Weekly Capsule (Apr 05 – Apr 09)

weekly Weekly Capsule (Apr 05   Apr 09)

News AnnouncementImpact Analysis
·        Monetary Policy holds status quo on repo rates at 4%·        This held the reverse repo at 3.35%  and the bank rate and MSF rate at 4.25%. CRR was up at 3.5% as already agreed

·        This was along expected lines as COVID has created new growth risks and inflation has been within 6% levels

·        RBI maintains growth estimate but flags inflation risks for FY22·        GDP growth has been maintained at -8% for FY21 and +10.5% for FY22 as per the RBI estimates with COVID risks

·        Inflation for FY22 was pegged lower from 5.2% to 5.0% but RBI has warned that supply chain issues could spike inflation

·        The RBI introduced continuous buying and selling of OMOs known as GSAPs·        These secondary market transactions will  be ongoing and help smoothen the yield curve across maturities

·        However, the risk of being flooded with rupee liquidity led to a sharp weakening of the INR to levels of Rs.74.60/$

·        Shortage of electronic chips could badly hit the global auto industry·        The supply of chips from Taiwan and the US had not been able to keep pace with the sudden surge in demand for chips

·        It is expected that the global auto industry alone could lose nearly $60 billion in sales due to the chip shortage

·        Macrotech IPO just about scrapes through with 1.36 times subscription·        Retail interest was negligible with just about 17% of the retail portion subscribed even as QIBs saved the day

·        Macrotech (formerly Lodha Developers) had proposed to raise Rs.2500 crore via IPO but debt levels were a concern

·        UCO Bank will write off Rs.12,537 crore loss against share premium account·        The share premium account is created when fund are raised at a premium in the IPO, and is classified as free reserves

·        This largely dilutes the net worth of the company and to that extent helps build ROE quickly when profits resume

·        Net direct tax collections at Rs.9.45 trillion, exceeds revised estimates·        Corporate taxes contributed Rs.4.5 trillion, personal income taxes Rs.4.71 trillion and STT contributed Rs.16,927 crore

·        However, the direct mop-up was 10% lower than FY20, which is understandable due to the lag effect of the pandemic

·        SBI may be going slow in funding the Carmichael mine project of Adani·        Earlier, the SBI had committed a loan of $1 billion to Adani to acquire the coal mines in Queensland to assure supplies

·        However, the bank is now worried about the viability of the project after major environmental protests in Australia

·        Barbeque Nation outperforms  with 40% returns despite negative listing·        Barbeque listed on Wednesday at 2% discount to issue price but closed nearly 45% higher over next 2 days

·        With the backing of marquee investors, the stock saw strong buying at lower levels as the company plans to reduce debt

·        BSE Metals index among the top star performers in calendar year 2021·        The index has gained sharply in the last 3 months on the back of spike in steel and other metal prices in world markets

·        However, despite this frenetic rally, the BSE Metals index is still around 30% below the peaks scaled in the year 2007

·        Equity funds saw net buying for the first time after 8 months of net selling·        The turn reflected a shift in sentiments as MF investors were more willing to commit money at lower levels

·        In addition, the SIPs also touched record levels of Rs.9,182 crore in March, an all time record for monthly SIP flows

·        Vehicle registrations fell 28% in the month of March 2021·        This could be attributed to the near 7-day lockdown in the city of Mumbai and also other major metros in India last month

·        It is ironic that registrations have dropped sharply in a month when dealer sales had risen sharply

·        Large cap funds continue to lag Nifty in 2020, like in 2019 and 2018·        With 81% of large cap funds underperforming, it is attributed to kurtosis, as only a handful of large caps outperformed

·        But even if you look at a five year period, nearly 70% of the large cap funds have underperformed

·        HEG and Graphite India rally sharply on the back of expected electrode demand·        Electrodes are heavily in demand in steel arc furnaces and that is expected in tandem with global steel demand

·        Both the stocks have been largely cyclical and dependent on the order flows from the steel manufacturing companies

·        Dixon and Bharti tie up for PLI based telecom product manufacture·        Telecom is one of the key products that India wants to reduce dependence on imports and is part of “Atma Nirbhar Bharat”

·        The JV will produce modems, routers, set-top boxes and IOT products for Airtel as well as for other telecom players

·        Groww raises $100 million Series-D funding from Tiger Global and Sequoia·        This latest round makes Groww the second Fintech unicorn after CRED, which touched $1 billion valuation recently

·        Groww provides an agnostic investment platform and will use the funds for hiring talent and for investor education

·        Adani Ports reports 41% growth in cargo volumes for month of Mar-21·        Total port volumes for Adani stood at 26MMT for March and 73 MMT for the fourth quarter ended Mar-21

·        Adani Ports has overtaken JNPT in terms of container volumes and now also has good visibility on the east coast


·        Credit Suisse takes a hit of $4.7 billion on account of Archegos Capital·        Archegos was a family office that sank under the weight of huge losses on its Total Return Swaps positions

·        Credit Suisse was one of the prime brokers that had structured and also funded the TRS for Archegos Capital

·        SBI MF becomes the first AMC to cross AUM of Rs.500,000 crore·        SBI MF has now built a near 20% lead over HDFC MF and ICICI MF with most of the growth coming in the last one year

·        The top 10 AMCs account for nearly 84% of the total AUM and 6 out of the top 10 are bank-sponsored mutual funds

·        Manappuram and Muthoot to gain from the new gold lending model·        According to a Bloomberg report, gold loan companies are cutting tenure and also reducing the LTV leverage

·        This is likely to benefit better capitalized gold lenders who also have the advantage of a more conservative LTV approach

·        Byju’s pays a whopping $1 billion for acquiring Akash Education Services·        The consideration for the merger will be paid through a mix of cash and stock of Byju’s for owners of Akash Education

·        This deal will combine the online interface of Byju’s with the offline pedagogic franchise of Akash Education

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