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Weekly Capsule

Posted on 24-May-2019 Comments  0

Weekly Capsule (May 20 – May 24) and Impact Analysis

News Announcement Impact Analysis

NDA scores a decisive victory in the national elections With 303 seats for the BJP and over 350 seats for the NDA, it was truly an election which was Modi all the way

The NDA not only dominated the Hindi belt but also made serious inroads into the states of Orissa and West Bengal

Sensex crosses 40,000 on the day of election counting on May 23rd While markets started the celebration post exit polls, the real thrust came on the counting day

While the Sensex lost 1200 points from the peak, Friday was again a decisive up move of over 620 points

Oil prices in the Brent market fall sharply during the week Most of the losses (in excess of 5.2%) came in a single day on Thursday due to trade war fears

Rising US stockpiles also pulled crude prices down. Brent has lost over 10% since its recent peak of $75.60/bbl

Brokerages turn positive on banks and rate sensitives post NDA win The PSU bank stocks were among the major gainers on hopes of speedy IBC resolution and more capital support

NBFCs and realty also celebrated on expectations of lower interest rates and sufficient liquidity support

FPIs turn net buyers during the election counting week FPIs turned net buyers during the election counting week on hopes of a stable government at the centre

FPIs had been net sellers through the month of May but that has now been more than compensated for

RBI moots stringent checks and balances on NBFCs One of the steps the RBI has taken is to set up a separate supervision department for the new kinds of risks

RBI may also put limits on NBFCs on asset liability mismatch and insist on greater disclosure

Reliance Capital exits the MF business and sells out to partner Nippon With the stake sale worth Rs.6000 crore, Nippon Life Asset Management becomes 85% owner of the AMC

The Reliance ADAG group has been desperately looking to monetizing assets to reduce its group debt

Theresa May agrees to step down on June 07th after no deal With May unable to get the required support for her BREXIT deal, she will move on effective June 07th this year

That still leaves the option of BREXIT turmoil open as BOE has estimated 7% fall in GDP if exit is tumultuous

JSW Steel to raise Rs.14,000 crore to fund its expansion plans JSW plans to expand its steel capacity to 24 MTPA by 2022 at an investment outlay of Rs.48,000 crore

The company had reported a sharp 48% fall in net profits in the March quarter due to higher input costs

L&T hikes stake in Mindtree to 28.45% through purchase of 2.49 mn shares The open offer scheduled to open on 14th May has been postponed pending SEBI approval for the open offer

L&T targets to take its overall stake in Mindtree to 66% to add a digital flavour to L&T’s IT business

RBI likely to introduce liquidity coverage ratio for NBFCs The LCR will be restricted only to those deposit taking NBFCs that have a loan book of more than Rs.5000 crore

It is the minimum liquidity that these NFBCs will have to maintain at any point of time to be operational

Modi government created $1 trillion of stock market wealth in 5 years The market cap of the BSE moved from Rs.75 trillion to Rs.150 trillion between May 2014 and May 2019

During this period, the indices Nifty and Sensex were up by 60% with most wealth coming from outside this set

Hinduja Group may be evaluating options to buy Jet Airways Jet may finally find a buyer in the form of Hinduja group of London and Naresh Goyal too could make a comeback

However, Hinduja Group has apparently set some very stringent conditions for their participation

Spice Jet CEO calls for tax cuts on ATF or inclusion in GST ATF costs are nearly 60% of the operating costs of the airline and have put the most pressure on airline companies

One way that is being considered to begin by bringing ATF under the GST ambit, while leaving out petrol and diesel

Rupee strengthens post the Modi win during the week A decisive mandate for the NDA combined with strong FPI flows kept the INR buoyant during the week

The trade war is likely to impact oil prices and that is also one reason why the rupee strengthened

Aviation sector shows de-growth of (-4.3%) in April 2019 This is the first month of negative growth in aviation since the month of June 2013, post which it has been growing

The fall was a result of Jet shutting down and also weak demand due to high airline prices

Indian industry puts forth a charter of demands from Modi government With NDA 2.0 taking charge on May 30th, industry has demanded lower corporate taxes, FDI and bold reforms

The industry bodies have urged the government to spend more on primary health, education, skills and infrastructure

Fitch expects a major consolidation in the NBFC sector in India Fitch foresees NBFCs merging or acquiring with larger banks for a bigger and sounder balance sheet

Just a couple of years back, India had seen a major consolidation in the telecom sector post Jio launch

Mutual funds and PMS permitted to trade in commodity derivatives Mutual funds will be allowed in commodity derivatives for maximum holding period of 1 month only

PMS in commodity derivatives will have less restrictions but all decisions will be subjected to client approval

NSE files an appeal with SEBI over the direction and quantum of penalties The SEBI order pertains to the preferential access given by NSE to select brokers in low latency trades

A prolonged hearing at the SAT could further delay the IPO of NSE as it is contingent to the resolution of the issue

Nestle dismisses stories of slowdown in consumption in India Suresh Narayanan maintained that both his food products were growing at double digit growth

Narayanan feels the impact is more temporary and is unlikely to sustain for too long, especially rural consumption



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