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Posted on 16-Aug-2019 Comments  0

Weekly Capsule (Aug 12 – Aug 16) and Impact Analysis

News Announcement Impact Analysis

For the fifth time in the last 6 weeks, the Nifty and Sensex ended in the red On a truncated week, the biggest impact came on Tuesday when the Sensex crashed by 625 points

The inversion of the US yield curve has raised the spectre of global recession and that has spooked the equity markets

CPI inflation comes in lower at 3.15%, WPI inflation lower at 1.08% The lower inflation was largely driven by lower food prices and lower fuel prices during the month of July

This lower inflation paves way for the RBI to continue with its accommodative monetary stance with respect to rates

Rupee weakens by 3.5% during the first half of August The rupee weakened from Rs.68.50/$ to Rs.71.50/$ in a span of just two weeks due to global weakness

This has resulted in the INR becoming the worst performing currency across Asia in the month of August till date

ANZ Bank downgrades full fiscal GDP growth for India to 6.2% This is a full 70 bps lower than the RBI revised estimates presented in the August monetary policy

ANZ has pointed at global growth concerns and India’s weak consumer demand as likely reasons for the downgrade

US bond yield curve again inverts during the week In a signal of impending recession, the yield on US 10-year bonds fell below the yields on 2-year bonds

This was a clear indication of an impending slowdown when there is absence of demand for long dated debt

Jet sale delayed once again after Vedanta backed, Volcan backs out With Volcan backing out, Jet has a real problem as neither Etihad nor Hinduja group is keen on majority stake

With most of the rolling stock of the airline claimed by aircraft lessors, not too many are keen on the airline

Fitch expects RBI to cut rates by another 40 bps by March 2020 According to Fitch, the worry over growth and lower inflation will be key factors in further rate cuts by the RBI

While the IIP and GDP surely need lower rates, the RBI has not been too happy with the speed of transmission

Amravati Infrastructure bonds pose a new problem for mutual funds Birla Mutual Fund and Franklin Templeton MF have an exposure of Rs.1300 crore to the Amravati Infra Bonds

After the World Bank withdrew funding, the worry for the funds is that these bonds have a 5-year moratorium

India’s forex reserves touch a life time high of $431 billion Limited intervention by RBI and gradual sterilization of dollar inflows has led to a sharp increase in RBI reserves

Economists are of the view that solid reserves provide the right opportunity to go ahead with sovereign bonds

The siege on Kashmir has continued for the 12th day in succession After near 12 days of the abrogation of Section 370, the whole of Kashmir continues to remain under curfew

With little media coverage of the state allowed, the only information percolating is from foreign channels and videos

IDBI Bank touches a 16 year low as it dips below the Rs.25 mark With little respite on the bad loans front, the situation at IDBI Bank has continued to remain challenging

The latest quarter also saw a sharp rise in provisions and deepening of losses, leading to a run on the stock price

Hong Kong Airport taken over by pro democracy protestors All flights to and from Hong Kong were cancelled after protestors had occupied the entire airport area

China has moved its paramilitary forces to Shenzhen, just across the HK border, to send a signal to the protestors

OPEC paints bearish oil price outlook for rest of 2019 and for 2020 OPEC has pointed out that supply caps may have little impact as the global slowdown remains a major threat

Historically, crude prices have been extremely sensitive to the growth levels and tend to crack when growth slows

Central banks prefer negative rates to keep currency wars at bay Currently, nearly $17 trillion worth of global bonds carry negative yields as demand for safety rises

Bonds across Germany, Switzerland and Japan are offering negative yields as a means to avoid currency wars

Reliance AGM makes big announcements for the future During the 42nd AGM, RIL announced that it will be selling a 20% stake in the oil and chemicals business for $15 billion

Reliance has also announced the all-India roll out of its Jio Giga fibre which is likely to revolutionize mobility

WTO to rule on complaint filed against India on sugar export subsidies Australia and Brazil had complained that Indian government was giving export subsidies which was contrary to WTO

India happens to be the highest cost producer of sugar and domestic market is already oversupplied

PM Modi reassures businesses in his Independence Day speech Mr. Modi highlighted that there was no question of hounding the wealth creators as they were also creating jobs

In a subtle hint, the prime minister also suggested to the regulators not to look at wealth creators with suspicion

Auto sales for July fall by 18.71%, the worst fall since December 2000 The reaction was immediately felt by the auto stocks which corrected sharply in reaction to the news

The auto weakness has been driven by tight funding markets, weak consumer demand and volatile fuel prices

BSE to come back with trading incentives for F&O segment Liquidity enhancement scheme (LES) is likely to be brought back after a gap to give a boost to F&O volumes

The BSE is obviously looking to leverage on the new inter-operability norms announced by SEBI

FM may announce industry package next week to boost growth This package is likely to be announced in the aftermath of the meeting that Ms. Sitharaman had with the prime minister

Markets are expecting a mix of tax cuts, levy waivers and government spending to boost GDP growth

Indian mutual funds have a Rs.200 crore exposure to Café Coffee Day This exposure is the total investment that mutual funds have made in equity and debt put together

Fund houses like DSP have already taken a cut to the extent of 50% of their exposure to CCD and SICAL Logistics



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