Weekly Capsule – 09 Oct 2020

weekly cap 1 Weekly Capsule   09 Oct 2020

News Announcement

Impact Analysis

  • RBI maintains status quo in repo rates and holds accommodative stance
  • With inflation above 6%, the MPC had limited choice on repo rates, especially with rates at 20-year lows
  • However, to spur growth, the MPC has committed to keep the stance accommodative as long as required for durable growth
  • RBI pegs full year GDP contraction for fiscal year 2020-21 at (-9.5%)
  • The RBI has projected contraction in Q2 and Q3 but positive GDP growth in the fourth quarter
  • RBI has also projected 20% growth in GDP in FY22 as growth is expected to pick up sharply from a lower base
  • RBI likely to make 24 hour RTGS available from December 2020
  • Currently, only NEFT (up to a value of Rs.2 lakh) is available round the clock on all days of the week
  • With this shift, India will become one of the few countries in the world to offer round the clock fund transfers
  • OMO size doubled and SDLs to be part of regular RBI OMOs
  • The OMO size at Rs.20,000 crore will ensure additional infusion of liquidity into the financial markets
  • The RBI will also include state development loans (SDL) into OMOs to make their pricing liquid and transparent
  • Nifty settles above 11,900 and Sensex settles above 40,000 for the week
  • The rally was largely driven by positive outlook for Reliance Industries and tech heavyweights like TCS and Infosys
  • The monetary policy assuring financial accommodation for a prolonged period also helped market sentiments
  • UTI IPO and Mazagon Docks IPO to list on the bourses on 12 October
  • While Mazagon got oversubscribed nearly 150 times, the response to UTI AMC was a lot more muted
  • Both the stocks have seen tapering of the grey market premiums in the last few days post the listing of Angel
  • SEBI asks listed companies to disclose forensic audit findings to exchanges
  • Normally forensic audit is conducted at the behest of a regulator when they suspect fraud and money laundering
  • While such reports can have a major impact on share value, it is currently not mandatory to disclose to exchanges
  • TCS announces better than expected results for Sep-20 quarter
  • Revenues managed to grow and cross the Rs.40,100 crore mark for the quarter despite tech spending worries
  • The net profit was lower at Rs.7450 crore but that was due to the Rs.1210 crore provision for Epic Systems legal case
  • TCS announces a buyback of 5.33 crore shares worth Rs.16,000 crore
  • The buyback is likely to happen at a price of Rs.3000 per share, which is a significant premium to the CMP of TCS
  • The eventual stake of Tata Sons in TCS will increase from 72.05% to 73.09% if Tatas don’t participate in the buyback
  • Vedanta delisting gets more than 90% bids but prices may be off-track
  • According to Vedanta, bids have come from the floor price of Rs.87.50 all the way to as high as Rs.320 per share
  • If Vedanta is not willing to accept the median price, then it has the option of making a counter offer for the buyback
  • Piramal Enterprises prepays short term loan to Barclays worth Rs.1000 crore
  • This 3.5 months loan was taken as a stop-gap at 8% but was repaid within one month itself
  • The repayment was funded by The $550 million inflow that PEL got from the sale of 20% in Piramal Pharma to Carlyle
  • Equity funds and debt funds see outflows in September 2020
  • While equity fund outflows tapered, the debt fund outflows were largely on account of quarter end liabilities
  • The one segment of mutual funds that did well was the passive funds set which saw inflows of Rs.6350 crore
  • Infosys pays $125 million to acquire a stake in Blue Acorn
  • The company specializes in artificial intelligence and other digital experience areas
  • This is in line with the new thinking at Infosys and also the direction that tech spending is assuming of late
  • Amazon files a legal case against Future Group over its Reliance sale
  • Amazon’s contention is that it had the right of first refusal to the stake as part of the deal when it acquired Future Coupons
  • However, that deal had a lock-in of 3 years and with its impending defaults, Future group had limited choice
  • SEBI puts stringent restrictions on inter scheme transfers in debt funds
  • This was triggered after there were IST of Rs.60,300 crore by debt funds post the Templeton fiasco in April
  • Now the waterfall is that fund managers must use the cash, equivalents and borrowings before doing IST
  • Dinesh Khara takes over as the new chairman of SBI
  • Dinesh Khara was the MD of SBI and has extensive experience in corporate and international banking
  • The big focus areas for Khara will be monetization of digital businesses and keeping a check on asset quality
  • Reliance rallies after ADIA picks up 1.2% in Reliance Retail at Rs.5512 crore
  • This is the sixth major deal and all the PE investors in RRVL had also participated in Jio Platforms; except GIC, Singapore
  • Till date, Reliance has sold 8.48% stake in Reliance Retail at a total valuation of Rs.37,700 crore
  • Valli Arunachalam issues legal notice to the board of Ambadi Investments
  • Valli would have been the first lady on the board of the Murugappa family group, but it was blocked
  • Valli has asked to be either given a seat on the board or has asked for her stake to be bought out at objective valuations
  • SEBI keeps AT1 bonds out of reach of retail investors
  • As per the new rules, the minimum investment will be Rs.1 crore and only QIBs will be permitted to invest
  • This will avoid the fiasco like in the case of Yes Bank when AT1 bonds worth Rs.8500 crore were written down to zero
  • RBI to introduce Positive Pay facility for high value cheques from Jan-21
  • Under Positive Pay, the cheque issuer uploads basic details of the cheque with a scan photograph to his bank
  • The bank will approve and clear the cheque only if the actual details fully match with the details uploaded by the issuer
  • Britannia issues bonus debentures in the ratio of 1:1 to shareholders
  • The debenture will have a face value of Rs.29 and will help Britannia manage cash outflows better
  • This is over and above the cash dividend of Rs.12.50 that the company is paying to shareholders

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