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Posted on 13-Mar-2020 Comments  0

Weekly Capsule (Mar 09 – Mar 13) and Impact Analysis

News Announcement Impact Analysis

Sensex ends volatile week with 5000 points gain from the bottom The bounce came after the markets touched lower circuit in early trades on Friday

A mix of domestic institutional buying and some positive noises from the government helped the recovery

Dow Jones also recovers 10% to close 2000 points higher on Friday This bounce was largely determined by short covering after heavy selling through the week

Most of the global indices lost around 25-28% in a span of just one month including DJIA, CAC, DAX and the Nifty

Trump declares National Emergency as the Coronavirus spreads across the US Trump has provided an emergency funding of $50 billion to fight the spread of the virus on a priority basis

Trump has already shut the borders to visitors from EU and has also cancelled all visa interviews in India

Yes Bank gets a major Rs.3100 crore life line from Indian banks ICICI Bank and HDFC Bank will infuse Rs.1000 crore each while Axis and Kotak will put in Rs.500 crore each

That brings the total capital contribution to Rs.10,300 crore, including SBI, and the balance may come from PE investors

AT1 bond holders in Yes bank may get equity to the tune of Rs.1700 crore This roughly translates into a markdown of 80% from the bond value of Rs.8500 crore as per the balance sheet

AT1 bond holders had put off their legal recourse after RBI had promised to intervene and sort out the matter

DGCA asks airlines to waive all cancellation charges due to the virus More than 30% of the tours and travel plans have been cancelled in the last few months

While that is going to result in business loss, airline companies will lose further if the cancellation charges are also waived

Saudi Arabia starts flooding the world market with cheap oil After increasing oil supply to 12 million bpd, Saudi Arabia has now dropped prices to as low as $25/bbl

The impact was clear on Brent Crude as the price dipped as low as $30/bbl, more than 50% lower in 3 months

India registers growth in exports and imports for Feb 2020 In a contrast to previous trends, exports for Feb-20 were up by 2.9% while imports were up by 2.43%

Interestingly for India, the trade push came from non-oil exports, which was up by 6.16% for the month of February

Rupee rebounds over the weekend as RBI intervenes to support The rupee had weakened to Rs.74.50/$ levels before RBI intervention helped it to close around 73.81/$

The RBI is estimated to have sold dollars to the tune of $1.50 billion to provide support to the local currency

FPIs sell Rs.41,522 crore of equities in the last one month FPIs were sellers on all days, except one, resulting in the Indian indices falling by 28% from the peak in a month

FPI selling in the last one month intensified due to the spread of the Coronavirus and the Yes Bank moratorium

US markets are expecting another big rate cut from the Fed next week Fed had already cut rates by 50 bps to 1.25% in the first week of March to counter the slowdown caused by the pandemic

However, the expectation now is that the US could push rates once again close to the zero mark; as it did in 2008

CBI and ED file fresh money laundering case against Rana Kapoor The promoter of Yes Bank is believed to have given out loans of Rs.20,000 crore that eventually turned bad

The CBI is also investigating the process adopted in the case of the purchase of the Rs.378 crore property in New Delhi

Air India bidding cut-off has been put off to April 30th from March 17th The bidders had asked for more time to evaluate the data and submit their bids for Air India

Also, the Coronavirus had substantially depressed the valuations of airline stocks

Chief Economic Advisor hints at rate cut by the Reserve Bank In view of the crash in the markets and the slowdown in growth, the CEA has hinted at an early rate cut by RBI

It was expected that RBI would cut rates after the US Fed did in early March, but the RBI has chosen to go slow

Retail CPI inflation comes in almost 100 basis points lower at 6.58% for Feb The fall in CPI inflation was largely driven by a sharp 283 bps fall in the overall food inflation

This sharp fall in inflation, it is hoped, will pave the way for an RBI rate cut this month

IIP growth bounces back to 2%, led by better manufacturing growth This marks the third successive month of positive IIP growth after 3 months of de-growth between August and October

Some green shoots of recovery are also visible in the sharp improvement in the PMI manufacturing and services

Larsen & Toubro raised Rs.1675 crore for its INVIT Fund These bonds will carry a coupon of 9.04% and is largest such INVIT issue raised on the NSE EBP platform

This INVIT fund raising is being done by L&T to take over the road assets of ailing Sadbhav Engineering of Ahmadabad

Franklin Templeton takes up to 3.5% cut on most of its debt funds This pertain to the full write-offs it is taking on its exposure to bonds of the ADAG group and Essel Infrastructure

The exposure to the AT1 bonds of Yes Bank are yet to be fully accounted for by the fund

Fitch warns of impact of Yes Bank issue on NBFCs According to Fitch, it could have an impact on its last mile business and its funding from other private banks

Also, the expectation is that the cost of funds for NBFCs may go up sharply, putting them under immense stress

Infosys dismisses three of its employees on tax refund related fraud These employees are alleged to have demanded money from the assessees towards speeding up their refunds

The employees were part of the CPC project of the tax department, which is currently being handled by Infosys

US Yield curve is now entirely under the 1% mark for all tenures For the first time in its history, even the US 30-year treasuries are trading at yields lower than 1%

Low yields combined with an inverted yield curve at places, is a pointer towards an impending economic slowdown



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