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Posted on 15-Feb-2019 Comments  0

Weekly Capsule (Feb 11– Feb 15) and Impact Analysis

News Announcement Impact Analysis

India imposes 200% import duties on goods imported from Pakistan This was a reaction to the ghastly terrorist attack on CRPF Jawans on 14th Feb in which 44 personnel were killed

In the aftermath of the attack, India withdrew its Most Favoured Nation (MFN) status accorded to Pakistan

India becomes top buyer of Venezuelan crude in the month of February Venezuela is already India’s third largest crude supplier after Saudi Arabia and Iraq

The US recently imposed sanctions on Venezuela to force the Maduro government out of power

Avendus Capital eyes $1 billion fund raising to tap the ESG investors Avendus is backed by KKR, one of the largest private equity players in the world

ESG entails investing in companies that are environment friendly, socially responsible and maintain governance

Nifty and Sensex fell for 7 days in succession on valuation worries The A/D ratio was clearly negative during the week with the mid caps bearing the brunt

Apart from higher crude prices, domestic pledged shares also puts pressure on the market overall

RBI lifts cap on FPI investments in corporate bonds This was broadly laid out in the credit policy statement announced last week where 20% limit was scrapped

Now FPIs will have the discretion to decide how much they want to exposure to debt of a single group

RBI has pulled up Yes Bank for making confidential report public Last week, Yes Bank had divulged that the RBI had affirmed that there was no divergence in the Yes Bank numbers

RBI has pulled up Yes Bank for selectively disclosing part of a report that was supposed to be explicitly confidential

India’s trade deficit in January came in higher at $14.73 billion This is sharply higher than the deficit of just $13.08 billion reported for the month of December 2018

While exports had moved up, the imports grew much faster despite crude prices being relatively lower

Infibeam is back to facing problems with its auditors Auditors of Infibeam had raised some governance questions over advances given to vendors

This became all the more suspect as the advances were routed through subsidiaries, a serious governance issue

US China trade talks appear to have made progress in the week The right noises appear to be coming from China and the US on the gradual resolution of the trade war

While Trump was briefed by the Trade Representative, not too many details of the likely pact were divulged

US and Iran have come down heavily on Pakistan for abetting terror The US has openly batted for India’s right to protect its integrity and take necessary military action

Iran has warned Pakistan after a similar attack on the Iran Guards even as Saudi has cancelled a business delegation

CPI and WPI inflation came in much lower during January While CPI inflation touched an 18 month low of 2.05%, even WPI inflation came in lower at 2.76%

CPI inflation was down due to weak food and fuel inflation. However, core inflation remained high at 5.4%

Crude prices moved above the $65/bbl mark during the week The sharp rise in crude prices was driven by supply cuts promised by Saudi Arabia and the OPEC

The sanctions on Venezuela also spooked markets and took the prices of crude higher

Rupee weakened beyond the 71/$ mark on crude concerns With crude above $65/bbl, the pressure on the INR was apparent. Consistent FII selling also put pressure

The rupee is likely to come under further pressure after the trade deficit for January widened

Parliamentary Panel wants detailed investigation into LIC in IL&FS fiasco The panel has raised doubts over the efficacy of LIC as the largest shareholder of IL&FS

The panel noted that the LIC neither took precautionary steps nor warned about the impending crisis

Parliamentary panel also calls for review of credit rating methodology The panel has now called for multiple ratings for the same instrument to avoid bias

Panel has also suggesting shifting to user paid ratings rather than issuer paid ratings for bond instruments

NCLT restarts the Amtek Auto resolution process The restarting was necessitated after Liberty House backed out of the deal on grounds of inadequate disclosure

However, the NCLT is proceeding legally against Liberty House and now the resolution has a timeline of just 140 days

A total of 2942 companies have pledged Rs.214,000 crore of shares Pledged shares have become the bane for the markets after mid caps and small caps corrected sharply

The Pledge ratio continues to be above 80% in many cases and this limit is normally the flag off for a crisis

IIP growth for December came in lower at 2.4% Weak manufacturing was the key reason for a tepid performance by the IIP number overall

Manufacturing accounts for 76% of IIP and also has larger implications for the GDP growth number

NCLAT gives time till Feb 19th to resolve the Essar insolvency crisis The crisis began after Essar promoters a higher counter bid after the COC accepted Arcelor bid at Rs.42,000 crore

Ruias have the support of the operational creditors, who are normally short changed in most NCLT resolutions

Government expects all banks to exit PCA by June 2019 Prompt corrective action (PCA) was launched for banks with high levels of net NPAs and weak balance sheets

Removal from PCA will enable these banks to again built their loan books and also undertake business expansion

Income Tax department withholds Rs.1 trillion of corporate tax refunds While there has been no official word, the withholding of refunds appears to be a tacit policy to manage liquidity

However, delayed refunds have a cost since it attracts interest and also impacts working capital for companies



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