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Posted on 10-May-2019 Comments  0

Weekly Capsule (May 06 – May 10) and Impact Analysis

News Announcement Impact Analysis

Trump goes ahead with punitive tariffs on $200 billion of Chinese imports Trump went ahead and imposed 25% tariffs on Chinese imports despite trade talks being in progress

China has promised to retaliate, although it has limited trade levers due to its huge surplus with the US

Etihad emerges as lone bidder for Jet Airways on the last day of bidding With hardly any potential buyer showing interest in Jet, it was left to Etihad to put in the sold offer to buy SBI stake

Most potential buyers backed out after SBI started selling the assets and landing rights of Jet in a piecemeal fashion

Sixth round of polling to be conducted on Sunday May 12th This will be the penultimate round of voting before the final round on 19th and the final outcome on May 23rd

The five rounds that have been completed have locked in the fate of more than 75% of the total Lok Sabha seats

IIP for March 2019 comes in sharply lower at (-0.1%) While this is a point-to-point calculation, there was clear weakness in the core manufacturing sectors

Capital goods production saw negative growth of -9% and that is not great news for the capital cycle revival

Reuters poll estimates CPI inflation to be closer to 3.3% for April The higher CPI inflation is expected to be due to a combination of higher food prices and fuel inflation

The CPI inflation will be announced on Monday 13th May and will be a key input for the June monetary policy

Tata gives up on its proposed joint venture with Thyssen Krupp The European Commission laid down stringent conditions for the JV which almost made the deal unviable

As Tata Steel began search for a new partner for its European steel business, the stock tanked sharply on Friday

Apollo Tyres saw a sharp fall net profits on the back of huge write offs Apollo took a write off of nearly Rs.200 crore given to IL&FS as an ICD, which is virtually irrecoverable now

Apart from the write down, Apollo Tyres was also plagued by higher input costs due to steep oil prices

MF flows into equity funds fell by 61% in the month of April This fall was despite the SIP collections for April standing at a record Rs.8200 crore on robust retail participation

However, bulk investing in MFs took a hit and the worst hit were the FMPs where nearly Rs.17,700 crore was taken out

Finance Minister admits that actual fiscal deficit would have been 3.8% If the government had not curtailed expenditure by Rs.1 trillion, the fiscal deficit would have been sharply higher

The sharp fall in spending was forced by below par collections in the direct tax front as well as the GST front

SBI announces profit but along with rise in provisions Provisions and slippages were higher for SBI, although the Chairman assured of the NPA cycle coming to an end

SBI still has a lot of uncertainty in its books due to its exposure to IL&FS, Dewan Housing, Essel Group and Jet Airways

Trump tweets destroys global wealth to the tune of $2.1 trillion In the last one week since Trump tweeted the trade war, global equity markets have lost nearly $2.1 trillion

This is just the loss in market cap not counting the overall losses in trade and GDP growth

Crude oil closes the week at $70.62 / bbl, above the support level The oil prices had touched a low of $68.52 after the trade war threatened to weaken demand for oil

However inventory draw downs in the US and the Iran sanctions held up the prices of oil

US yield curve inverted again in May after seeing a reverse spread in March The inversion of the yield curve was a result of the 3 month yields on treasuries going above the 10-year benchmark

In the past, any inversion of the yield curve has typically led to a recession on 9 out of the 11 occasions

EU relies on India and China to sustain their Iran deal EU nations and the UK have been unhappy with the US for imposing stringent sanctions on Iran all over again

They now rely on India and China, two of the largest Iranian oil buyers, to step in and put pressure on the US

Indian aviation growth falters to 3.1% in the month of March 2019 This is a sharp fall in domestic passenger growth from a high of 18% over the last one year

While Jet has constrained supply, other issues like Pratt & Whitney engines and 737 Max issues also contributed

Indian banks could recover as much as Rs.80,000 crore this year from IBC This will include the proceeds of Essar Steel and Bhushan Steel & Power, which could not be completed last year

This write back could come as a big relief to the Indian PSU banks which continue to be under stress

RBI withdraws circular to banks on provisions for IL&FS exposure RBI had issued this circular since NCLT had exempted banks from making provisions for IL&FS exposure

This had made RBI unhappy but got sorted out after NCLT allowed banks to provide for IL&FS dues

Bail plea of Nirav Modi rejected by British Court Lawyers of Nirav Modi could not secure bail for him in the $2 billion fraud and money laundering case in India

India has sought extradition of Modi to India to face trial, but that may still take more time

PMI manufacturing and PMI services come under pressure Why both of them remained above 50 (expansion), the momentum loss was visible in both cases

The two PMIs put together have a strong impact on the overall IIP growth and the GDP outlook

Wilbur Ross looks to re-negotiate with India on trade policy Ross, US Commerce Secretary, had expressed dissatisfaction at India restrictive trade and ecommerce policies

Simultaneously, the US has refused to give any discounts on oil it forgoes buying from Iran at cheaper rates

March quarter has given indications of slowdown in rural demand This slowdown was visible in results of Hindustan Unilever, Godrej Consumer and Britannia

Rural distress has been caused by weak agri prices and benefit of loan waivers not reaching the small farmers



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