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WEEKLY CAPSULE AND IMPACT ANALYSIS


Posted on 21-Dec-2018 Comments  0

Weekly Capsule (Dec 17– Dec 21) and Impact Analysis

News Announcement

Impact Analysis

The US Fed hiked Fed rates by 25 bps to the range of 225-250 bps

While the rate hike was factored in, the Fed did give out a fairly dovish outlook for rates in the coming year

Even Jerome Powell has confirmed that target rates will end up much lower than originally envisaged

BSE mid cap and small cap index see steepest fall in last 7 years

The year 2018 has been one of the worst years for small and mid caps with losses 24% and 14% respectively

Apart from the LTCG tax on equities, the ASM and the MF reclassification also led to selling in smaller names

Government pledges to increase bank capital support by Rs.41,000 crore

Total recapitalization for the year will go up sharply from Rs.65,000 crore to Rs.106,000 crore

The government will need to support the PSU banks as they take on the short term pain of farm sector write-offs

Nifty faces stiff resistance at the 11,000 levels during the week

The Nifty retreated nearly 250 points after getting within a stone’s throw from the 11,000 mark

The markets tanked on the last trading day on fears that the US slowdown was visible in the Q3 GDP numbers

ONGC announces a buyback of Rs.4000 crore in this fiscal

The buyback will be at a price of Rs.159 and will help the government get closer to its divestment target for the year

Analysts and credit rating agencies are unhappy with the way PSUs are being used for meeting divestment targets

Brent Crude touched a 17-month low of $55/bbl during the week

This level was last seen in July 2017 and Brent has now lost over $30 from the peaks of October 2018

The dilution of Iran sanctions and the fears of weak oil demand due to faltering growth have spooked oil prices

Rupee strengthened below the 70/$ mark on weak oil prices

With the oil prices down, the trade worry is less acute and that has led to less demand for dollars from importers

Also the inflation remaining under 4% and the US Fed’s dovish outlook for 2019 have helped the INR to gain more Rs.5

Telecom ministry mulls easing spectrum trading norms

The DOT may permit telecoms to trade in spectrum to partially allay the financial stress the sector is under

The telecom companies can also opt for higher number of instalments to repay; 16 instead of 10

GST Council may look to cut tax on cement, ACs and digital cameras

This is likely to be part of the GST Council meeting on 22nd Dec to rationalize the 28% peak bracket of GST

The shift from 28% to 18% will result in a revenue loss of Rs.20,000 crore for the government

Government plans to file petition against IL&FS auditors

The government plans to reopen the books of IL&FS to monitor for any audit lapses in the process

Even as IL&FS struggles with $12 billion of debt, there are allegations of siphoning of funds by senior managers

SEBI is considering a Sandbox approach to testing Fintech ideas

Sandbox is a method of testing complex algorithms on a small data in live environment before the final approval

SEBI has recognized that going ahead technology will increasingly drive change in the capital markets

Nilanjan Roy to take over as the next CFO of Infosys

Nilanjan Roy will continue as the CFO of Bharti Airtel till the end of February 28th 2018 before joining Infy on March 01st

Infosys has seen a huge churn in the CFO role and Roy is expected to bring some stability to the role

Benchmark bond yields fall sharply to 7.224% in line with US yields

The 10-year bond yields had breached the 8% mark in October putting tremendous pressure on bond prices and equities

However, the bond yields have retracted nearly 100 bps and a dovish stance from the Fed should help matters

Boeing calls Indian airfares too low to be sustainable in the market

According to Boeing, Indian average airfares are nearly 15% below the average break even rate for airline companies

Most airline companies are still facing negative spreads due to fare competition and high ATF prices

Monetary Policy Committee continues to be cautious on inflation

The MPC minutes were announced on 19th December which expressed surprise at low levels of inflation

The MPC also pointed out that the full impact of the MSP increases may not be still reflected in the prices

The nation has been seeing a spate of farm loan waivers across states

The Congress set the ball rolling with farm loan waivers in MP, Rajasthan and Chhattisgarh as per their poll manifesto

Congress soon followed suit in Assam and Gujarat and this trend is only likely to sharpen as elections approach

Dewan Housing plans to get out of the AMC JV with Pramerica

Pramerica is likely to buyout the entire stake of Dewan Housing in the DHFL Pramerica joint venture

This will help DHFL monetize part of its non-core assets so as to focus on streamlining its core home loans business

NSE gets approval to launch Nifty 50 options on a weekly basis

As of now weekly options are only allowed in Bank Nifty and the volumes have built rapidly in the last 2 years

Weekly options are suited for arbitrage and also for getting finer pricing in short term risk, suited to retail traders

World markets have lost nearly $15 trillion in market cap from the peak

The sharp market cap loss has been driven by expectations of a global slowdown driven by the inverted US yield curve

Apart from the trade war fears, the big hit has been has been taken by the richly priced FAANG stocks which lost 25%

Option traders are making million dollar bets on TCS and Infy puts

The broad consensus based on options data seems to be a correction of 8-10% in these frontline tech stocks

Traders are betting on the weak US demand and spending to hit the growth of these frontline IT companies

Combination of note ban and GST may have cost 35 lakh jobs in MSMEs

Most of these job losses were an outcome of the cash crunch created by demonetization and the stress of GST

Even global economists have written sharply criticising the manner in which GST and note ban were implemented

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