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Posted on 22-Mar-2019 Comments  0

Weekly Capsule (Mar 18– Mar 22) and Impact Analysis

News Announcement Impact Analysis

Nifty and Sensex correct sharply on Friday after a 7-day rally Both the Nifty and Sensex were driven down by weak cues coming from the US Fed

Most frontlines were down led by Auto, banking, IT and even oil market companies saw some serious correction

The Fed decided to maintain status quo on interest rates in its March meeting The Fed maintained the repo rates at the range of 2.25% to 2.50% with a dovish stance

Fed’s stance virtually rules out any rate hike through 2019, hinting at a serious problem of economic slowdown

Global investors pull out more than $20 billion from equities This move is surprising considering that global markets have been in the midst of a massive rally

Nearly 60% of the funds removed from equity funds have been reallocated by investors into bonds

Spice Jet may lease the 40 aircraft of Jet Airways that have been grounded This could be valuation accretive for Spice Jet as they will come at an economical cost for the airline

With Jet market share having fallen sharply, the big market share gains could go to Indigo and Spice Jet

Piramal Group may be in the lookout for distressed real estate A large chunk of distressed realty assets are expected to come into the market post the IL&FS default

Piramal has been looking for deep value properties to buy at distressed rates to ramp up their portfolio

Government gets bids worth Rs.9500 crore for 5th tranche of CPSE ETF Anchor investors had already put in Rs.6072 crore worth of bids on the first day itself

The government had set Rs.3500 crore as the base amount but it is likely to exercise the green shoe option

Brent Crude fell sharply from higher levels on growth concerns Even as OPEC cuts and sanctions gave support to crude price, there was resistance from the supply of US shale

Oil prices fell sharply on Friday after the Fed commentary hinted at a likely slowdown in global growth

Government and banks get together to save Jet Airways from bankruptcy The options include an outright sale, change in management and subsequent capital infusion into the company

Bankruptcy would lead to huge job losses and the government may not be keen on that ahead of elections

Government exceeds its full year disinvestment target of Rs.85,000 cr The target was reached with the CPSE-ETF fifth tranche collection and the PFC deal worth Rs.14,500 crore

The government has again set a target of Rs.90,000 crore of divestments for the fiscal year 2019-20

April first could mark a new regime for companies and global investors Companies will be subject to the new Corporate Governance Code and new Insider Trading rules

Global investors from Mauritius and Singapore will be liable for additional tax on profits on a discretionary basis

Global bonds yields may be falling to new lows on growth concerns Most markets were seeking protection from falling growth as was evinced by the Fed commentary after status quo

It may be recollected that bond yields had shot up last year on hopes that the US may maintain a hawkish tone

Steel prices rise by nearly 7% in the last 1 months since mid February This was due to a shortage created by the shutdown of the largest iron ore mine in Brazil

In addition, the demand from infrastructure has also grown much faster than production leading to rise in price

L&T Infotech makes a hostile bid for Mindtree L&T Infotech wants to use Mindtree’s diversified client base to de-risk its concentrated business model

The original promoters of Mindtree have pledged to fight and stave off this hostile acquisition bid

FPI flows into debt touch Rs.9005 crore till March 22nd This is a 17-month high as far as FPI flows into debt are considered, which is welcome after the liquidity crisis

This basically indicates confidence that the RBI was unlikely to drop rates too much and also in stability of the rupee

Bank credit to NBFCs grows by 48% in the year to December 2018 This is starkly higher than the 14.6% growth recorded by bank credit overall in the last 1 year

Interestingly, commercial credit to industry actually saw negative growth of (-0.7%) during this period

Government warns sugar mills against selling sugar below the MSP The government had fixed the Sugar MSP at Rs.31/KG plus applicable GST to ensure good realizations for farmers

However, it was found that most mills were selling at lower price to get rid of their excess stock of sugar

Hedge fund, Crescat, calls for long on gold and short on equity strategy Crescat expects the equity prices to fall with peaking out of economic growth towards the end of 2020

Crescat is recommending investors to buy gold denominated in Yuan terms rather than in dollar terms

Venezuela stops export of oil to India to focus on China and Russia Venezuela was not happy with the fact that India had supported the US in its sanctions on Venezuela

India is the second largest cash buyer of Venezuelan oil after the US, and that should worsen the Venezuelan crisis

RBI wants IL&FS loans to be classified as non-performing assets (NPAs) The government had given special exemption to IL&FS and all its subsidiaries from NCLT bankruptcy proceedings

RBI has objected to the duality of control since NPA management comes under the purview of the RBI

Goldman Sachs upgrades Indian stock markets to Overweight Goldman’s bet is largely on the back of political stability post the elections and the flow of FPI money into India

Interestingly, Goldman had actually downgraded India to Underweight just 6 months back, a big shift.

IT stocks rally during the week on positive NASSCOM projections NASSCOM has projected IT services to grow at 9.2% for the fiscal year 2019-20; nearly 200 basis points higher

The growth is likely to be largely led by the digital side of the business, which is currently dominated by the big names



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