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Posted on 05-Apr-2019 Comments  0

Weekly Capsule (Apr 01– Apr 05) and Impact Analysis

News Announcement Impact Analysis

Monetary policy cuts repo rates by 25 points along expected lines The reduction of repo rates to 6% restores the status quo that existed before June 2018, prior to the rate hikes

However, markets were disappointed by the fact that RBI did not shift the stance of the policy to accommodative

RBI appoints task force for creating secondary market for corporate loans This is intended to create a ready exit route for banks who now have a better idea of haircuts after the NCLT stretch

The secondary market will also be instrumental in better pricing of risk and a real time risk assessment of loans

Monetary policy focuses on creating organized securitization market The initial testing will be done with the Housing Finance Companies, which will get a means to monetize assets

Securitization also gives investors an additional asset class to participate in with higher than average returns

Monetary policy puts intense focus on liquidity infusion into markets The RBI will combine its monthly OMOs of Rs.40,000 crore with the $5 billion dollar swap auctions

In addition, the RBI has also eased the HQLA definition to be carved out of NDTL, giving more lendable resources to banks

A day after the monetary policy, the rupee weakened to 69.23/$ Rupee weakness was driven by dovish credit policy and the uncertainty of elections coming up

The dollar swap auctions had already put a lid on rupee appreciation by creating demand for dollars

NBFCs are now increasingly relying on retail sources of deposits In the last few months, bank funding has dried up and mutual funds are averse under SEBI strictures

That has forced most of the NBFCs to prefer the traditional retail route to raise funds for on-lending

Trump urges the US Fed to drop interest rates A month after the Fed almost called off further rate hikes in 2019, Trump has called for reduction of rates

Trump has pointed at the need to give a push to economic growth via lower rates and ample liquidity

Mutual fund assets grew at the slowest rate in 7 years for fiscal 2018-19 The total mutual fund AUM increased by just 6% to touch a total AUM of Rs.24.51 trillion

That was largely due to the heavy outflows in debt, especially with institutions withdrawing from corporate debt outlays

Jet Airways may finally end up in the lap of the Tata Group post April 09th Tatas have already expressed interest in buying out Jet Airways from the lenders, despite the cash flow problems

Tatas had earlier made a bid but had backed out after Goyal wanted to retain control. That is not an issue any longer

Trade talks between the US and China to continue in the coming week Without committing on a Summit date, both countries have agreed to take forward their talks to next week

While there is a ceasefire, the deal is stuck over China agreeing to structural shits in its IP policy

CCI approves the proposed purchase of 66% in Mindtree by L&T Infotech Of course, this is an unsolicited bid in the aftermath of VG Siddhartha of Café Coffee Day selling his 20% stake to L&T

Founders of Mindtree came together to prevent the takeover of an entrepreneur driven company by a conglomerate

Goldman Sachs rules out further rate cuts in the current year Goldman expects that the RBI may pause after the April rate cut to assess the transmission impact of the cut

When rate were cut in February, the transmission was very weak due to high average cost of funds of banks

Laxmi Vilas Bank and Indiabulls Housing to merge to expand footprint The entire merger will be executed through a share swap without any cash payments involved in ration of 0.14:1

This merger will combine the strong North and West footprint of Indiabulls with the Southern focus of LVB

Government opts for restructuring of BSNL and MTNL A day after news of BSNL laying off 54,000 workers, the PMO instructed DOT to expedite the revival package for telecom

The government may not be too keen to upset the apple cart with the general elections fast approaching

IL&FS and Videocon shock markets with their NPA disclosures IL&FS has contended that nearly 90% of the bank loans to IL&FS Financials could actually turn out to be NPAs

In the case of Videocon, the entire outstanding of Rs.90,000 crore could be irrecoverable in the absence of any assets

Theresa May asks for 3 months BREXIT extension, gets a full year EU has agreed to give a full year to Theresa May to get parliamentary approval for the BREXIT deal

However, May will be keen to push the deal through much earlier before the EU elections change the equations

Promoters with dues of $70 billion could benefit from the SC order During the week, Supreme Court had struck down the RBI circular on greater discretion to refer to NCLT

SC had ruled against such a carte blanche, but it could lead to a de-rating of banks according to Moody’s

SKYMET spooked the markets with a below average rainfall prediction SKYMET has projected rainfall at 93% of long period average which is below the normal range of 96% to 104%

SKYMET expects the rainfall to be impacted in June due to the high probability of the El Nino effect

PMI manufacturing and services turn up tepid numbers for March In both cases, the numbers were in expansion mode (above 50) but the momentum was lagging

The pressure came from fresh orders, new recruitments and inventory build up as well as production

Sensex completes 40 years of existence on April 01st 2019 During the last 40 years of existence, the Sensex has been a 390-bagger in terms of wealth creation

Of course, only 10 of the original Sensex companies still exist in the index and many new industries have come in

GST collections in March touch a record of Rs.1,06,000 crore This is the largest ever single month collection and is only the third occasion in the year to cross Rs.1 trillion in a month

The government will be pressured as direct taxes and GST collections have been below expectations.



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