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Posted on 02-Aug-2019 Comments  0

Weekly Capsule (Jul 29 – Aug 02) and Impact Analysis

News Announcement Impact Analysis

Trump announces fresh 10% tariffs on Chinese imports worth $300 billion Trump announced a fresh set of tariffs as China was allegedly moving too slow on the trade deal

As a result of the announcement, oil prices crashed by 7% on Thursday on global growth concerns and equities were down

The US Federal Reserve cut the funds rate by 25 basis points This is the first rate cut by the Fed in 10 years and takes the interest rate range lower to 2.00-2.25%

Markets were largely disappointed as the cut was lower than anticipated by the global markets which wanted 50 bps cut

V G Siddhartha of Coffee Day Enterprises commits suicide In a letter to the board he had alleged extreme harassment by the tax authorities and also by private equity players

The two major stocks of the group, Coffee Day Enterprises and SICAL Logistics have been on lower circuit for the last 5 days

Kharif crop output lower by 6.6% on a YOY basis this year, but could pick up The weak Kharif output was largely on the back of a 9% shortfall in rains in the months of June and July

IMD expects rainfall to be normal in August and September but the impact of delayed sowing will only be known later

Deutsche Bank to offload all its derivative positions into bad bank With an exposure of $45 trillion to derivatives, Deutsche Bank has been on the brink for quite some time now

Deutsche has set aside $1.1 billion to take care of the losses that the bad bank may have to incur due to the positions

Maruti Suzuki cuts its sales force by 6% as sales sink to new lows With the sharp fall in auto sales by over 25% YOY, the company had no choice but to lay off workers

Maruti has already shed nearly 45% of its peak value in price and expects more pain in the months ahead

PMO cheers market by calling for a rethink on the FPI tax The markets were enthused on Friday by the PMO calling upon the finance minister to review FPI surcharge

FPIs have pulled out nearly $3 billion from the Indian markets since the Union Budget announced the additional surcharge

Decision on 35% public holding deferred for the time being The Budget announced a proposal to increase the public holding from 25% to 35% to bring more free float

With companies expressing concerns over too much of dilution, the decision on the subject has been put off

Rupee slumps on Friday on trade war fears and dollar strength One of the factors that was driving rupee weakness was the escalating trade war and the likely global slowdown

At the same time, the lower than expected rate cut by the Fed is likely to make the dollar stronger and the rupee weaker

HDFC reports sharp rise in profits for the June quarter The sharp rise in the net profits was largely driven by profit booked on sale of stake in Gruh Finance during the quarter

However, HDFC managed to maintain NIMs at around 3.5% and NPAs were also in check

SBI posts an increase in profits to Rs.2312 crore for June quarter The sharp rise in profits for SBI was largely driven by lower provisioning and a pick-up in lending during the quarter

However, the gross NPAs of SBI remained static at around the 7.53% even as the net NPAs also remained static

Government to infuse Rs.10,000 crore into housing finance companies The special line of credit will be in addition to the Rs.1trillion already committed to NBFCs via banks

Currently, realty sector is suffering because NBFCs are caught between tight liquidity and high borrowing costs

Markets positive on Bharti Airtel despite Rs.2866 crore loss in Q1 Markets were largely enthused with the sharp rise in operating margins which saw a spurt of nearly 700 bps

Also, the ARPU of the company got closer to the Rs.130 mark, thanks to weeding out of low value customers

FPIs withdrew a total of $2.7 billion from equities in July The selling was largely in the aftermath of the Union Budget and the selling is expected to continue through August

However, the FPIs were buying into bonds due to the rate differential which kept the rupee under check

Zee manages to sell an 11% stake in the company to Oppenheimer The deal happened at a price of Rs.400 but only 11% could be sold for Rs.4224 crore against the 20% anticipated

Zee needs to repay Rs.11,000 crore to mutual funds and banks that was taken as promoter funding against shares

CRISIL downgrades GDP growth for current fiscal to 6.9% This is lower than the 7% growth outlook that the RBI and the Finance Minister have been talking about

CRISIL has underlined global economic slowdown, trade war and the weak consumption in India as key reasons

Core sector growth came in at just 0.2% for the month of June 2019 Core sector saw weak performance from refining, crude oil production and cement while steel was strong

The core sector growth becomes critical as it accounts for nearly 40% of the overall IIP number each month

India crosses 60% of full year fiscal deficit in the first quarter This is likely to put pressure on the current fiscal deficit target of 3.4%, although CAG pegs it closer to 5.8%

The good news is that it was worse in the previous year wherein the first quarter had seen 69% target breached

Karma Capital rules out shifting FPIs from trusts to corporates According to Karma Capital, even if the shift was done it would attract the provisions of the GAAR Act

FPIs fear that even if a one-time exception is made, it makes them vulnerable to hounding in future

GBP slumped to a multi-year low on negative BREXIT noises With Boris Johnson being okay with a no-deal BREXIT, the UK Pound tanked to as low as Rs.84/GBP

The Bank of England has already hinted that a no-deal BREXIT could hit GDP growth by as much as 6%

India calls on Iran to free the Indian nationals on the British ship The demand was made after Iran released 9 Indian crew members working on board the ship

The ship was detained by the Iran Revolutionary guards in retaliation to a similar action by the UK



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