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Weekly Capsule

Posted on 27-Mar-2020 Comments  0

Weekly Capsule (Mar 23 – Mar 27) and Impact Analysis

News Announcement Impact Analysis

Coronavirus cases cross 6 lakh afflictions worldwide The virus has already resulted in 27,000 deaths worldwide with Italy accounting for a third of the casualties

While the virus had its origins in China, it is Europe that appears to have become the epicentre of the pandemic

Dow Jones lost 900 points on Friday after an encouraging week There was panic in Wall Street after the number of active COVID-19 cases in the US crossed a record 100,000

The fall was on the back of growth pessimism despite the US government infusing over $2 trillion to boost the economy

Moody’s slashes India’s 2020 growth estimate from 5.3% to 2.5% This move comes even as CRISIL has downgraded India’s estimated GDP growth for FY20 to just 3.5%

These assumptions are typically factoring in negative growth in the March quarter and flat growth in June quarter

Finance Minister announces helicopter payouts for the BPL families The policy includes assured payouts to BPL families as well as provision of free food grains during the lock-in period

In addition, the FM has also assured that health workers would get health cover to the tune of Rs.50 lakhs floater

RBI cuts repo rates by 75 bps in an urgently convened MPC meeting The RBI surprised the street by cutting rates by 75 bps to stave off any immediate risk of recession

In addition, the RBI has also cut the CRR by 100 basis points to 3% releasing another Rs.1.37 trillion in the process

RBI offers 3 month moratorium to business loans and personal loans This will not be an across-the-board waiver but contingent on bank approval after an application is made by the customer

However, RBI has clarified that any extension of payment terms will be subject to interest accrual during the period

Tata Motors to convert its passenger vehicle business into separate entity The entity will be a subsidiary of Tata Motors and will house the PV business and the electrical vehicles business

The company estimates that a distinct management approach will help in getting SOTP valuation for Tata Motors

Global refiners are cutting down capacity as demand compresses With most of the major countries facing a lockdown, the demand for oil has suddenly fallen to a new low

This has forced refiners to cut production and even invoke Force Majeure clauses with oil extractors to stay afloat

US economy faces worst rise in jobless claims in the previous week The rise in jobless claims to 3.28 million is clearly an outcome of the series of lockdowns across factories and business

This brings to an end the longest jobs boom in the US when unemployment had touched a low of just 4%

Oil prices continued to be under pressure on supply and demand woes On the supply side, the OPEC has ruled out any truce with Russia and will continue to flood the market with cheap oil

On the demand side, the shutdown and the growth slowdown are having a deep impact on oil demand

DSP and SBI to again start accepting inflows into their small cap fund Both these AMCs had stopped accepting fresh inflows into their small cap fund due to high volatility

With valuations much lower and the recent 40% correction in the BSE 250 Small Cap Index, this appears to be on track

Coronavirus may have cut global oil demand by 20 million bpd This is nearly 20% of the current global oil output and that is putting pressure on prices

With major shutdowns, the demand from factories and from transport segment has come down substantially 

DGCA has extended ban on international flights to April 14th This ban was originally till March 31st but with the pandemic nowhere under control, the extension was inevitable

The government has already warned that this 21 day ban may be eventually extended to 3 months if required

Bernstein further downgrades price target for Bajaj Finance to Rs.1700 According to Bernstein, the pain on consumer lending may continue and even NPAs could see a visible spike

Bajaj Finance has already corrected nearly 45% in the last 2 months and now this factors another 50% downside

India VIX remains at elevated above the 70 levels despite bounce After the VIX crossed the 50 levels in mid-March, it has never come below that level and even touched a high of 86

Normally, markets show a sustained bounce only after VIX settles below the 20 levels for a sustained period of time

RBI permits Indian banks to put trades in the NDF rupee market The non-deliverable forward (NDF) market on rupee is quite active in centres like Dubai and Singapore

This allows Indian banks to participate and also exercise control on the rupee trading in offshore markets

Yes Bank total fund raising plans increased to Rs.15,000 crore While Rs.10,000 crore has already been infused by an SBI-led consortium, Yes Bank will raise Rs.5000 core via QIPs

However, ICRA has pointed out that Yes bank may need an additional capital infusion of Rs.10,000 crore in next 2 years

Indian aviation companies to lose $3 billion due to virus; CAPA These losses would arise due to cancelled flights as well as most routes flying at below break-even capacity

Domestic analysts have warned that it could create a serious solvency issue for Interglobe Aviation and Spice Jet

Hindustan Unilever emerges as the third most valuable company After a long time, HDFC Bank slipped out of the Top-3 position after the sharp correction in stock prices

Hindustan Unilever has been one of the few companies to gain during the pandemic due to a hygiene rush

Gems and Jewellery sector could lose close to Rs.75,000 crore  This would be the direct impact of the demand crunch caused by the Coronavirus over the next few months

Most malls and jewellery shops in India are either shut or are seeing zero footfalls as the sector hopes for rescue package

Nifty locked in lower circuit for second time in March The markets got once again locked in lower 10%  circuit after a similar experience on March 13th

The fears of slowdown in the aftermath of COVID-19 has largely driven the global investor panic across markets


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