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Posted on 01-Mar-2019 Comments  0

Weekly Capsule (Feb 25– Mar 01) and Impact Analysis

News Announcement Impact Analysis

Markets became volatile after IAF launched attacks on terror camps With India attacking the terror camps in KPK, Pakistan violated Indian airspace which finally led to the capture of an IAF pilot

However, there was some de-escalation of tensions after Pakistan volunteered to release the pilot back to India

GDP growth for the third quarter came in sharply lower at 6.6% This was much lower than the consensus of 6.9% and was led down by manufacturing and services

The full year GDP growth has been now projected at 7% meaning a growth of just about 6.4% in the 4th quarter

PMI Manufacturing for Feb-19 came in sharply higher at 54.4 This is higher than January indicating economic expansion and also a pick-up in growth momentum during the month

The growth was led by new orders and higher output as well as inventory stocking and growth in job creation

Carlyle has acquired 9% stake in SBI Life at a price of Rs.4600 crore This deal gives SBI life an overall valuation of over Rs.50,000 crore for its reach and SBI franchise

This is should be a good starting point for creating a benchmark for insurance company valuations in India

Jet Fuel prices (ATF) were hiked by 8.1% on higher crude prices After two rounds of price cuts late last year, the sharp rise in ATF prices is likely to further pressure airline profits

Crude has rallied from around Rs.51/bbl in December to $66/bbl on OPEC supply cuts and Venezuela sanctions

SEBI sets fresh norms for preferential issue of shares SEBI in its latest Board Meet has decided that preferential allotments cannot be made at a discounted price

In addition, SEBI has also decided that such issues will not be granted exemption from making open offer

GST rate cut in real estate not enough to impress realtors Last Sunday, the GST Council cut GST on under construction houses to 5% and low cost houses to just 1%

How realtors are unlikely to benefit considering that the input tax credit (ITC) benefit stands withdrawn

Oil crosses $66/bbl but corrected on US economic data Weak manufacturing data from the US resulted in oil prices correcting more than 2% as demand worries were back

Despite OPEC supply cuts and sanctions on Venezuela and Iran, demand from the US and China remains the key

Bharti Airtel; has announced a massive Rs.32,000 crore investment plan This investment in infrastructure will help Bharti veritably compete with the price war launched by Reliance Jio

Bharti will also be raising resources from its African monetization to create a full-fledged war chest

The forex reserves were up by $944 million at $399.21 billion While forex reserves are not picking up, at least, the depletion has stopped after RBI was not required to support the rupee

The current forex reserves are just about sufficient to cover 9 months of imports, not a very healthy sign

Tata Motors rules out plans to sell its JLR subsidiary Tatas have denied as mere rumours, any plans afoot to sell the prestigious JLR business due to slack demand

However, Tata Motors denied that they had any plans even to sell a minority stake in JLR ahead of BREXIT

Tata Steel makes a big bet on downstream steel products With the buyout of Bhushan and Usha Martin, Tata Steel is targeting 30% sales from downstream steel products

Downstream products are less cyclical and also offer higher margins, something that can de-risk the business model

SEBI permits mutual funds and PMS to trade in commodity derivatives The institutional base will be critical in making the commodity derivatives market deeper and broader

This will also provide a new asset class for mutual funds and also give them hedging opportunities against exposures

PSU banks recover over Rs.98,000 crore in the current fiscal till date This has taken the total collection since 2015 to a level of Rs.287,000 crore with a higher loan coverage

With the NCLT process in full swing, the momentum is likely to bring in another Rs.1 trillion by end of 2019

Cement prices have shown an uptick for two months in succession The sharp rise in price of cement is indicative of pricing power coming back to cement manufacturers

While South based cement manufacturers are the big beneficiaries, infrastructure has given a big boost

VIX or fear index rose sharply above the 19 mark during the week The sharp rise in the VIX was on the back of the escalation of tension on the India Pakistan border

With tensions easing, the VIX has fallen to around 16.47 although it needs to come below 14 for market stability

Iron ore prices are likely to rise by 4% in the year 2019 This price rise is due to disruption in the Vale’s iron ore mines in Brazil. Brazil supplies 25% of China’s annual ore demand

In the last one year, steel companies have consistently passed on higher ore prices to the end users of steel

Anil Ambani seeks to pay Ericsson Rs.260 crore out of tax refunds Anil Ambani has been instructed by the Supreme Court to pay the balance Rs.450 crore to Ericsson in four weeks

SBI and other banks have objected to the tax refunds being used for the payment to operational creditors like Ericsson

India postpones retaliatory tariffs on US imports into India India had threatened the US with retaliatory tariffs if they did not exempt India from the recent special tariffs

Considering the fluid situation in Kashmir and with China, India has decided to play it safe with the US

Fiscal deficit touched a high of 122% of full year target in first 10 months This was largely led by weak GST collections and shortfall in GST revenue. Welfare outlays have also been higher

In the meanwhile, the bond yields need to be watched as they are normally vulnerable to spikes in fiscal deficit

NCLAT rejects lender demands to refer IL&FS to the NCLT Referring to the NCLT will at least allow the creditors to recover some portion of their outstanding debt

The NCLAT order even protects IL&FS and subsidiaries from further defaults in the future too



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