging the 12% and 18% slabs into a single rate to further simplify
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