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  • Weekly wrap-up: Market updates, news and insights for the week ending 10th August

    Publish date: 10th August, 2018


    News: Nifty faced profit booking on Friday on trade war concerns

    Our perspective:

    • The Nifty closed the week at 11,429 with the OMC stocks lending some support to the markets. The weakness of the INR to 69/$ also put pressure on the markets on Friday.
    • Asian stocks across came under pressure due to risks to China’s growth in the light of the escalating trade war between the US and China. Asian currencies have also come under pressure due to imminent fears of Chinese Yuan devaluation.

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    News: Jet Airways hit 3-year low after company deferred earnings announcement

    Our perspective:

    • The ostensible reason given was that the audit committee had not recommended the First Quarter results to the board. The stock fell over 10% on Friday to touch a new 3-year low.
    • Jet has been caught between rising ATF prices and falling fares due to competition. This has led to narrowing of the CASK. Cash situation at Jet Airways continues to be grim.

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    News: WTO warns of global trade slowdown in the light of escalating trade wars

    Our perspective:

    • The US and China account for over $35 trillion of annual GDP and WTO has expressed concerns that the repercussions on world trade and GDP growth could be quite intense
    • The immediate reaction was visible in the weakening price of Brent Crude which is again getting closer to $72/bbl. INR crossed the 69/$ mark on Friday on currency war worries.

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    News: TVS Motors takes a hit on two-wheeler market share by about 90 basis points

    Our perspective:

    • This was the direct outcome of an aggressive price war initiated by Bajaj Auto in the last quarter. Bajaj ranks fourth in the two-wheeler segment after Hero, Honda and TVS Motors.
    • The price war was initiated by Bajaj Auto in two segments; scooters and entry-level bikes, which are most amenable to price based competition for market share.

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    News: $6 billion worth of IPOs undecided on timing of the issue

    Our perspective:

    • With high levels of volatility and a sharp correction in mid caps and small caps, IPOs worth Rs.41,000 crore are undecided on the timing of the issue despite Sensex at record highs
    • The problem is more acute in case of companies which had filed for IPO before the mid-cap correction. Similarly, sector specific worries have held back some of the seafood IPOs.

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    News: UTI domestic shareholders want T Rowe Price to also pare its stake

    Our perspective:

    • Currently LIC SBI, BOB and PNB hold 18.5% each in UTI while T Rowe Price holds the balance 26%. Domestic investors need to pare their stake in next 7 months to below 10% as all four of them already have an existing mutual fund franchise.
    • The domestic share holders have called for level playing field by asking T Rowe Price to all reduce stake below 10%. Current CEO of UTI is backed by T Rowe price.

    News: HPCL and BPCL announce better than expected Gross Refining Margins

    Our perspective:

    • The GRMs in the case of HPCL and BPCL were around the $7 mark with HPCL even bettering that level on the back of better crude realizations.
    • Both the downstream stocks have corrected sharply from recent peaks on fears that higher oil prices may force the government to bring back its oil subsidy strategy.

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    News: Tata Sons gets clearance from the ROC to convert to a private company

    Our perspective:

    • This move was being resisted by the Shapoorji Pallonji group as it will make it very difficult to sell their 18% stake in Tata Sons without the consent of the current management.
    • The Shapoorji Pallonji group owns 18.4% stake in Tata Sons but that stake has been under debate after Cyrus Mistry was moved out of the chairmanship of Tata Sons in 2016.

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    News: RBI will pay Rs.50,000 crore as dividends to the government India for fiscal Jun-18

    Our perspective:

    • It may recollected that RBI had its dividend payout in 2016-17 to just Rs.30,600 crore to provide for demonetization costs and also to create a contingency reserve.
    • Dividend for 2017-18 is higher than the previous year but still lower than what we saw in years prior to that. Government is looking to boost its inflows to take care of the fiscal gap.

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    News: RBI plans to go ahead with the NRI bond issue in the third quarter of this fiscal

    Our perspective:

    • With rising trade deficit and pressures on fiscal discipline, the government may finally raise NRI bonds worth $35 billion to make the forex position more comfortable.
    • While annual imports could cross $500 billion, the forex reserves have fallen to $405 billion leaving India with just 9 months of forex cover, which calls for a dollar boost.

    News: HDFC AMC gets a bumper listing on the bourses

    Our perspective:

    • The second AMC to list on the bourses (after Reliance AMC) listed at a premium of over 65% and continues to hold the gains, despite the market volatility
    • However, the current market capitalization of over Rs.40,000 crore values the AMC at nearly 14 times AUM, which is twice the price at which deals are concluded.

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    News: Britannia innovates with the issue of bonus debentures to shareholders

    Our perspective:

    • Issued in the ratio of 1:1 to shareholders, it offers a fixed return attachment to shareholders who have already benefited from the company’s stellar performance
    • Britannia may also consider a stock split as it will be looking to bring the stock price into more acceptable price range for retail investors. The stock has returned 2200% in 10 years.

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