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WEEKLY CAPSULES


Posted on 30-Aug-2019 Comments  0

Weekly Capsule (Aug 26 – Aug 30) and Impact Analysis


News Announcement Impact Analysis


Real GDP growth comes in sharply lower at 5% for June quarter This is the lowest quarterly GDP growth in the last 7 years and was led lower by agriculture and manufacturing
The weak GDP growth in June quarter also raises doubts over the RBI’s full year projected target of 6.9% growth
Nominal GDP growth falls to 16 year low of just 7.99% Nominal GDP is the real GDP growth gross of inflation and it needs to grow at 12% if India has to touch $5 trillion GDP
The week growth in nominal GDP is indicative of another weak quarter for Indian companies after a fairly disappointing Q1
China and the US finally manage to tone down their war rhetoric US first hinted that they may be open to further trade talks with China to ease the global growth situation
China has also eased its stand and has now decided to postpone the tariff hike it had threatened the US with
Finance Ministerannounces mega bank merger plan on Friday The FM announced the merger of smaller banks into larger banks like PNB, Canara Bank and Union Bank
This will reduce the total number of PSU banks in India from 27 in 2017 to just 10 in the current market scenario
Bank unions oppose the plan to merge PSU banks across India Bank unions have raised serious reservations over the likely manpower rationalization that may be required for merger
Unions have also stated that the merger will not, in any way, impact the bad loan recovery efforts of the banks
RBI transfers Rs.176,000 crore to the government of India as payout This includes dividend of Rs.123,000 crore and return of excess capital to the tune of Rs.53,000 crore
The total dividend transfer alone this year is twice the transfer done in the previous year by the RBI
Bank NPAs in March 2019 fall from 11.2% to just 9.1% The RBI annual report revealed that this sharp fall was due to lower slippages on loans and better recoveries
However, the RBI also reported that bank frauds in 2018-19 had grown almost five-fold to Rs.71,543 crore
Currency in circulation increases 17% to Rs.21 trillion in March 2019 This sharp rise in currency levels takes it well past the pre demonetization levels making liquidity easy
This also indicates that the use of currency continues to be rampant in the Indian context despite digital shift
Canara Bank to merge with Syndicate Bank to create a Southern power house This will give the two Karnataka based banks a virtual hold over the lucrative southern banking market
This merger also helps them to tide over the cost issues by sharing common resources and expanding treasury
PNB gets the lion’s share of the bank recapitalization allocation Out of the Rs.70,000 crore allocation, PNB got the highest allocation of Rs.16,500 crore this year
Union Bank also get Rrs.11,500 crore and these two banks accounted for 40% of the total allocation made
Governance issues results in a number of top level changes Naresh Thakkar has been removed from the post of CEO of ICRA after he was found complicit on ratings to IL&FS
Gautam Thapar became the latest victim to be ousted from the top post after the fraud discovered at CG Power
Boris Johnson gets Queen’s approval to suspend Parliament The intent was to ensure that the BREXIT does not get sabotaged in the last minute due to absence of a deal
The opposition Labour Party will now call for an Emergency session of Parliament to force the debate
SBI Caps red flags the sharply higher debt exposure of NHAI Total debt of NHAI has crossed Rs.250,000 crore with its annual interest outgo at nearly Rs.25,000 crore
The worry is also that NHAI may have contingent liabilities to the tune of Rs.65,000 crore as per ICRA
Forex reserves dip below the $430 billion mark last week This fall of $1.5 billion during the week was largely on the back of RBI supporting the rupee around the 72/$ levels
With consistent FPI selling and weak trade numbers, the RBI had been defending the rupee around the 72/$ levels
US GDP takes a fall but consumer data remains robust US GDP for the June quarter came in at 2%, lower than the 2.1% that the markets were estimating
However, consumer numbers were extremely robust, reducing the recession worries in the US
FPIs ask for exempting debt capital gains also from surcharge After FPIs pulled out nearly $4.5 billion, the finance minister exempted all equity capital gains from the surcharge
However, this would only be relevant for FPIs structured as trusts and debt would still remain out of purview
AMFI expects the mutual fund AUM to touch Rs.100 trillion in a decade That would translate into a near 4-fold jump in AUM for the Indian mutual fund industry after a 3-fold jump in 5 years
However, the MF industry has some challenges in the form of getting out of the FMP crisis and rewarding equity SIPs
Government eases foreign ownership norms for global investments The government has allowed 100% FDI in coal mining and 26% FDI in the area of digital media
Even the norms for single brand retail have been substantially simplified and that could also give a boost
Government to give Rs.6286 crore subsidy for sugar exports This subsidy is to compensate the Indian sugar producers for their higher cost of production relative to global norms
Global sugar majors like Brazil and Australia have already complained to the WTO about these measures
SEBI warns of hidden costs in direct plans of mutual funds Direct plans were intended to lower the TER off the MF investors and hidden costs were distorting it
SEBI has warned the mutual funds against such back door charges and has also talked of strict penalties
Downstream oil gets a boost from passing investment costs Downstream oil companies will pass on their BS-VI capital cost of Rs.30,000 crore to consumers through higher fuel prices
That does raise concerns over billing consumers for the capital spending by these downstream oil companies


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