Daily Market Update FEB 23

unnamed Daily Market Update FEB 23

Even as DHFL was getting close to being sold to Piramal Enterprises, there is a new angle as the transaction auditor, Grant Thornton, has reported further fraudulence worth Rs6,182 crore in DHFL. The report by Thornton states that certain transactions were undervalued, fraudulent and preferential in nature. These transactions apparently were executed over a period of time. Based on the observations presented by Grant Thornton, the administrator filed an application before NCLT pertaining to disbursements made to certain entities under the header of Other Project Loans. This is likely to delay the resolution process.

The latest criticism of Bitcoin comes from no less a person than the US Treasury Secretary Janet Yellen. She referred to Bitcoin, the world’s most valuable cryptocurrency, as highly speculative and inefficient for transactions. In India, RBI has already put a ban on transactions in Bitcoin and other cryptocurrencies. Yellen called it inefficient as the energy consumed in processing transactions was huge. These comments from Janet Yellen came in the midst of Bitcoin crashing 16% on the crypto exchanges. Instead, Yellen has suggested that the US Fed seriously explore pros and cons of a digital dollar currency, which will be digital and yet reliable as it would have the backing of the Fed. The comments assume importance as the ECB Chief, Christine Lagarde, had also criticized cryptos as being speculative and facilitating illicit transactions.

Bharti Airtel appointed investment banks to help raise Rs 7,500 crore through the issue of overseas bonds. The bond sale is expected to be launched in the next few days. Bharti will use the funds to build a war-chest as it needs cash to buy spectrum in the upcoming 4G auctions. It also needs to invest in networks and gradually clear its statutory dues. These overseas bonds are likely to be raised by Airtel’s Mauritius arm and guaranteed by Bharti. In the Dec-20 quarter, Bharti turned around to report a net profit of Rs.854 crore after 6 straight quarters of losses; supported by gains on the sale of towers business and better ARPUs.

The MPC minutes were published on 22 February and the consensus was to continue with low rates and an accommodative monetary policy for now. However, members of the MPC like Mridul Saggar have also warned that the price stability role of the RBI cannot be ignored for too long. The MPC was impressed by the fact that high frequency growth indicators were positive even as inflation was gradually tapering to lower levels. Summing up the discussion, Shaktikanta Das underlined that supporting growth recovery remained the first priority. Jayant Varma suggested sticking to a data driven approach on rates and stance.

Nifty and Sensex corrected sharply for the fifth day in succession. Rising bond yields and fears of COVID-19 resurfacing halted the rally in the stock markets. On Monday, the Sensex lost 1145 points while Nifty lost 306 points. Among the heavyweights, only ONGC, Kotak Bank, and HDFC Bank managed to hold in the green. Big value losers included Tech Mahindra, M&M, Reddy Labs, Reliance Industries, IndusInd Bank, Axis Bank, TCS, and Maruti Suzuki. Nifty A/D ratio was unfavorable at 10:40. The pressure was lower in mid-caps with the S&P BSE Mid-Cap index closing just 1.34% lower. Metals dazzled but IT took deep cuts.

In a positive development for Indian PSU banks, India Ratings and Research revised its outlook for the PSU banking space for FY22 from “Negative to Stable”. However, it does expect higher levels of stress in retail loans. The last 9 months gave banks the opportunity to beef up their provisions to provide for the pandemic-related risks. In fact, India Ratings expects that the provisions would be up by 80% on these specific NPAs in the coming year. It is more gratifying that it has revised its credit growth estimates for FY21 from 1.8% to 6.9% and further upgraded its forecast for credit growth in FY22 to 8.9%. The agency also pointed that most of the retail stress in FY22 would come from unsecured advances which was an area where private banks were more active. It also expects deposit rates to rise as credit revives

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