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Weekly Capsule

Posted on 17-Apr-2020 Comments  0

Weekly Capsule (Apr 13 – Apr 17) and Impact Analysis

News Announcement Impact Analysis

RBI announces Rs.50,000 crore TLTRO 2.0 for liquidity to NBFCs This will be a liquidity facility which will be purely for NBFCs with 50% reservation for small and medium NBFCs

TLTRO 2.0 will entail buying bonds of NBFCs by the banks as the current system focuses only on PSU and top rated bonds

NPA classification to commence only after EMI moratorium gets over This was a clarification that was long overdue and this shall apply to banks and also to NBFCs giving loans

This refers to the 3-month EMI moratorium that the RBI had already announced to give relief in midst of COVID-19

Realty loans can be extended by one year in genuine business cases This extension of the loan tenure can be now done in genuine cases without need for asset classification as non-standard

This will be a major boon for mid-sized realty companies that rely on the NBFC route for raising funds for operations  

RBI further cuts the reverse repo rates by 25 basis points to 3.75% The idea was to expand the gap between repo and reverse repo rate to make parking with RBI unattractive

The idea of the RBI here is to incentivize the banks to lend more to borrowers than keeping idle money

Former finance secretary Garg warns of Rs.10 trillion budget shortfall in FY21 FY21 is likely to see a sharp contraction in GST and income tax revenues and spike in post Covid-19 expenditure

One option in front of the government is to monetize the deficit which is tantamount to printing notes

SBI to extend special lines of credit for NBFCs to tide over liquidity crisis NBFCs have Rs.250,000 crore of CPs and  NCDs that are due before the end of May 2020

In the absence of a dedicated support line of credit from the banks, most NBFCs would end up defaulting

US jobless claims added another 5.2 million during the latest week This takes the total unique jobless claims to 22 million in the last four weeks since the eruption of the COVID slowdown

This take unemployment to an all-time high and wipes out all the jobs created since the Great Depression of the 1930s

GDP growth in fiscal year 2021 could taper to 1.1%; SBI Research SBI Research expects a virtual washout in the first two quarters of the fiscal with a bounce after that

This should still be a positive for the markets as all other world economies are expected to contract during this period

Analysts expect India to move towards current account surplus by FY21 This is largely to be led by a sharp fall in the trade deficit and a rise in services surplus almost wiping out net deficit

Despite weak revenues, analysts are expecting a sharp spike in the inward remittances from NRIs during the year

Overall trade (exports + imports) for March 2020 contracts to $53 billion This is the lowest monthly level of trade reported in the last 10 years and is driven by a sharp fall in world trade

However, the FIEO has warned that without a proper rescue package we could see spike in job losses and NPAs

Government processes 3.3 lakh claims for EPF withdrawal worth Rs.940 crore This was in a short span of just 15 days after people were allowed to withdraw from EPF to tide over COVID-19

It shows the liquidity crunch in the market and is not a good trend as this is supposed to be social security money

Early estimates of the monsoon have come in at 100% of LPA The good news for Kharif appears to be that this time around there are limited chances of an El Nino effect

However, the real picture of the monsoon will only be clear once the first South West estimates come in June

WPI inflation dips to just 1% for the month of March 2020 Like in the case of CPI inflation, Wholesale inflation also saw a sharp tapering in the food inflation component 

However, WPI accords a much higher weightage to manufactured goods and that has remained flat

Donald Trump stops funding to WHO for its alleged anti-US policy Trump has alleged that WHO delayed the announcement of the COVID-19 pandemic despite being informed by China

Trump has also insinuated that the WHO had deliberately done so to favour China over other countries

FTSE Russell has hinted at raising India weightage in indices in June FTSE will hike India weightage by 1.56% which will lead to $2 billion of fresh inflows from ETFs and passive funds

This comes after MSCI had also hinted at increasing India’s weightage in the EM index post FPI limit relaxation

SEBI calls for a close watch on Chinese FPI investments into India While it is just about $1.1 billion officially, India has been sceptical about China increasing its stake in Indian companies

SEBI has been investigating if the actual Chinese exposure is higher via sub accounts and proxy investments 

Lockdown could cost Indian economy $300 billion as per early estimates With the lockdown extended by 21 days, the cost comes to $200 billion at Rs.35,000 crore of lost business per day

In addition, economists estimate that there could be another cost of $100 billion due to the lag effect of the lockdown

India allows paracetamol exports but puts curbs on API exports Paracetamol exports were in line with the commitment to ensure that COVID-19 drugs are made available globally

However, APIs are inputs and they are essentially to secure the supply chain for the pharma industry in India

SIP closure ratio spiked to 70% in the month of March 2020 This shows that for every 3 fresh SIP registrations, there have been 2 requests for closure of SIPs in mutual funds

This is the highest SIP closure ratio seen in 2020 and could be a hint of SIP flows tapering in the future

Face-off between tour operators and airlines likely over lockdown tickets While tour operators have demanded full refund of fares from the airlines, the airlines are only willing to reschedule

Considering grounded flights and zero business, it would be impractical to expect airlines to refund the full money

TCS and Wipro hold back annual increment plans In the midst of weak revenue and profit growth, IT majors have desisted from any job cuts for the year

However, across all levels, the salaries have been frozen even as fresh offers made have been honoured


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