Market Capsule

Posted on 21-Apr-2017 Comments  0

Highlights of the Week (Apr 17 – Apr 21) and Impact Analysis

Major News Item

Impact Analysis

  • Yes Bank and IndusInd Bank give positive profit growth

  • For both the banks, the worry was on the NPA front with slippages visible in the aftermath of demonetization

  • In case of Yes Bank, the Gross NPAs doubled from 0.76% to 1.52%, although it is still comparatively comfortable

  • NALCO divestment sees good demand from retail and QIB investors

  • The OFS was priced at a discount to the market price making the stock attractive to OFS investors

  • The demand for NALCO was also buoyant due to a pick-up in growth in China and strong global metal prices

  • Credit growth sinks to a 60-year low at just 5% for the fiscal year 2016-17

  • The fall in credit growth is being interpreted by many analysts as a sign of disintermediation in debt fund raising

  • Despite surplus liquidity with banks to the tune of Rs.4 trillion and lower MCLR,credit growth from banks is yet to pick up

  • WPI inflation comes in lower by 85 basis points at 5.70% for March 2017

  • The slower growth in WPI in March was largely attributed to a slower growth in oil prices during the month

  • For the time being the threat of negative WPI inflation leading to deflation appears to be a thing of the past

  • Indiabulls Real Estate to demerge its commercial real estate business

  • This may be aprecursor to getting foreign investors who typically prefer to buy commercial estate exposure in India

  • Indiabulls Real Estate will focus only on the retail segment with the commercial business going into a separate unit

  • NCLT dismisses the waiver petition filed by Cyrus Mistry in the Tata Sons case

  • Mistry had filed apetition with the NCLT accusing Tata Sons of compromising the interests of minority shareholders

  • Mistry was not eligible to petition as his stake was lower than 10%, so lawyers had sought waiver which is now dismissed

  • Supreme Court sets in motion the sale of Sahara Aamby Valley

  • The Aamby Valley property of Sahara was already attached to repay the depositors of Sahara Group

  • Many large business houses like the Tatas and Godrej, have evinced interest in some of Sahara’s properties

  • Donald Trump tweaks visa rules as Australia also follows suit

  • Trump has putsevere restrictions on low-end jobs getting outsourced to other countries at the cost of US employment

  • Australia has also tightened the norms for non-Australians to apply for Australian citizenship and made it more stringent

  • TCS reports 4.2% growth in top-line and inthe bottom-line; margins fall

  • The tepid growth was expected but the redeeming feature was the 29% growth in the high potential digital business

  • TCS has already announced a Rs.16,000 crore buy back plan to shore up the EPS ofthe stock and help form a bottom

  • RBI raises red flags over the exposure ofIndian banks to telecom sector

  • Telecom sectorowes nearly $65 billion to Indian banks and the telecom industry has interest coverage of less than 1

  • RBI has urged banks to increase the provision for these telecom exposures, which could hit bank profits nextquarter

  • SKYMET and IMD again diverge on monsoon forecasts for 2017

  • SKYMET had predicted shortfall in rains due to the El Nino effect while IMD expects normal rains

  • Last year, the IMD has got its projection bang on target and the monsoons are critical for CPI inflation

  • France goes to polls on Sunday even as There sa May calls for snap polls

  • France is seeing the contest between the far right and the far left, neither ofwhich are preferred by the markets

  • UK has called forsnap polls in June 2016, at a time when even half the tenure of the government is not over

  • IMF upgrades global growth forecasts but also raises some red flags

  • Global growth upgraded to 3.5% helped by a recovery in the US and partially byEU and led by China and India

  • However, the IMF has pointed to increased protectionism and isolationism as amajor threat to world trade and commerce

  • Balance sheet shrinking may be the next challenge for central banks

  • US Fed and the ECB are sitting on bonds to the tune of over $4.5 trillion each,which needs to be gradually wound up

  • Winding up bond portfolio will lead to liquidity tightness in the global markets,as we saw in 2013, when it was first mooted

  • Wipro retrenches 600 staff as employee costs start to bite

  • Wipro plans to take its retrenchment numbers to 2000 and this may be a trigger for many more IT companies

  • With thinning margins, IT companies have the big challenge to increase automation and reduce manpower cost

  • Key opposition parties moot the idea of a Grand Alliance in 2019

  • The Grand Alliance is being seen by regional parties and the Congress as the best foil for the BJP juggernaut

  • The contrasting lesson from Bihar and UP was that the opposition needs to combine to pose a challenge to the BJP

  • Warburg may be in the lead to acquire Prem Watsa’s stake in ICICI Lombard

  • Wats a has a 35% stake in ICICI Lombard and he now plans his own general insurance venture with Kamlesh Goyal in India

  • Other than Warburg, Temasek of Singapore and Carlyle Group are also in the fray for the 35% stake in ICICI Lombard

  • MPC minutes hinted at a clear split in approach to rate setting

  • Members like Ravindra Dholakia are more in a favour of a benign interest regime to spur growth

  • However, others like Michael Patra are more on the hawkish side and are urging the RBI for a rate hike

  • Bond prices slumped in India after the MPCminutes hinted at hawkishness

  • Bond yields moved up sharply and bond prices fell after Dr. Patel almost appeared to agree to a hawkish stance

  • Higher rates will mean higher yields on bonds and lower bonds prices, leading to losses for bond holders

  • IRDA urges LIC to cuts is stake in all listed companies to below 15%

  • This is essentialto ensure that the risk to policy holders is kept under controlunder volatile market conditions

  • LIC has been the government’s investor of choice on many occasions and has also bailed out fund raising programs

  • HDFC Bank once again flatters the street with its Q4 results

  • Net profits of HDFC Bank grew by 18.2% in line with estimates but gross NPAs did increase by 12.5% in absolute terms

  • The bank has aggressive growth plans and has outlined plans to raise nearly Rs.50,000 crore to fund its expansion plans

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