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Weekly Capsule

Posted on 21-Jun-2019 Comments  0

Weekly Capsule (Jun 17 – Jun 21) and Impact Analysis

News Announcement Impact Analysis

The US Federal Reserve maintains status quo on rates Despite pressure from Trump, the Fed chose to maintain status quo on rates but hinted at cuts in the future

This dovish outlook had a positive impact on the US markets as well as other EMs across the world

Iran shoots down an American drone in the midst of a simmering Middle East While the US claimed the drone was in international airspace, Iran has affirmed that it was above Southern Iran

Trump had ordered retaliatory attacks on Iran but withdrew in the last minute considering the volatile situation

Monetary Policy Committee minutes hint at inflation risk The members of the MPC, despite voting unanimously, underlined that rate cut was only to push growth

The MPC minutes specifically highlighted the inflation risk arising from higher food and oil prices

GST Council Meet decides to extend anti-profiteering by another 2 years The first GST meet chaired by Sitharaman focused more on the penalties under the anti profiteering clause

The Council extended the last date for filing full year returns by 2 months to August 31st

Brent Crude soars above $65/bbl in the midst of rising Middle East tensions The spurt in oil prices was visible after Iran shot down the US drone and US threatened to retaliate

Oil traders panicked that a war in the Middle East could seriously impact oil movement in the area

Government may not to budge on its Electrical Vehicles deadline The deadline for EV shift is 2023 for 3 wheelers and 2025 for two wheelers up to 150 CC

While the Niti Aayog has spoken about 2030 deadline for cars, the government has been silent on the issue

Jet Airways gets referred to NCLT with the plea by SBI being admitted With no buyers forthcoming in the Jet Airways issue, there was little choice for SBI but refer to NCLT

With its aircraft being repossessed and employees having left, it is unclear how much creditors can really recover

Reliance Capital reduces its outstanding CPs by over 90% The proceeds from sale of stake were used by Reliance Capital to reduce outstanding CPs from Rs.950 crore to Rs.75 crore

The ADAG group has been on a spree monetizing its key assets and using the proceeds to repay group debt

CCI approves merger of Indiabulls Housing Finance and LVB This will be the first instance of a larger NBFC merging with a smaller bank

While Indiabulls Housing Finance gets a banking license, LVB gets a strong franchise in the West and the North

Deloitte and KPMG question the jurisdiction of NCLT in audit ban NCLT had proposed a ban of 5 years on Deloitte on taking up fresh audit works for alleged collusion in IFIN

Currently, audit activities in India are fully regulated by the ICAI, which is a statutory body by itself

India Ratings downgrades Reliance Infra to Default Status The downgrade was necessitated after the company got into severe cash flow problems in the recent past

However, the company has not participated in the rating exercise despite repeated requests from the rating agency

Facebook launches proprietary payment gateway The payment gateway will start by facilitating payments via Facebook and WhatsApp

Over time, this will also be integrated with Facebook’s proposed crypto currency, Libra

Steel Ministry seeks higher import duties to deter cheap imports With a slowdown in China, a lot of steel has been flooding India from Japan, Korea and China

On behalf of local steel companies, the ministry has sought higher tariffs to deter the import of low cost steel

The US affirms that there will be no cap on H1-B visas for now The cap on H1-B visas was supposed to become a major impediment for software companies in India

It was expected that the US would impose these limits as a retaliation to punitive tariffs and data localization norms

China rules out inclusion of India in the elite Nuclear Suppliers Group (NSG) China has reiterated that it will continue to block the admission of India into the NSG

The inclusion of a country into the NSG is conditional on the signing of the NPT, which India has refused to do

Canada based Manulife and M&M Finance form mutual fund JV The proposed joint venture is likely to be 51% owned by Mahindra and 49% owned by Manulife

Interestingly, M&M is making a big foray into the AMC business at a time when the likes of RCAP are exiting

Falling bond yields hit India and the US bond markets Indian bond markets saw 10-year yields falling below the 6.8% mark on the back of dovish outlook by the RBI

US bond yields also fell below the 2% mark during the week on the back of Fed hinting at future rate cuts

IBC recoveries at over 40% according to report by ICRA The recovery has been 42% for operational creditors and 44% for the financial creditors in the IBC cases overall

This is considered to be a very positive recovery rate, although the real challenge may be in the next round

OPEC could see open rift between Iran and Saudi Arabia The OPEC meeting scheduled in the first week of July could see Iran and Saudi clash over Middle East tensions

Iran has also been unhappy as Saudi Arabia has been taking key decisions with Russia, without involving the OPEC

Air passenger traffic rises once again after a brief lull in past few months The airline industry appears to have gotten out of the temporary slowdown caused by the Jet shutdown

While growth at 3% is way below the historical average, at least the supply shortfall has been managed pretty well

Trump promises to restart trade negotiations with China Trade teams will start discussions ahead of the G-20 meeting in Japan where Trump and Xi are expected to meet

In the last 1 year, the biggest casualty of the trade war has been the global growth prospects



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