Weekly Capsule – 27th Nov 2020

weekly cap 1 1 Weekly Capsule   27th Nov 2020

News Announcement

Impact Analysis

  • Sep-20 quarter GDP contracts by 7.5% on weak services sector growth
  • This compares favourably with the contraction of 23.9% in Q1 and is also lower than estimates by rating agencies
  • The sequential bounce in GDP performance was driven by a sharp turnaround in utilities and manufacturing sector
  • Financial services and public services come under pressure in Q2 GDP
  • Financial services and public services contracted at a higher rate compared to Q1 due to weak capital raising
  • However, the important segment of trade, services and hotels saw some recovery although structural issues continue
  • RBI announces merger of Lakshmi Vilas Bank with DBS Bank India
  • DBS Bank India is unlisted and is a part of DBS Group of Singapore with operations in over 18 countries
  • This is the first case of a foreign bank being asked to take over a beleaguered bank, outside of PSU banks
  • Equity capital of LVB has been entirely written off by the RBI
  • That means the equity will cease to exist and hence the shareholders of LVB will get nothing from this deal
  • In addition, the RBI has also instructed LVB to write off Rs.320 crore of Tier 2 bonds prior to the amalgamation
  • RBI confirmed that banks had paid back Rs.4300 crore as interest on interest
  • This was the compounding amount that the government had committed to write back, totalling to Rs.7500 crore in all
  • While banks will pay back the borrowers, the said amount will be fully compensated by the government to the banks
  • Core sector contraction for Oct-20 widened to -2.5% on MOM basis
  • The oil sector with the heaviest weight continued to drag the core sector output index lower
  • However, one change seen was that steel production saw compression even as cement output stayed buoyant
  • Crude oil edges above $48/bbl in the North Sea Brent market
  • The sharp spike in oil was largely on the back of prospects of a vaccine and a return to growth in the world economy
  • IEA estimates that for the next four quarters, demand could exceed supply leading to reserve drawdown across the board
  • Burger King announced Rs.810 crore IPO opening on December 02nd
  • The IPO will be priced at the floor price range of Rs.59-60 and will comprise Rs.450 crore fresh issue and Rs.360 crore OFS
  • Bids can be made for a minimum lot of 250 shares and the issue will be used to expand its store franchise
  • Fiscal deficit at 126% of the full year target as of end of October
  • This is a widening of the gap with the fiscal deficit standing at 114% of full year GDP at the end of September
  • Post the third stimulus, fiscal deficit is estimated to cross 10% of GDP and the impact is visible in falling central spending
  • FC Kohli, father of the Indian IT industry passes away at the age of 96
  • FC Kohli was one of the original founding members of TCS and is considered to be the software pioneer in India
  • It is largely to the credit of Kohli that TCS has become a $191 billion conglomerate today
  • Russia’s Sputnik may commence production in India soon
  • The company that owns the Sputnik brand, RDIF of Russia, has tied up with Hetero Drugs for 100 million doses
  • Sputnik claims high efficacy rates of above 90% but Western nations have expressed doubts about the approval process
  • NSE expelled Karvy Stock Broking and Anugrah Stocks during the week
  • Both these brokers had been guilty of breaching the bye laws of the exchange leading to eventual default
  • In the case of Karvy, the broker had illegally used the shares from client demat accounts to raise funds in the market
  • SBI Research expects the RBI to hold rates in the December meet
  • With the inflation at well above 7.5%, the scope for rate cuts is quite limited as far as the RBI is concerned
  • In addition, the rates are already at multi-year lows and hence scope for rate cuts is very limited
  • Online retailers Amazon and Flipkart record $8.3 billion festival sales
  • This is the highest ever festival sales recorded in India by ecommerce players supported by customer growth
  • Interestingly, 88% of the customer growth is driven by 4 crore shoppers mainly came from the Tier-2 towns and cities
  • National Anti Profiteering Authority fines P&G Rs.241 crore
  • This pertained to GST reductions not being passed on to the end customers, which is mandatory under GST Act
  • The company has been asked to pay up the supernormal profits made with interest but without the penalty amount
  • Walt Disney to lay off 32,000 workers across its principal theme parks
  • This is due to the COVID impact and this excludes another 37,000 workers who will be furloughed
  • The theme parks have still not been allowed to function at full capacity due to social distancing norms
  • SBI cautions banks lending below repo rates to AA rated customers
  • With liquidity abundant in the system, many banks are lending to lower rated corporates for 15-year tenure
  • Apart from the negative spread, these loans also run the risk of maturity mismatch in the books of the banks
  • Congress and Left parties object to allowing corporates into banking
  • Both parties have objected on the grounds that this could lead to a clear conflict of interest between lender and borrower
  • However, this is only likely to start as an effort to upgrade the NBFCs of industrial groups into banks for better regulation
  • SBI raises Rs.2500 crore via the issue of Basel III (AT1 bonds)
  • The bonds are perpetual bonds and will have coupon rate of 7.73%, much above its benchmark borrowing rates
  • SBI will have the call option to call back after 5 years and now most investors prefer AT1 bonds only of blue chip banks
  • India banned another 42 Chinese apps on security and sovereignty grounds
  • This is in addition to the 70 apps that India has already banned from China in the recent past over security issues
  • Some of the popular apps banned in this round include Jack Ma’s Alipay, Snack Video, Shien, Club Factory and China Social
  • Templeton approaches Supreme Court against the High Court order
  • Templeton objected to not being allowed to wind up the funds without approval of unit holders
  • While most investors in the 6 funds of Templeton need to take a steep haircut, as of now they are still in the dark

Related Post

Add a Comment

Your email address will not be published.