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Posted on 13-Sep-2019 Comments  0

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

News Announcement Impact Analysis

Brent Crude closes the week near the psychological $60/bbl mark During the week, the oil prices surged beyond $63/bbl after Saudi Arabia appointed an oil hawk as new Energy Minister

However, Trump stating that the US would ease sanctions on Iran was instrumental in pulling oil down again

CPI inflation for August comes in mildly higher at 3.21% This was nearly 6 bps higher than July and was largely represented by a rise in food inflation during the month

With inflation still within the RBI comfort zone of 4%, the rate cut in October appears to be on the cards

IIP for July comes in lower at 4.3% on a YOY basis The sharp fall in the IIP was largely driven by manufacturing basket of IIP falling from 7% to 4.2% on a YOY basis

Combined with reasonable inflation, the sharp fall in manufacturing IIP makes a strong case for a rate cut

Altico defaults on ECB debt to Mashreq Bank of the Middle East This default led to a downgrade of the bonds of Altico (a real estate lending NBFC) to junk status

UTI Fund and RNAM Fund, with a significant exposure to Altico, have already side-pocketed their Altico holdings

Kris Gopalakrishnan to head government panel on data India’s data policy and privacy policies have been the subject of much debate in the last few years

This committee will submit a report that will form the basis of a wider consultation on non-personal data

Trade tensions eased during the week after US and China decide to talk In response to China exempting select American products from tariffs, US also postponed tariffs on China

The two nations are scheduled to meet in October and the US has agreed to keep Huawei out of the discussions

ECB announced the resumption of QE and cut rates further into negative ECB chair Draghi announced 10 bps cut in rates to (-0.50%) and announced €20 billion QE per month from November

This decision may impel the US Fed to also persist with rate cuts even as Trump has been calling for negative rates

Merchandise trade deficit for August almost flat at $13.45 billion The fall in trade deficit was triggered by a 6% fall in exports and a 13% fall in overall imports

The data appears to be more indicative of an overall slowdown in global trade due to the ongoing trade war

After Maruti and Ashok Leyland, M&M also announces production stoppage The rise in no production days at auto plants is being driven an unprecedented slowdown in auto demand

The problems has gotten compounded because banks are now getting wary of funding dealer auto inventories

GST Council to meet on Friday, September 20th to debate GST cuts It is proposed to cut GST rates on a number of products including automobiles and biscuits to arrest slowdown

However, states have objected to the GST rate cut on autos as it would lead to loss of revenues of Rs.50,000 crore

Government likely to sell stake in BPCL to global oil firm In a first major effort at privatization of oil companies, the government may hive off its stake in BPCL

This was viewed positively by the market with BPCL being the top gainer on the last trading day of the week

Government may sell up to 100% stake in Air India to sweeten the deal With buyers uninterested in a minority stake in Air India, the government is now open to selling 100% in the flag carrier

However, the government will had to address its $8 billion debt and monetization of hidden assets first

Gold stays above $1500/oz in the international spot market Despite the thawing of uncertainty between the US and China, the gold prices remained elevated

The gold silver ratio is at the upper end of the historical spectrum and that will cap any rise in gold prices

London Stock Exchange rejects $39 billion bid by HKSE Hong Kong Stock Exchange had made an aggressive bid for the LSE at $39 billion to expand its global presence

However, LSE had recently acquired Refinitiv for $26 billion and this amounted to undervaluing the SOTP

Scottish court rejects Boris Johnson’s proposal to suspend parliament Labour party scored a small victory after the parliament suspension plan was struck down

That means the BREXIT date gets postponed to 2020 and there is more time to craft a BREXIT deal for the UK

Bharti Airtel plans INVIT for optic fibre assets to raise $2 billion INVIT is a vehicle to separate the key infrastructure assets owned by a service provider into a separate SPV

This allows the main service company to become less asset intensive and in the process improves ROE

BOFA ML sees possibility of 50 bps rate cut in October policy According to BOFA, the weak GDP numbers in June quarter and the low IIP paves the way for a 50 bps rate cut

However, the RBI may be wary of losing out on its leverage if it front ends too much of its rate cuts in a short span of time

Liquid funds see higher inflows, credit risk funds see outflows The overall AUM of the mutual funds segment hardly shifted in the month of August and stayed around Rs.25.4 trillion

Even monthly SIPs at Rs.8230 crore were slightly lower than the previous month but remain robust overall

Modi government completes 100 days in office during the week On the political front, the abrogation of Section 370 and the Chandrayaan-II remained the big positives in 100 days

However, GDP growth in June quarter came in at a 6 year low of 5% and the slowdown is pinching the economy hard

Private equity flows in August higher by 13% at $4.4 billion Most of the PE deals happened essentially in the realty and infrastructure sector during the month

There were a total 16 big ticket deals with a ticket size of more than $100 million during the month

Indian telecom companies may now have to shell out Rs.41,000 crore This payment is towards additional spectrum usage charges and falls hardest on Bharti Airtel and Vodafone Idea

This would mean additional pressure on telecom companies that are already under ARPU pressure currently



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