Weekly Market Updates

Posted on 20-Feb-2017 Comments  0

Big News

Every since the RBI shifted its monetary stance in its Feb Policy to“Stable” from “Accommodative”, there have been questions over future rate hikes. While another 2 rate hikes during the current calendar year cannot be ruled out, we still feel that an April rate cut by the RBI could be highly unlikely. There are 3 key reasons for the same…

Oil inflation is the worry…

Acursory look at the CPI inflation and the WPI inflation for the month of January makes it evident that the crux of the inflation problem is non-core inflation. Food inflation is largely in control due to a bumper Kharif crop following last year’s normal monsoon. However,the non-core inflation is highly susceptible to global oil prices.Since the beginning of 2016, the price of Brent Crude has moved up from $30/bbl to $56 /bbl. This sharp surge has been driven in the last couple of months by the OPEC supply deal. Under this deal, the OPEC and a few friendly nations have agreed to cut supply of oil by up to 1.8 million barrels per day (bpd). This has been instrumental in keeping oil prices high. Since India depends on imports for nearly 80% of its crude requirement, the correlation with inflation is almost direct. The real challenge for the Indian economy could come if Brent crosses $60/bbl. RBI would prefer more subdued non-core oil inflation before giving the nod for further repo rate cuts!

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Market Capsule

Highlights of the Week (Feb 13 – Feb 17) and Impact Analysis

Major News Item

Impact Analysis

  • Infosys calls press meet to addressgovernance issues raised

  • Sesha sayee and Sikka confirm that there was no rift between the promoters andthe board except cultural differences

  • Board also affirms that compensation package of Sikka aligned with global best practices and competitive

  • Infosys rejects hush money allegation with respect to severance package

  • Allegations arose after former CFO, Rajiv Bansal, was paid 30 month’s severance package, contrary to normal practice

  • Board confirmed that the severance disbursal has been stopped and fool-proof processes put in place for the same

  • Uday Kotak cautions that the world may get increasingly protectionist

  • The trend of protectionism set in motion by Trump seems to be getting popular support across the world

  • After the BREXIT vote in Britain, France is also moving towards a right leaning LePen government, which is anti-Euro

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