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Weekly Capsule

Posted on 31-May-2019 Comments  0

Weekly Capsule (May 27 – May 31) and Impact Analysis

News Announcement Impact Analysis

Modi government takes charge on 30th May with new cabinet sworn in The surprise exclusions from the cabinet included Jayant Sinha and Rajyavardhan Rathore

While Amit Shah was expected to get cabinet rank, the induction of S Jayshankar was a pleasant surprise

Key portfolios get shuffled around in Modi 2.0 regime Nirmala takes over all important Ministries of Finance and Corporate Affairs and Amit Shah gets Home

Rajnath Singh moves to Defence while ex-bureaucrat S Jayshankar moves in as Minister of External Affairs

GDP disappointed in the fourth quarter at just 5.8% annualized The Q4 GDP was lower than expected and even the full year GDP was lower than expected at just 6.8%

The pressure continued on the agriculture and manufacturing front with added pressure from tight liquidity conditions

Brent prices cracked sharply below the $65/bbl mark during the week This sharp fall in crude happened despite the Iran sanctions and the OPEC supply cuts which offered price support

The big concern in global markets was the trade war and risk of a slowdown in GDP as hinted by negative yield curve

L&T to launch open offer to Mindtree shareholders on June 17th L&T has already acquired close to 29% stake in Mindtree and is now statutorily bound to make open offer to shareholders

The success of the takeover will hinge on the FPIs who hold more than 40% stake in Mindtree

Modi government meets revised fiscal target for fiscal 2018-19 The 3.4% revised fiscal deficit target was met by last minute cuts in spending on areas like healthcare and education

For the fiscal year 2019-20, the government has already touched 22% of full year fiscal deficit target in April itself

Modi government extends pension scheme to shopkeepers and traders The budget had originally envisaged the scheme only for farmers in the rural and semi-urban areas

Now this facility has also been extended to 3 crore traders and retailers, who have been a loyal voter base of the NDA

Government to present the full year budget on July 05th The full year budget superseding the interim budget will be presented on July 05th as part of the 1 month budget session

The markets are expecting this to be a kind of a big bang budget considering the growth and job challenges

Unemployment touches a 45-year high of 6.1% in the latest year In what would typically call for urgent attention, the jobless number of NSSO almost match the estimates of CMIE

This would entail a big focus on making agriculture productive and also to give a big boost to the SME segment

Manpasand Beverages loses 55% value in just five days The problems for the group had started last year but got exacerbated with the arrest of their CEO for GST default

Corporate governance has been a major issue at Manpasand and last year their auditors had resigned for the same reason

Bond yields in the Indian market fell to a multi-year low of 7.03% The sharp fall in bond yields was led by cues from the US bond markets where benchmark yields have crashed to 2.2%

The fall in yields has been triggered by rate cut hopes, surge in liquidity in markets and fears of global slowdown

Analysts expect the RBI to cut repo rates by 25 bps in its June meet This cut, if it comes, would be on top of a 50 bps cut overall in the months of February and April

With inflation in check and growth faltering, the cut in interest rates can go a long way to resuscitate growth

India continues to get diverse weather reports from the agencies Private sector, SKYMET, expects June to be one of the driest months impacting the sowing and cropping season

But, government owned IMD expects average rainfall but sees limited impact on agricultural output for the year

India likely to turn net importer of steel in fiscal 2020 India has been consistently a net exporter in the last 3 years and that could change with the influx of cheap steel

Japan and Korea have dominated steel exports to India cornering nearly 60% of the total market

Bharti sees its ARPUs finally picking up by 19% in the fourth quarter The sharp pick-up in ARPUs was largely driven by the strategy to gradually weed out the low revenue customers

However, analysts are of the view that at current levels, Bharti may still struggle to remain profitable in the telecom segment

ICRA calls for stringent risk management systems for NBFCs The big focus will be on reducing the maturity mismatch for NBFCs to the extent possible

NBFCs will also be asked to maintain liquid assets as a buffer and will now also appoint a Chief Risk Officer

Samsung plans big investments to make India a manufacturing base Samsung plans to double its smart phones sales in India and take it up to a value of $1 billion per annum

In India, Samsung phones operate in the mid-range of Rs.8,000 to Rs.18,000 price band, which is the preferred band

Trump plans to fully ban work permits for the spouses of IT employees By banning work permits for spouses, the intent is to save more jobs in the US for the local population

This work permit under H4 was launched by Obama to leverage on the skills of a qualified spouse

High margin ethanol bails out the sugar industry in the fourth quarter While ethanol contributes only 12% of revenues it accounts for nearly 50% of the profits of sugar companies

The core sugar business has been under pressure following another year of excess supply pushing prices down

OMC combined debt rises to a five year high of Rs.1,62,000 crore This debt pile is due to higher capital spending and also due to delays in payment of subsidies to OMCs

The last time this happened was when crude had crossed $100/bbl, even as oil is just at $65/bbl currently

SEBI insists on quick disclosure of all bond defaults by corporates SEBI is of the view that quicker disclosure will enable the investors to take more informed decisions

However, bank loans continue to be out of the purview of disclosure due to historical reasons



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