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Weekly Capsule (Aug 14 – Aug 18) and Impact Analysis

Posted on 18-Aug-2017 Comments  0

Major News Item

Impact Analysis

  • The MPC minutes indicate a clear shift towards a dovish stance by RBI

  • Five out of the six members of the MPC were in favour of cutting rates with 1 member even suggesting a 50 bps cut

  • The MPC has admitted to over estimating inflation and so the monetary stance could now shift back to accommodative

  • US dollar weakened after the Trump Business Council was disbanded

  • The council was disbanded after high profile resignations in the after math of a racist stance taken by Trump

  • With the winding up of the council, investors are raising serious doubts over the economic promises of Trump

  • Terrorism returned to Europe with an attack in the tourist spot of Barcelona

  • This is one more in the long list of terrorist attacks across European nations like France, Belgium, Spain and UK

  • This attack is likely to make these countries more cagey with respect to accepting immigrants from Africa and Middle East

  • Vishal Sikka steps down from the position of MD & CEO of Infosys

  • The current CEO has been at logger heads with the original founders of Infosys,especially Mr. Narayanamurthy

  • Murthy had serious reservations on the subject of executive compensation and corporate governance standards

  • Gold imports likely to surge by 33% to 750 billion tons in 2017

  • Gold imports are rising by nearly 100% each month as jewellers are making up for lost time after the jewellers’ strike

  • Gold imports put pressure on the RBI as it entails imports of unproductive goods with no downstream applications

  • Fed Presidents are increasingly hinting at a more dovish approach to rates

  • Robert Kaplan and Neil Kashkari, 2 high profile Fed presidents, are strongly infavour of flat to lower Fed rates

  • Their view is that the outlook for growth and inflation do not justify committing to a hawkish approach to rates

  • Jindal Energy to launch electric car in India by 2020

  • Electric cars are yet to take off in a big way but the demand is expected to grow 40-fold by 2030

  • Electric cars are considered to be the biggest threat factor for demand for fossil fuels and oil prices in future

  • CPI inflation came in higher at 2.36% and WPI inflation at 1.88%

  • The 90 bps bounce in retail inflation was driven by higher vegetable prices,especially tomatoes

  • WPI inflation bouncing back from lower levels is indicative that economy is unlikely to see a slowdown

  • India gets its first oil import consignment of shale oil from the US

  • With Saudi Arabia cutting oil supplies to Asia, India is increasingly looking to the US to supply crude

  • The cost of US shale is working out cheaper than the crude that India was traditionally sourcing from West Asia

  • Trade data for July 2017 hinted at a merchandise deficit of $11.45 bn

  • With the growth in imports falling, the trade deficit has marginally improved in the month of July

  • However the immediate challenge is that exports of goods and services are almost static due to a strong INR

  • US ups its ante at the all important NAFTA trade talks

  • US has sought greater concessions from Mexico and Canada to reduce the trade deficit which is up 4 times since NAFTA

  • In his election speech, Trump had promised to walk out of unfavourable trade agreements and NAFTA could be next

  • SEBI approved the buy back proposal put up by Infosys

  • The $2 billion buy back proposal took time for approval as it also involved buy back for the ADRs of Infosys

  • The ADRs can now be converted into local shares and then tendered for the buy back.Price is yet to be decided.

  • SEBI exempts stakes in distressed companies from open offers

  • This was a much needed exemption from the Take over Code which will enable banks to easily take over stressed assets

  • An open offer to the existing shareholders would have added substantially to the cost of the buy out and made it unviable

  • Government announces New Metro Policy with PPP condition

  • All fresh metro related projects will now have to be necessarily on Public Private Partnership (PPP) basis only

  • This will open a huge window of opportunity for companies like Reliance Infra that are aggressive in this space

  • More banks follow the savings rate cut band wagon after SBI

  • Banks like HDFC Bank, Axis Bank, PNB, BOB and Axis Bank have all gone ahead and cut savings rates by 50 bps

  • This was necessitated as the rapid rise in deposits after the note ban,did not see proportionate rise in loan growth

  • Base metals could rally further says a report by Soc Gen

  • Most base metals have rallied by 15% this year and could rally further by December this year

  • A sharp pick-up in growth in EU and rising Chinese demand for base metals is propelling this rise in prices

  • Tatas sever all business relations with the Shapoorji Pallonji group

  • This decision camein the light of the removal of Cyrus Mistry from the post of Chairman of Tata Sons last year

  • The SP group has been a beneficiary of lucrative construction contracts from the Tatas over the last many years

  • Goldman Sachs warns of high yield trap in emerging markets (EM) debt paper

  • Most money managers have been targeting higher rated junk notes in EMs in search of higher yields

  • Goldman Sachs feels that this could be a dangerous strategy especially if flows suddenly turn risk-off

  • Tomatoes may be emerging as the new worry for CPI inflation

  • At Rs.100 per kg,tomatoes were singularly responsible for inflation rising by 90 basis points in July 2017

  • It is indicative of a larger challenge as nearly 16% of tomatoes were wasted due to poor transport and cold storage

  • BSE and NSE to suspend trading in United Brewery Holdings (UBH)

  • The suspension is due to non-compliance and non-payment of fines for two years.Mallya’s stake has also been frozen

  • The Indian banks have been trying to recover a sum of $1.3 billion which he owes to banks via Kingfisher Airlines

  • Promoters to off load up to 15% stake in HDFC Life as part of the IPO

  • Standard life will off load 5.43% while HDFC will off load 9.57% stake in HDFC Life as part of the IPO

  • HDFC has pushed ahead with the IPO after the proposed merger with Max Life was called off due to IRDA objections



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