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Morning Capsule: Your pre-market news update

Publish date: 22nd August, 2019

Stocks usually react to news developments. This is why investors and market participants usually keep a close eye on the news. It can give stock ideas and a general sense of a market trend.

Here’s a look at the news flow yesterday:

Nifty and Sensex correct sharply on the “Parle Slowdown” effect

While there was a mix of factors including higher oil prices that drove markets lower, the actual negative impact appeared to have come from Parle Products warning that it may have to lay off up to 10,000 workers. Parle caters to the mass market in urban and rural India and acts as a lead indicator of the willingness of people to spend. It could also have implications for retail debt.

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Brent Crude stronger and sustains above the $60/bbl mark on Wednesday

Brent crude inched closer to the $61/bbl mark as larger than expected US drawdown led to a sharp rise in crude prices. Oil prices also moved up on worries over the emerging geopolitical situation in the Middle East. Houthi rebels have been attacking Saudi facilities while the Hormuz stand-off continues. In between, the OPEC also stands ready to cut output if required.

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Changes in STT on options to take effect from September 01st

An important announcement for option buyers was made in the Union Budget 2019 wherein the STT on ITM expiring options was rationalized at 0.125% on the extent of moneyness of the option only. In the past, the securities transaction tax (STT) was charged at 0.125% of the notional value. This will also ensure that options don’t trade at deep discounts to intrinsic value on the expiry day.

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Monetary Policy Committee minutes reveal justification behind 35 bps rate cut

While it was known that 4 out of 6 members had voted for 35 bps rate cut, the minutes made public on 21st August reveal better insights. The RBI governor had specifically favoured a higher rate cut considering the weakening growth impulses. Das had also underlined the importance of reducing rates sharply in the light of the high real interest rates prevailing in India.

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SEBI board clears easier entry norms for Foreign Portfolio Investors

In a slew of measures to placate the FPIs in the aftermath of the higher surcharge, SEBI announced a largely simplified KYC process for FPIs. In addition, FPIs will also be allowed to do off-market transfers; which was hitherto not permitted. SEBI has also laid out a plan to reduce the number of FPI categories from 3 to 2. Entities established in IFSC would be given the status of deemed FPIs.

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Indian monsoons above average for the fourth week in succession: IMD

According to a report from the Met Department, rains have been above the long period average (LPA) for the fourth week in succession with the only downside risk being the heavy flooding in many areas despite the delayed monsoons. In fact, the rice growing Northwest region received nearly 63% above average rains. This has taken full season rains to 2% above the season LPA.

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IMF warns countries against aggressive rate cuts and currency intervention

Global gold prices rallied above the $1500/oz mark after bond yields dipped sharply on US Fed stimulus hopes. US markets are now expecting the government to combine monetary and fiscal measures. Instead of stopping at rate cuts, the Fed and the government may synchronize that with a fiscal boost to make it more meaningful for growth. That has, however, meant lower bond yields.

Other news highlights

• The markets regulator Sebi eased the regulatory and compliance framework for foreign portfolio investors (FPI) by broad-basing their classification, and simplifying their registration, entry and know-your-customer (KYC) norms in a bid to boost investments. (Mint)
• Marred by an economic slowdown, direct tax collections have seen dismal growth so far in the current fiscal year, with the mop-up growing by under 5 per cent till mid-August. (BS)
• The central board of the Employees’ Provident Fund Organisation (EPFO) decided to appoint three asset management companies, HSBC AMC, UTI AMC and SBI Mutual Fund, as its fund managers for three years and reiterated its commitment to pay an interest rate of 8.65% for 2018-19 despite the reservations of the finance ministry. (Mint)
• As part of its resolution plan to emerge from its loan defaults, the troubled Dewan Housing and Finance Corporation (DHFL) has proposed a conversion of lenders’ debt into equity for the acquisition of a 51% stake in the company at a price of Rs 54 a share. (BS)
• HCL Technologies and Tata Consultancy Services are leading the race for bagging an IT outsourcing deal worth $100 mn from New Zealand-based dairy cooperative Fonterra Co-operative Group. (BS)
• Electrosteel Castings said it plans to raise Rs 500 mn through a preferential issue of shares. The board of directors said it has approved a proposal to allot 2.7 crore shares at Rs 18.20 a share to Shree Khemisati Constructions Pvt Ltd, Global Exports, Mayank Kejriwal, Asha Kejriwal and Beigrave Investment Fund. (BL)
• ITC denied that it was in the race to acquire Coffee Day Enterprises though it was approached for a deal. (ToI)
• The Supreme Court has issued a notice to DLF based on a petition that highlighted how DLF had suppressed key information regarding judicial proceedings against its largest chunk of land-bank in Haryana. (BL)
• Drug firm Zydus Cadila said it has received final approval from the US health regulator to market generic Ranolazine Extended-Release tablets used for treatment of chronic angina. (BL)
• ITC is going to increase the salary of its chairman and managing director Sanjiv Puri by more than 45% and three executive directors by 30% since it does not have the option to issue stock options. (ET)
• NTPC has said that the government has accepted its request to surrender the Kudanali-Luburi coal block located at Odisha allotted to it jointly with Jammu & Kashmir State Power Development Corporation Ltd (JKSPDC) in July 2013. (ET)
• Maruti Suzuki India Ltd expects vehicle sales to recover in the forthcoming festival season buoyed by new product introductions and expectations of some favourable government decisions. (Mint)

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By: Sandhya Kannan, Head – Content