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Weekly Capsule


Posted on 24-Apr-2020 Comments  0

Weekly Capsule (Apr 20 – Apr 24) and Impact Analysis

 

News Announcement

Impact Analysis

 

 

Ø  Fitch downgrades India’s FY21 GDP growth estimate to just 0.8%

Ø  Fitch expects negative GDP growth in the first half of FY21 with a sharp bounce in the second half of the fiscal

Ø  According to Fitch, the lag effect of COVID-19 would result in compression of supply and also of consumption

 

Ø  Templeton shuts down 6 debt schemes with AUM of over Rs.30,000 crore

Ø  Most of these are credit risk funds and Templeton has shut down these funds due to redemptions and illiquidity

Ø  These funds will be locked for purchase and redemptions and funds will be redeemed after the assets are sold gradually

 

Ø  Oil futures dipped into negative zone during the week, touching ($-37/bbl)

Ø  This movement was unique to WTI Crude just a day ahead of its May expiry on April 21st due to lack of demand

Ø  At a larger level, this oil price movement is reflective of the sharp demand contraction and ineffective supply cuts

 

Ø  MCX faces legal troubles after brokers sue the exchange over oil price

Ø  Leading commodity brokers sued the exchange for setting the settlement price for crude at negative level

Ø  Brokers have argued that there was no provision for negative rates. Total losses could mount to Rs.442 crore

 

Ø  Airlines continue to book tickets even after ban imposed by DGCA

Ø  With the lockdown likely to end on May 04th, the airlines are accepting ticket bookings from 15th May onwards

Ø  Earlier, the DGCA had instructed airlines to refund the money for tickets booked but airlines including AI had refused

 

Ø  Banks still unwilling to led to NBFCs despite TLTRO 2.0

Ø  The RBI package of special TLTRO 2.0 for large and small NBFCs has found few takers among the banks

Ø  Banks are wary of the worsening credit profile of NBFCs with weakening payment cycles and higher cost of funds

 

Ø  US based Gilead faces failure in clinical tests of anti COVID-19 drug

Ø  This had led to a huge disappointment in the market although more rigorous tests are still going on

Ø  In the meanwhile, Oxford Research project in the UK has claimed that it is very close to a vaccine for COVID-19

 

Ø  US FDA warns against the usage of Hydrochloroquine (HCQ) for COVID-19

Ø  This malarial drug had been touted by Trump as a solution but the drug regulators are not too sure of the same

Ø  India had recently relaxed export norms to enable the supply of HCQ drug to the United States

 

Ø  The US sees over 9 lakh COVID-19 infections and 52,000 casualties

Ø  US has been the worst affected by COVID-19 followed by European nations like France, Spain, Italy and the UK

Ø  The absence of a total lockdown in the US is only worsening matters as lack of social distancing is aggravating the spread

 

Ø  Industry has warned that COVID-19 could shut down 31% of apparel units

Ø  The total number of job losses due to the lockdown are estimated at closer to 2.5 million

Ø  However, if the downstream impact is also calculated, it is estimated that job losses could be closer to 10 million

Ø  According to IATA, India air traffic to fall by 47% due to COVID-19

Ø  India is expected to be the worst hit by the pandemic as it had been the fastest growing market in Asia Pacific

Ø  The pressure is already visible in the airline industry which has started mass lay-offs, pay cuts and furloughs

 

Ø  IRDA has asked insurance companies to be cautious on dividend payouts

Ø  IRDA wants insurance companies to conserve liquidity in the current circumstances to be able to meet payouts

Ø  Earlier, the RBI had instructed banks not to declare any further dividends for the fiscal year 2020 to conserve cash

 

Ø  Yes Bank to raise another Rs.5,000 crore via rights or QIP

Ø  This will be in addition to the Rs.10,000 crore that the bank has already raised from a string of Indian banks

Ø  This will take the total capital raising to Rs.15,000 crore and help Yes Bank to shore up its capital adequacy

 

Ø  India to allow shops to function in non-containment zones

Ø  This will apply to all the shops that are registered with the state under the Shops & Establishments Act

Ø  The idea is to reduce the pressure on jobs and livelihood and also to start the process of lockdown lifting

 

Ø  IIFL Wealth buys L&T Capital Markets for a sum of Rs.230 crore

Ø  This acquisition will give IFL wealth an additional Rs.20,000 crore in AUM plus access to client base

Ø  IIFL Wealth is already the largest player in the domestic wealth management space with $25 billion in AUM

 

Ø  Spot Gold crosses $1750/oz during the week on uncertainty demand

Ø  Gold is now less than 10% away from its historic peak of $1879/oz touched in the peak of 2011

Ø  Gold has rallied 35% in the last one year and remains one of the best performing asset classes across the world

 

Ø  Facebook takes a 10% stake in Reliance Platforms at $5.7 billion

Ø  This values the Reliance Digital franchise at around $57 billion approximately the driver of the RIL bull rally

Ø  The alliance to tap the vast potential of India in the digital space and in enabling small businesses to go digital

 

Ø  Hin Leong Group of Singapore admits to have misled on profits

Ø  The group has sought bankruptcy with negative net worth of nearly $4 billion due to the oil price losses

Ø  This bankruptcy could also result in $100 million of losses to ICICI Bank which is also exposed to the group

 

Ø  SEBI eases buyback route in the midst of COVID-19 pandemic

Ø  The cooling period for the second buyback after the previous buyback has been reduced from 1 year to 6 months

Ø  This will enable promoters to take advantage of low prices to enhance their stake in their companies

 

Ø  Insolvency Code put in suspension for a period of 6 months till COVID-19 abates

Ø  This will give some relief to companies as banks cannot hold the stick of insolvency to make them pay up

Ø  However, banks are not too happy as this will take away their one major leverage in debt recovery

 

Ø  Kotak Bank to raise Rs.7800 crore via the sale of 6.5 crore shares

Ø  This will help to shore up the capital adequacy of Kotak Bank by another 300 basis points to a very safe level

Ø  It also helps Uday Kotak to reduce his stake in Kotak Bank from 29.9% to 29% in view of RBI stipulations

 

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