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Posted on 06-Sep-2019 Comments  0

Weekly Capsule (Sep 02 – Sep 06) and Impact Analysis

News Announcement Impact Analysis

Global markets rally after US and China agree to resume trade talks Despite the recent round of tariff hikes by the US, both the US and China agreed to sit across the table for trade talks

This news was positively received by the global markets and even oil prices rallied on this news

China gives a big push to liquidity by cutting Bank Reserve Ratio (BRR) BRR is the equivalent of the CRR in India and the BRR cut by China is likely to give a big boost to liquidity

The BRR cut is expected to increase the lendable resources of Chinese banks by nearly $126 billion in a big push

Auto stocks saw aggressive short covering during the week The short covering in auto stocks was driven on the hopes of the FM announcing a cut in GST rates

However FM office has confirmed that the matter will only be referred to the GST Council for a final decision

Financial stocks take a hit this week on external benchmarking worries External benchmarking of loans to retail borrowers and SMEs kicks off from October 01st onwards

This will impel the banks to cut rates in line with repo rate cuts and is likely to pressure bank margins in a serious way

Metal stocks see a pick up during the week on China revival hopes Metal stocks saw a mix of short covering and selective buying at lower levels after China started stimulus measures

The stimulus is likely to give a boost to Chinese demand, which accounts for 50% of global metal consumption

Prabhat Dairy may look to delist the shares of the company Delisting involves an offer to existing shareholders wherein they can tender the shares at a said price

The company can delist the shares only if more than 90% of the shares are offered for buyback by the shareholders

FPIs continue to be net sellers in Indian equities in September FPIs have sold nearly $1 billion in the first week of September as global risk-off trading has been the underlying theme

Despite the cut in surcharge on tax last week, FPIs have not been too excited about investing in India

P Chidambaram taken into 14-day judicial custody in INX Media case The Supreme Court refused bail to Chidambaram after the CBI lawyer claimed that he could tamper with evidence

He has been accused of taking kickbacks in the INX Media case for facilitating their FIPB approval to bring in foreign funds

Bank of Japan hints at cutting interest rates deeper into negative zone Japan is already in negative rates and this cut would only take rates deeper into negative zone

Negative yield are a major issue with nearly $16 trillion worth of bonds carrying negative yields in the global market

US sees an increase in jobless claims in the latest week The jobless claims represents the number of persons applying for unemployment benefits each week

The increase is being attributed to job losses in the aftermath of the trade war between the US and China

US trade deficit falls but trade deficit with China widens The US trade deficit with China was actually higher by 9.3% for the month of July, while overall trade deficit fell

That is largely an indication that the trade war and higher tariffs have not made any significant progress

Indian rupee takes support around the Rs.72/$ level on RBI dollar selling After the rupee weakened to Rs.72.39/$ in August, the central bank intervened to keep the rupee below 72/$

The sharp fall in the INR in August was largely driven by consistent FPI selling post the Union Budget announcement

Subhash Chandra repays 1/3rd of Essel Group debt due in September There is still 2/3rd to go for Chandra to honour his side of the standstill agreement with the mutual funds

Zee had recently sold a major stake in the company to Oppenheimer to raise funds for the repayment

Canara Bank will once again attempt to sell its housing finance arm With a view to getting out of non-core businesses, Canara will look to sell its stake in the home finance business

Canara Bank was recently merged with Syndicate to create a south based banking power house

NBFCs could be up against another Rs.35,000 crore time bomb According to Prime Database, NBFCs overall have repayments of Rs.34,869 crore in the current month towards loans

With chances of refinance or rollovers slim, repayment would put real pressure on the NBFC cash flows

Government fixes Rs.3890/gram as the price for the gold bond issue The SGB issue opens on Monday and the issue will be open till 13th, and this excludes digital discount of Rs.50/gram

The scheme has a maximum limit of 500 grams of gold per individual and also offers 2.5% interest payout

Reuters hints at FPI caution on India flows and also on rupee value This was based on a survey of equity and currency strategists at various foreign broking houses

Risk off sentiments are expected to keep FPI flows into India tepid and that would also mean rupee gains could be capped

China chooses to go easy on Hong Kong and withdraws Extradition Bill With student protests very strong, China did not want to take chances in an era of information and social media

Hong Kong chief, Carrie Lam, announced that China would respect the sovereignty of the Hong Kong SAR

Services PMI for August falls to 52.4 hinting at loss of momentum This lower services PMI was driven by reduction in hiring and also in fresh service sector order flows

The weaker services PMI comes in the background of weak manufacturing PMI and also weak GDP growth

RBI task force makes secondary market for corporate loans easier FPIs will be allowed to directly participate in distressed debt to ease foreign fund flows into this segment

In addition, the RBI will also allow mutual funds and insurers to participate in the distressed debt market

Jet Airways left with just 3 suitors after Volcan backed out Finally, Jet has three suitors from Panama, Russia and one from Latin America for the final round of bidding

It remains to be seen how much haircut the funds will now demand from the banks before the take over



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