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Weekly Capsule

Posted on 12-Jul-2019 Comments  0

Weekly Capsule (Jul 08 – Jul 12) and Impact Analysis

News Announcement Impact Analysis

Oil supply faced a challenge as 70% of Gulf of Mexico oil facilities shut This shutdown was necessitated by the Tropical Storm Barry that hit the Gulf of Mexico, the oil centre of the US

This storm has also resulted in a sharp rise in crude prices to $67/bbl in the Brent market due to supply shortfalls

DHFL announces loss of Rs.2223 crore for March 2019 quarter These are unaudited results and the audited results will be announced by July 22nd later this month

The sharply higher losses were on the back of a Rs.3280 crore provision that DHFL had made on account of bad debts

Bond Yields dip lower to the 6.49% levels for the benchmark 10-year bond The sharp fall in bond yields were driven by the Fed Chair Powell almost affirming a rate cut in the next meet

The proposed $10 billion sovereign bond issue also pulled up prices of bonds and depressed yields

Global fund managers rushing towards negative yield bonds This rush has become more pronounced after the BREXIT concerns in UK and rising Middle East tensions

Negative bond yields create a major challenge for savers and pensioners as they do not get enough returns

D-Mart impresses the street with a sharp growth in profit margins First quarter net profit margins of D-Mart stood at 5.8% compared to 5.5% last year and 4% this year

EBITDA margins for the quarter also came in at an impressive 10.3% on better operational efficiency

Raghuram Rajan highlights risks in India’s sovereign debt plan Rajan has pointed out that the sovereign bond issue could make India’s external ratings and currency fragile

Sovereign bonds carry currency risk if the dollar appreciates and that is a risk the budget has not factored for

Infosys shows more robust growth than TCS in first quarter The growth in profits and the operating margin performance of Infosys were better than TCS despite cost pressures

Infosys also reported a 35% shares of digital revenues in the first quarter and large deals of $2.7 billion

Dow Jones and S&P 500 touch life times highs during the week The sharp rally in the benchmark indices was driven by the optimism post the dovish statement by Jerome Powell

The CME FEDWATCH has already been hinting at a very high probability of a rate cut in the July 31st Fed policy

IndusInd reports 38% growth in first quarter profits for June The growth in profits was driven largely by the post merger impact of Bharat Financial (an MFI)

However, the quality of assets in IndusInd’s core business remains under pressure with asset quality worsening

Income tax filing dates may be extended beyond July 31st Normally, the CBDT has delayed filing dates to accommodate changes in the filing process

The government may grant an extra month due to change in tax filing format and also the auto fill facility

SBI takes the lead in removing all charges on electronic transfer The Union Budget had asked banks to waive all EFT charges and take the costs in their own books

SBI has not only made the NEFT and RTGS transfer free of cost but even IMPS transfer will be charge free from August 01st.

Allahabad Bank reports Rs.1700 crore by Bhushan Power and Steel Allahabad became the second bank after PNB to report a fraud by promoters of Bhushan Power to the RBI

This has spooked the banks and is likely to negatively impact the interest shown by buyers in the IBC process

Ethanol blending could get a boost in India to take on EV challenge Ethanol blending has come up after government asked auto companies to submit a timetable for EV shift

While there have been tax sops for EVs in the budget, the industry may settle for more ethanol blending as a mid-way

Infosys completes localization target of 10,000 employees in the US This localization was an outcome of commitments given by Indian IT companies on IT jobs creation

This move has been responsible for a sharp rise in costs and a fall in OPMs for Infosys and other IT players

New amortization rules lead to massive outflows from liquid funds Effective July 01st liquid funds have to provide amortization for paper above 30-day maturity from 60-day currently

This has pushed low risk investors to banks and the higher risk investors to liquid plus and short term funds

Tata Steel plans to cut its debt further as a measure to reduce group debt During the year, Tata Steel has cut debt by Rs.17,864 crore to Rs.100,816 crore via product rationalization

The steel sector has seen a sharp fall in demand in the second half on the back of weak demand from auto sector

CPI inflation rises to an 8-month high of 3.18% for the month of June 2019 The sharp rise in CPI inflation was largely driven by a rise in food inflation, which has been the ongoing trend

However, experts feel this will not hamper the RBI efforts to cut rates in August as core inflation is still down

IIP growth for the month of May comes in lower at just 3.1% This contrasts with 3.8% IIP growth in the year ago period and a sharply higher 4.3% in the month of April 2019

The sharp fall was in manufacturing at 2.5% and these accounts for 77% of IIP basket. Mining was also weaker

FPIs may find it hard to dodge the higher tax surcharge incidence The only option for FPI trusts is to convert themselves into corporates to avoid paying the higher surcharge

However, any shift done to avoid tax will attract the provisions of the GAAR with its retrospective tax implications

China growth likely to fall to a 30-year low of 6.2% in current year This sharp fall in growth according to IMF will be driven by the trade war and the attack on shadow banking

Weak Chinese growth is not great news for the world economy as China has been the engine of global growth

NRI deposits of $94 billion come up for redemption this fiscal year Nearly 70% of total NRI deposits outstanding are maturing in the current fiscal year

Normally, chunk of the deposits get rolled over but this could put pressure on the Indian rupee value



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