Market Capsule

Posted on 17-Feb-2017 Comments  0

Highlights of the Week (Feb 13 – Feb 17) and Impact Analysis

Major News Item

Impact Analysis

  • Infosys calls press meet to addressgovernance issues raised

  • Sesha sayee and Sikka confirm that there was no rift between the promoters andthe board except cultural differences

  • Board also affirms that compensation package of Sikka aligned with global best practices and competitive

  • Infosys rejects hush money allegation with respect to severance package

  • Allegations arose after former CFO, Rajiv Bansal, was paid 30 month’s severance package, contrary to normal practice

  • Board confirmed that the severance disbursal has been stopped and fool-proof processes put in place for the same

  • Uday Kotak cautions that the world may get increasingly protectionist

  • The trend of protectionism set in motion by Trump seems to be getting popular support across the world

  • After the BREXITvote in Britain, France is also moving towards a right leaning LePen government, which is anti-Euro

  • Snapdeal plans a massive retrenchment drive of 30% across its verticals

  • This is part of Snapdeal’s larger plan to do away with 1000 full time workers and nearly 8000 contract workers

  • For the last fiscal, Snapdeal had a net loss of Rs.2960 crore and tight funding and fall in valuations is worsening the scene

  • Idea Cellular disappointed the street with quarterly loss of Rs.385 crore

  • Revenues, ARPUsand OPM came under pressure due to intense competition fromReliance Jio

  • The stock had rallied sharply on the back of hopes of a merger with Vodafone but now the financials are back to haunt

  • FPIs turn net buyers in Indian market inFebruary 2017

  • FPIs infused over Rs.7000 crore in equity and debt put together in the first 3weeks of February

  • This comes as a big relief after FPIs withdrew over $12 billion from Indian markets in the Oct-Dec quarter

  • Political situation in Tamil Nadu gets a breather with arrest of Sasikala

  • Governor Vidyasagar Rao has invited Palaniswamy to form the government and take the floor test within 15 days

  • If the Sasikala faction gets through despite her being in jail, then it may mean the end of the road for Panneerselvam

  • Retail CPI inflation for January 2017 came in lower at 3.17%

  • This is sharply lower than the 3.41% in December but is also being largely attributed to a slowdown due to demonetization

  • However, RBI is unlikely to take this cue to cut repo rates as core inflation continues to be quite high at around 5%

  • GVK group secures contract to build the Navi Mumbai airport

  • GVK offered 12.60%revenue share to government out bidding GMR which offered 10.44%revenue share

  • CIDCO needs to complete preparatory work like acquiring land, relocating people etc before handing over the land

  • Tata Motors disappointed the street with a 96% fall in net profits

  • The company washit by weakness in the global JLR business as well as the domestic MHCV and cars business

  • Operating margins were down by 490 points at 7.6% leading to a huge negative reaction of over 20% in the stock

  • Apart from Tata Motors, Sun Pharma alsodisappointed on Q3 results

  • Net profits were down by 5% for the quarter triggered by weaker sales in the US and in India

  • On the downside,the EBITDA margins fell by nearly 530 bps to 29%, tilting towards the lower end of Sun’s spectrum

  • WPI inflation came in at a 30-month high of5.25% for January 2017

  • WPI inflation wasdriven higher by fuel, which has nearly 15% weight. This also hada huge spill-over effect

  • The CPI inflation which had a high gap of 9% some 16-months back has now slipped into negative gap territory

  • Janet Yellen hints at a high probability of rate hike in March 2017 meet

  • Janet Yellen’s hawkishness has led to traders building in higher probability ofa rate hike in March Fed meet

  • Fed had heldstatus quo in Feb but with strong data on inflation and jobs,March rate hike looks very likely

  • DSP Blackrock Micro Cap fund to stop accepting fresh subscriptions

  • With an AUM ofnearly Rs.4800 crore, this fund remains one of the largest smallcap funds

  • Post the mid-caprally, the fund has take this decision to protect the interests of its long-term unit holders

  • Cabinet approved the merger of SBI with its five subsidiaries

  • While SBH and SBP are 100% subsidiaries; SBT, SBBJ and SBM will merge with SBI through share swap as they are listed

  • The merger will lead to cost rationalization, greater balance sheet size and benefits of centralized treasury operations

  • Trade data for January hinted at higher exports, but higher deficit too

  • Exports continue to rise for fifth straight month but higher imports were led by non-oil imports

  • At current level of imports, the forex reserves are sufficient to cover 12½ months of imports

  • TCS indicates that it may be open to buying back equity

  • TCS sits on over $6 billion of cash reserves with limited opportunities to deploy them into growth

  • Cognizant took the lead with a $3.4 billion buyback program and cash-rich TCS and Infosys are expected to follow suit

  • Crucial meeting of the GST Council comes upon February 18th

  • This meeting is likely to sign off on specific rates of GST for differentproducts and services

  • There have been strident demands for penal rates of GST on tobacco products under the demerit goods category

  • SEBI streamlines regulations pertaining to mergers and acquisitions (M&A)

  • The amendments puts restrictions on listing through reverse mergers, which is a common practice

  • Similarly merger of an unlisted subsidiary into listed parent will also be subjected to e-voting by shareholders

  • SEBI may allow institutional investors totrade in commodities markets

  • Mutual funds mayget the first permission to foray into commodities. Banks will require RBI approval

  • This could also be the precursor to new products like options on commodities and spot-futures arbitrage

  • RBI governor justifies shifting monetary stance from accommodative to neutral

  • According to Patel, the shift was necessitated due to the stubborn nature of core inflation at around 5%

  • The governor also sees upside risks to inflation from higher oil prices since crude has strong externalities for the economy

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