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Weekly Capsule

Posted on 19-Jul-2019 Comments  0

Weekly Capsule (Jul 15 – Jul 19) and Impact Analysis

News Announcement Impact Analysis

Nifty crashes below the 11,450 mark and loses 600 points post Budget The correction in the market sharpened on Friday over fears of a prolonged liquidity crunch in the economy

Apart from weak global cues, markets were also disappointed that the government was unwilling to review the FPI tax

Geopolitical situation gets a little more tense in the Middle East region The situation got tense after Iran actually seized a couple of British tankers near the Strait of Hormuz

Iran had threatened to block the Strait of Hormuz after the US had imposed sanctions on Iran to block oil sales

10-year bond yields touch a multi-year low of 6.25% during the week Bond yields have been sharply down ever since they broke the 7% mark on dovish cues from the US Fed

With the CME FEDWATCH hinting at a strong likelihood of a 50 bps rate cut on July 31st, bond markets see yields sinking

HDFC Bank reported 21% growth in net profits for Q1 at Rs.5,568 crore Net interest income (NII) grew by 23% during the period even as the net interest margins (NIM) was stable at 4.3%

Gross NPAs in the quarter were marginally up from 1.3% to 1.4% and the bank also declared a special dividend of Rs.5

Jet’s resolution professions invite expression of interest by August 03rd The EOI will be for the remaining assets of Jet Airways which will be hived off as part of the settlement

Jet currently has 14 aircraft (down from 124), 49% in Jet Privilege and real estate properties to hive off

Grant Thornton raises serious concerns over IL&FS audit Thornton pointed that rating agencies had assigned high ratings to IL&FS despite knowing about its failing financials

According to Thornton, employees of IL&FS had connived with rating agencies to ensure good ratings

Brookfield likely to invest Rs.25,000 crore in Reliance Tower Trust The infusion will give Brookfield a 100% stake in the company that now holds the assets of Reliance Jio Infratel

The investment will be subject to requisite government approvals as it will transfer ownership to a foreign entity

Deloitte Haskins and BSR, former auditors of IL&FS, challenge ban The government had filed a petition with the NCLT for a 5-year ban on DHS and BSR for shoddy IL&FS audit

The auditors have questioned the jurisdiction of the NCLT to adjudicate on the matter

IMD warns that deficient rainfall looms over half of Indian sub-continent The rainfall situation worsened with the 20% monsoon deficit reported in the month of July 2019

In addition, SKYMET has also predicted that the next 2 years could see drought like conditions in India

SEBI calls for greater transparency in auditor resignations SEBI has objected to the recent cases of arbitrary resignations by the auditors of listed companies

SEBI wants a more detailed explanation of such resignations especially if they happen in less than 1 year of appointment

Indigo spat takes a toll on stock price despite excellent results Problems started when the Gangwal group raised questions about the functioning of the Bhatia group in the board

As a compromise, Indigo may expand the board but the overhang of the dispute remains on the stock price

Vodafone Idea to wind down Aditya Birla Payment Bank This marks the second major player to exit the payments bank business after Mahindra group also opted out of it

The restrictions on pure Aadhar based banking has put limits on the ability of payment banks to attract deposits

SEBI tweaks disclosure norms for bank NPA divergence disclosure From a 15% divergence needing disclosure, SEBI has now asked banks to disclose if the divergence is 10%

Disclosure also become mandatory if the Gross NPAs move up by 10% as compared to 15% earlier

FPIs infuse Rs.6500 crore into Indian debt since the Union Budget This has been in contrast to the equity segment, where FPIs have been consistent sellers

With global yield falling, the high real rates on the Indian bonds and the a stable currency are favorable

Nirmala Sitharaman rules out any relief for FPIs on super-rich tax The higher surcharge on earnings above Rs.2 crore will also hit FPIs that are structured as trusts in India

The FM has offered the opportunity to convert into corporate structure but refused any concessions to FPIs

Bankers have sought more detailed forensic audit of Jet books A detailed forensic audit demand was based on a basic audit conducted by Grant Thornton

The forensic audit showed signs of round tripping an example being the undisclosed loan to Jet Lite worth Rs.3000 crore

US Consumer spending growth comes in stronger than expected US Consumer Spending growth came in at 0.4% as against street expectations of a mere 0.1%

This data point is unlikely to change the Fed outlook on cutting rates on July 31st, although quantum of cut is unknown

Crude spends a volatile week in the global Brent market Crude prices gyrated between $67/bbl and $62/bbl on global uncertainty over Iran, US supplies and Chinese growth

Chinese growth fears pulled down the price of oil even as the tensions in the Strait of Hormuz offered support to oil

Market history may favour mid caps according to Kotak Mutual Fund According to KMF, on previous occasions in 2008 and 2011, mid caps had corrected sharply on global factors

However, in the next one year, the bounce in mid caps was almost to the tune of 100% from lower levels

Trade deficit narrowed marginally to $15.28 billion for June 2019 While imports were lower, the real worry for India would be the 9.7% fall in exports on weak global trade

Even as global trade weakens, this puts a big question mark over the Make in India efforts of Indian government

Economists raise concerns over low inflation in India A group of economists and bankers in India have voiced concerns over consistent low inflation

They aver that low inflation could be precursor of weak growth and consumption as shown by weak IIP numbers



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