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Posted on 09-Aug-2019 Comments  0

Weekly Capsule (Aug 05 – Aug 09) and Impact Analysis

News Announcement Impact Analysis

Indian Parliament abrogates Article 370 absorbing Kashmir into Union of India The state of Kashmir now stands divided into two Union Territories viz. Jammu & Kashmir and Ladakh

The change of status was done amidst a heavy military clampdown and Section 144 in the whole of Kashmir

BSE Sensex bounces by 900 points on Thursday and Friday on FPI hopes The sharp rise in the markets was on the back of hopes that the government may look to scrap FPI tax and LTCG tax

This led to a surge in short covering during the last two days as traders aggressively covered positions in banks and auto

MPC cuts the repo rates by 35 bps in a departure from general practice The 35 bps rate cut was higher than the previous occasions but less than market expectations of 50 bps

However, the committee members unanimously voted to keep the stance of the policy as accommodative

RBI downgrades the full year growth target to 6.9% The growth downgrade in the monetary policy was due to a mix of domestic slowdown and global weakness

The sharp negative market reaction on the day of the policy was largely on the back of this growth downgrade

Floods strike the state of Kerala for the second year in succession As per current estimates, more than 45 people are dead and more than 1 lakh are displaced due to rains in Kerala

Like in the previous year, the Kerala flooding is expected to hit gold demand and the output of rubber

China lets the Yuan dip beyond the level of CNY7/$ This marks the lowest level for the Chinese Yuan over the last 10 years and has led to currency scare in most EMs

The US has warned China that it may be tagged as a Currency Manipulator for deliberately weakening the CNY

FPIs continue to sell heavily in the month of August too The sentiments of FPIs became negative after the surcharge on tax which would hit FPIs structured as trusts

Since the budget announcement, Indian equities have seen FPI outflows to the tune of more than $4 billion

Monetary Policy permits 24 hour NEFT to be launched from December NEFT without additional charges will be permitted round the clock on all days of the week from December in digital boost

However, there would be timing restrictions on RTGS transfers which refer to transfers above a sum of Rs.2 lakhs

INR corrected sharply during the week and got closer to the 71/$ mark The correction in the INR was visible for more than a couple of weeks due to consistent FPI selling in equities

However, the sharp fall in the INR came after the PBOC let the Chinese Yuan slip below the CNY7/$ mark

Brent crude oil dipped below the $60/bbl mark during the week The oil prices dipped as low as $56.30/bbl during the week on global slowdown fears after the CNY devaluation

However, the oil prices did bounce back on the last two days of the week on hopes of additional OPEC supply cuts

NCLAT rejects auditor pleas challenging the 5-year ban on Deloitte The NCLT Appellate Tribunal ruled that imposing a ban on auditors in the IL&FS case was perfectly legitimate

Deloitte and KPMG had pointed out that the court did not have a jurisdiction on the matter on technical grounds

Indian IIP fell to 2% in the month of June on weak manufacturing In another signal of weakening GDP, the manufacturing sector saw pressure leading the IIP 4% lower

While this is partially the base effect, the impact on business confidence cannot be denied

International gold prices touch 6 year high of $1500/oz Gold prices normally react to heightened uncertainty and are hence a good hedge in such times leading to safety run

Gold in the Indian markets also went up sharply to an all time high above the Rs.38,000/10 gm mark

BREXIT takes its toll on UK second quarter growth GDP in the June quarter dipped by (-0.2%) in the United Kingdom as stock piling took its toll on growth

The Bank of England has already warned that a no-deal BREXIT would have an overall impact of up to 7% of GDP

Wall Street spooked as Trump adamant on deal with China Trump has underscored that any deal with China would exclude giving concessions to Huawei to operate in the US

Huawei has been bone of contention, since the US has been accusing Huawei of endangering American security

SEBI tightens the screws on mutual fund regulation SEBI in its latest round of regulations has barred MFs from investing in unlisted equity or debt

SEBI has also asked all the debt funds to bring down their share of unrated debt from 25% to 5%

Paint manufacturers give strong results in the June quarter The growth in the paints sector was largely led by the decorative paints segment which is less cyclical

The growth comes at a time when two of its largest user segments (construction and autos) are in trouble

Market strategists warn against aggressive rate cuts by the Fed Experts have warned that the Fed Board must prevail upon Donald Trump against aggressive rate cuts

The fear is that aggressive rate cuts may weaken the dollar and take away its exorbitant privilege

Auto industry demand GST rate cuts and funding sops The stage was set by Anand Mahindra calling for GST on autos to be cut from 28% to 18%; the median rate

Auto companies are also demanding easy funding from NBFCs, which has been a major constraint for demand

Pakistan suspends bilateral ties with India post Kashmir decision On the one hand, Pakistan has cut all trade ties with India, although the circular trade still continues

Additionally, Pakistan also recalled its envoy from India and also sent the Indian envoy back to India

NCLT sees stress coming into banking from new sectors going ahead The NCLT expects stress to now come from sectors like media, housing, NBFCs and infrastructure

NCLT has also warned that a slowdown in growth would also put a lot of retail borrowings at risk of default



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