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Weekly Capsule

Posted on 14-Jun-2019 Comments  0

Weekly Capsule (Jun 10 – Jun 14) and Impact Analysis

News Announcement Impact Analysis

UBS downgrades price targets for IndusInd Bank and Yes Bank The two stocks were downgraded for their high proportion of loans given to group companies

Their lower share of CASA deposits also made them vulnerable to asset shocks, as per UBS

The US blames Iran for the tanker attack off the Gulf of Oman The attack on two tankers had the impact of adding to geopolitical risk and taking oil prices higher

While the US has blamed Iran, the Iranian government has denied any involvement and warned against any adventure

Trade deficit for the month of May widens to $15.36 billion The export growth once again remained tepid at 3.93% for the month of May on low business traction

While non-oil imports were up by just 2.9%, it was oil imports that saw a spike of 8.23% on a YOY basis

CPI inflation comes in higher for May at 3.07% driven by food inflation Even as core inflation tapered, the food inflation jumped from 1.15% to 1.83% for the month of May

The higher inflation in May could make the MPC review its rate cut plans in the light of weak monsoons

IIP growth picks up to 3.6% for the month of April 2019 IIP growth saw a pick-up I all the three segments viz. mining, manufacturing and electricity production

The good news appears to be on the green shoots of revival seen in the capital goods segment

India to impose retaliatory tariffs on 29 US items effective from June 16th With the US unwilling to budge on the GSP for India, the decision has been taken to retaliate through tariffs

India will hike import duties on walnut from 30% to 120% and on chickpeas from 30% to 70%

SEBI comes out with new norms for credit rating agencies Now rating agencies will be required to disclose the probability of default for every debt instrument rated

In addition, rating agencies will also have to disclose factors that could trigger an upgrade or a downgrade

ASSOCHAM calls for hike in deduction for home loan interest The home loan interest deduction has been stuck at Rs.2 lakhs for a long time and there is a call for raising it

This could be a boost for the housing sector as the current exemptions are out of sync with reality

FM discussed special window for NBFCs with RBI and banks The special window will be designed to provide the NBFCs with a liquidity support system to fall back upon

However, this window will be meant to assist NBFCs with liquidity problem and not with solvency problem

Uday Kotak warns of financial sector issues impacting the real sector The woes of the NBFC sector is already showing in the performance of the realty and auto sector

Kotak pointed out that most NBFCs were trying to pass off solvency and governance issues as liquidity issues

Bond yields again fell below the 7% mark towards the end of the week While inflation has been higher, the weakness in the global growth has led to yields coming down

During the week, the yields had attempted to bounce above the 7% mark but had failed to sustain above the level

SEBI bars NDTV and its promoters from accessing capital markets for 2 years This order was passed against NDTV for keeping the minority shareholders in the dark about three loan agreements

Not only are Prannoy and Radhika barred from capital markets but also from sitting on any corporate board

Infosys to announce first quarter results on July 12th The first quarter is normally critical as that is when the full fiscal guidance is provided by the management

While attrition continues and margins are lower, the chaos at the company has since been arrested

Jet Airways sinks further in the red with no solution visible With Etihad unwilling to take a majority stake in Jet Airways, the company may be sinking despite assurances

Jet owes Rs.8,000 crore to banks, Rs.10,000 crore to vendors and nearly Rs.3,500 crore as unpaid salaries

Government to auction telecom spectrum worth $84 billion This will be largely instrumental in meeting the funding shortfalls for the current fiscal year

The response of the telecom companies remains in doubt as debt levels are already high and profits are thinning

Societe Generale points out that EMs may be entering dangerous phase According to SocGen, EMs like India and China may be more vulnerable to softer growth due to the trade war

EMs could be specifically vulnerable as they have a close interplay between currencies and financial markets

NCLT adjourns hearing on Jet Airways till June 20th The hearing was for the bankruptcy petition filed by two creditors of Jet to take the company to NCLT

The NCLT is likely to give a final view next week after an update from SBI on the status of current options

Cyclone Vayu gives Gujarat a skip and moves towards Oman The coast of Gujarat was spared the fury of Cyclone Vayu which was expected to inflict massive damage

We saw earlier in the case of Odisha wherein, despite being fully prepared, the damage was huge

Mutual funds not too keen on adopting side pocketing strategy Despite SEBI permitting side pocketing of toxic fund portfolios, the mutual funds have not been too keen on adopting

Side pocketing is a more transparent way of making a clean breast of the portfolio quality to shareholders

Saudi Aramco reports profits of $111 billion for year 2018 This is a sharp growth in net profits on the back of a spike in oil prices during the year due to supply constraints

Aramco is targeting a valuation of $2 trillion in 2020 and may be feasible if the profit growth sustains next year

British Petroleum upgrades Saudi oil reserves for the first time since 1989 Saudi reserves have been pegged at 297 billion barrels as against the previous estimates of 266 billion barrels

However, Venezuela with 303 billion barrels of reserves remains the largest by a margin



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